    [Senate Hearing 115-498]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 115-498

                     THE PERFORMANCE OF THE ELECTRIC POWER
                    SYSTEM IN THE NORTHEAST AND MID-ATLANTIC
                      DURING RECENT WINTER WEATHER EVENTS,
                           INCLUDING THE BOMB CYCLONE

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

                                    HEARING

                                   BEFORE THE

                                  COMMITTEE ON
                          ENERGY AND NATURAL RESOURCES
                              UNITED STATES SENATE

                         ONE HUNDRED FIFTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                JANUARY 23, 2018

                                   __________

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                           Printed for the use of the
                   Committee on Energy and Natural Resources

            Available via the World Wide Web: http://www.govinfo.gov

                                ______

                 U.S. GOVERNMENT PUBLISHING OFFICE
     28-695              WASHINGTON : 2019

                   COMMITTEE ON ENERGY AND NATURAL RESOURCES

                        LISA MURKOWSKI, Alaska, Chairman
    JOHN BARRASSO, Wyoming               MARIA CANTWELL, Washington
    JAMES E. RISCH, Idaho                RON WYDEN, Oregon
    MIKE LEE, Utah                       BERNARD SANDERS, Vermont
    JEFF FLAKE, Arizona                  DEBBIE STABENOW, Michigan
    STEVE DAINES, Montana                JOE MANCHIN III, West Virginia
    CORY GARDNER, Colorado               MARTIN HEINRICH, New Mexico
    LAMAR ALEXANDER, Tennessee           MAZIE K. HIRONO, Hawaii
    JOHN HOEVEN, North Dakota            ANGUS S. KING, JR., Maine
    BILL CASSIDY, Louisiana              TAMMY DUCKWORTH, Illinois
    ROB PORTMAN, Ohio                    CATHERINE CORTEZ MASTO, Nevada
    SHELLEY MOORE CAPITO, West Virginia  TINA SMITH, Minnesota

                          Brian Hughes, Staff Director
                    Patrick J. McCormick III, Chief Counsel
                        Robert Ivanauskas, FERC Detailee
                 Mary Louise Wagner, Democratic Staff Director
                    Sam E. Fowler, Democratic Chief Counsel
               Spencer Gray, Democratic Professional Staff Member

                                C O N T E N T S

                                  ----------

                               OPENING STATEMENTS

                                                                       Page
    Barrasso, Hon. John, a U.S. Senator from Wyoming.................     1
    Cantwell, Hon. Maria, Ranking Member and a U.S. Senator from
      Washington.....................................................     1
    Murkowski, Hon. Lisa, Chairman and a U.S. Senator from Alaska....     4

                                   WITNESSES

    McIntyre, Hon. Kevin J., Chairman, Federal Energy Regulatory
      Commis-
      sion...........................................................     6
    Walker, Hon. Bruce J., Assistant Secretary, Office of Electricity
      Delivery and Energy Reliability, U.S. Department of Energy.....    17
    Berardesco, Charles A., Interim President and Chief Executive
      Officer, North American Electric Reliability Corporation.......    24
    Clements, Allison, President, goodgrid LLC.......................    50
    Ott, Andrew L., President & CEO, PJM Interconnection, L.L.C......    55
    van Welie, Gordon, President & Chief Executive Officer, ISO New
      England........................................................    65

              ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED

    Barrasso, Hon. John:
        Opening Statement............................................     1
    Berardesco, Charles A.:
        Opening Statement............................................    24
        Written Testimony............................................    26
        Responses to Questions for the Record........................   136
    Cantwell, Hon. Maria:
        Opening Statement............................................     1
        The National Academies of Sciences, Engineering, and
          Medicine--A Report entitled ``Enhancing the Resilience of
          the Nation's Electricity System''..........................     3
    Clements, Allison:
        Opening Statement............................................    50
        Written Testimony............................................    52
        Responses to Questions for the Record........................   143
    King, Jr., Hon. Angus S.:
        Chart entitled ``Natural Gas Prices--Massachusetts vs.
          Marcellus''................................................    85
        Chart entitled ``Natural Gas and Wholesale Electricity Prices
          Are Linked''...............................................    87
    McIntyre, Hon. Kevin J.:
        Opening Statement............................................     6
        Written Testimony............................................     8
        Responses to Questions for the Record........................   107
    Murkowski, Hon. Lisa:
        Opening Statement............................................     4
    Ott, Andrew L.:
        Opening Statement............................................    55
        Written Testimony............................................    57
        Responses to Questions for the Record........................   155
    van Welie, Gordon:
        Opening Statement............................................    65
        Written Testimony............................................    67
        Responses to Questions for the Record........................   166
    Walker, Hon. Bruce J.:
        Opening Statement............................................    17
        Written Testimony............................................    20
        Responses to Questions for the Record........................   119

     THE PERFORMANCE OF THE ELECTRIC POWER SYSTEM IN THE NORTHEAST AND MID-
       ATLANTIC DURING RECENT WINTER WEATHER EVENTS, INCLUDING THE BOMB
                                    CYCLONE

                                  ----------

                           TUESDAY, JANUARY 23, 2018

                                           U.S. Senate,
                     Committee on Energy and Natural Resources,
                                                        Washington, DC.
        The Committee met, pursuant to notice, at 10:18 a.m. in
    Room SD-366, Dirksen Senate Office Building, Hon. Lisa
    Murkowski, Chairman of the Committee, presiding.

                   STATEMENT OF HON. JOHN BARRASSO,
                       U.S. SENATOR FROM WYOMING

        Senator Barrasso [presiding]. We call this hearing to
    order. I want to welcome everyone here.
        Senator Murkowski will be here shortly for this hearing
    that is titled, ``Examining the Performance of the Electric
    Power System in the Northeast and Mid-Atlantic during recent
    winter weather events, including the Bomb Cyclone.''
        I would like to start by calling on the Ranking Member,
    Senator Cantwell, to give her opening statement.

                   STATEMENT OF HON. MARIA CANTWELL,
                      U.S. SENATOR FROM WASHINGTON

        Senator Cantwell. Thank you, Chair Barrasso, and good
    morning to everyone. I am sure that Senator Murkowski will be
    here shortly.
        As some people may know, a 7.9 magnitude earthquake hit off
    the coast of Alaska, impacting Kodiak and parts of the Pacific
    Northwest with tsunami warnings that were issued for activities
    that were expected. Those warnings for tsunami waves have been
    recalled, but no doubt, I am sure the Senator is dealing with
    lots of things this morning related to that and other issues.
        I want to thank our witnesses, Chairman McIntyre and Mr.
    Walker, for being here. And I want to thank the staff here.
    We're glad we're back in operation. So we look forward to
    hearing from all our witnesses on the subject on the
    reliability of the grid and its performance.
        Last year Secretary Perry and his staff reviewed the
    reliability of the electricity grid in the light of the
    changing fuel mix, and I was relieved when I saw the staff
    report in August which I thought was fairly balanced. It
    carefully distinguished between the terms ``reliability'' and
    ``resilience'', and it described emerging techniques to
    integrate more renewable resources, including synthetic inertia
    and frequency response. It also recommended grid operators
    adopt resilience metrics that still needed to be developed.
        Unfortunately, when Secretary Perry filed his report as a
    proposal to FERC, I was a little more alarmed. The proposal
    ignored the conclusion of the Department's own staff. It was a
    transparent attempt, in my opinion, to prop up the
    Administration's favorite kinds of energies which are getting
    outpaced in the marketplace.
        There were many problems with this proposal. They never
    defined resilience. It picked a single attribute of power
    plants--fuel stored onsite--and it elevated it above all other
    factors. It promised full recovery for coal in some states that
    had chosen to follow a market model years ago. But the biggest
    problem was that it would hit consumers with billions of
    dollars of additional added costs to multiple, independent
    assessments.
        Bailing out coal plants isn't just bad policy, it was a
    breathtaking raid on the consumer's pocketbooks.
        The PJM market monitor found that the Secretary's proposal
    could nearly double the cost of wholesale energy in the
    nation's largest electricity market. So I want to applaud
    Chairman McIntyre and the whole Commission for unanimously
    rejecting the Secretary's proposal. At the heart of that
    rejection, I believe, are consumers. I think the Commission
    wisely reviewed the Federal Power Act's just and reasonable
    standard for electricity rates and found that the Secretary had
    not met this burden of proving that the current rules are
    unjust and unreasonable. Consumers couldn't have asked for a
    better defense.
        Given some of the troubling stories about coal interests
    and lobbying the Department, it has never been more important
    for FERC to maintain its tradition of independence.
        I hope that Secretary's proposal hasn't given resilience a
    bad name. The difference between the grid's recovery from
    hurricanes in Florida and Texas versus Puerto Rico shows that
    resilience really does affect lives and quality of life. It
    deserves more attention.
        So I am pleased that we have Allison Clements testifying
    today, along with our other witnesses. She serves on the
    National Academies Committee that wrote an excellent report
    last summer on grid resilience, and I would like to submit that
    report for the record.
        [The information referred to follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Cantwell. It also has a series of concrete
    recommendations to Congress, to FERC and the Department of
    Energy that I hope we can explore today.
        Again, Madam Chair, thanks to all the witnesses for being
    here and for calling this hearing.

                   STATEMENT OF HON. LISA MURKOWSKI,
                        U.S. SENATOR FROM ALASKA

        The Chairman [presiding]. Thank you, Senator Cantwell.
        My apologies to our witnesses, as well as our Committee
    members. We have had a busy morning in Alaska this morning. I
    am told all is well, but I appreciate more than ever the value
    of things like the earthquake and tsunami early warning
    systems. It is important that they are there and that they were
    actually operating now that the government is back to order.
        Last week I outlined the busy agenda that we will have this
    year. While we will maintain our focus on legislation and
    nominations, oversight is also a very critical part of our
    role. We are obligated to examine the performance of agencies
    under our jurisdiction. Today is an opportunity to gauge
    whether federal policy is helping or hindering improvements in
    energy system performance.
        While it may not have been up to Alaska standards, the
    cold, snow and ice endured by many in the lower 48, especially
    along the Eastern Seaboard, was quite notable over the holidays
    and into the New Year. While the worst of it occurred over and
    on the shoulders of a holiday period and we didn't reach the
    extremes felt in the 2014 Polar Vortex, we did experience a so-
    called ``Bomb Cyclone'' event.
        I understand that a Bomb Cyclone is a cyclone storm system
    in which the pressure drops precipitously in a short period of
    time. Apparently these happen relatively often off the
    northeast coast but this recent storm was a record-breaker with
    the largest pressure drop in a 24-hour period since 1976. As
    such, it presented a kind of informative stress test for the
    electric power system.
        Now I have often said that federal law and policy must
    enable energy to be affordable, clean, diverse and secure. With
    this hearing, we return to a subject I have been following
    keenly since at least 2010 about how changes in the nation's
    electric grid and the mix of primary electricity sources are
    stressing system reliability and what federal changes may be
    necessary to address those stresses. The Secretary of Energy's
    Notice of Proposed Rulemaking (NOPR) issued in September and
    the recent FERC Order in response were focused on these same
    issues.
        In 2014, following the Polar Vortex, we held a similar
    hearing to examine challenges to the electric system. I said
    then that we needed to redouble a properly scaled and
    continuously improving approach to grid reliability and
    security. I am pleased to see that today's testimony shows that
    there were many lessons learned from that extreme weather
    event.
        For example, there now appears to be improved coordination
    between the electric and the gas systems. The RTOs and FERC
    have reformed market rules and improved business practices,
    NERC has updated its approaches and that is all good news. The
    bad news is that we have not addressed the more difficult and
    fundamental challenges for electric and gas infrastructure.
        For example, gas pipeline infrastructure remains too
    constrained. Broader policy changes are not sufficiently taking
    into account increasing risks that, in future years, system
    operators may have to turn to intentional service
    interruptions, otherwise known as ``load shedding'' or rolling
    blackouts or brownouts, to manage certain peak periods. One of
    our witnesses will speak about the situation in New England,
    which in some respects could serve as a harbinger of challenges
    in other parts of our nation.
        We must ensure that our nation's natural gas supply, which
    is a boon to our economy and to our national security, can be
    reliably delivered to a changing marketplace.
        At the same time, it is not clear what the reliability and
    economic impacts will be of a grid whose primary electricity
    resources are less diverse over time as baseload nuclear and
    coal units continue to retire.
        Meeting all of these challenges, while also strengthening
    competition for the benefit of energy customers, should be a
    shared priority. After all, promoting competition has been a
    tenet of federal electricity policy that has enjoyed wide
    bipartisan support for more than two decades and should remain
    so.
        This morning we will hear from leaders of two agencies
    under our jurisdiction, FERC and the Department of Energy. We
    will hear from the heads of three regulated entities with
    quasi-regulatory responsibilities, the North American
    Electricity Reliability Corporation, or NERC, and the two
    regional transmission organizations, PJM and ISO New England.
    We also have a member of a committee of the National Academies
    of Science, Engineering, and Medicine with us.
        So I welcome each of you to the Committee this morning and
    look forward to your testimony. I would ask that you try to
    limit your testimony to about five minutes. Your full
    statements will be included as part of the record.
        This morning we are joined by the Honorable Kevin McIntyre,
    who is the Chairman of the Federal Energy Regulatory Commission
    (FERC). This is the first time that you have appeared before
    the Committee in your capacity as Chairman. We welcome you.
        The Honorable Bruce Walker is also with us as the Assistant
    Secretary for the Office of Electricity Delivery and Energy
    Reliability at the U.S. Department of Energy (DOE). It is good
    to see you again, Bruce.
        Mr. Charles Berardesco is the Interim President and the CEO
    for NERC, the North American Electric Reliability Corporation.
    We welcome you.
        Ms. Allison Clements is the President of goodgrid LLC.
    Senator Cantwell has mentioned your contributions. We thank
    you.
        Mr. Andrew Ott is the President and CEO for PJM
    Interconnection, L.L.C. Welcome.
        Mr. Gordon van Welie is the President and CEO of ISO New
    England.
        Welcome to each of you.
        Chairman McIntyre, if you would like to begin with your
    comments this morning.

     STATEMENT OF HON. KEVIN J. MCINTYRE, CHAIRMAN, FEDERAL ENERGY
                         REGULATORY COMMISSION

        Mr. McIntyre. Yes, Senator.
        Chairman Murkowski, Ranking Member Cantwell and members of
    the Committee, thank you for the opportunity to appear before
    you today to discuss the performance of the electric system
    during the recent weather events.
        I am honored to serve as the Chairman of the FERC. Our
    Commission takes seriously the responsibilities that Congress
    has entrusted to us concerning the reliability of the bulk
    power system (BPS) in this country.
        We are still receiving and reviewing the data related to
    the performance of the bulk power system during the cold
    weather event that has taken place over the past month. Based
    on what we know to date, it appears that notwithstanding stress
    in several regions, overall, the bulk power system performed
    relatively well amid challenging circumstances. Looking
    forward, we must both learn from this experience and remain
    vigilant with respect to challenges to the reliability and
    resilience of the bulk power system.
        The performance of the bulk power system during the 2014
    winter event you referred to, now commonly known as the Polar
    Vortex, did provide useful context for understanding the
    performance of the bulk power system under the more recent
    winter events of the past month.
        During the 2014 Polar Vortex, much of the U.S. experienced
    sustained and, at times extreme, cold weather. The challenges
    presented by these conditions and high electric demand were
    compounded by unplanned generator shutdowns of various fuel
    types. These combined circumstances tested grid reliability and
    power supplies and contributed to high electricity prices.
        Drawing on that experience, FERC took numerous actions, as
    you have referenced, to address reliability and resource
    performance issues. For example, the Commission directed
    Regional Transmission Organizations and Independent System
    Operators, or RTOs and ISOs, as we usually call them, to report
    on fuel assurance issues, and the Commission revised its
    regulations to enhance coordination between the natural gas and
    the electric industries in light of the increasing use of
    natural gas as fuel for electric generation.
        For certain regions, the Commission approved capacity
    market reforms that are intended to increase financial
    incentives for improved resource performance and to penalize
    non-performance or poor performance. The Commission also
    approved temporary winter reliability programs in New England.
        Turning to the winter weather events of the past month, it
    is useful to consider the impact of the recent weather events
    on both the provision of service and the associated costs of
    that service. Importantly, there were no significant customer
    outages that resulted from failures of the bulk power system,
    generators or transmission lines. While there were no
    significant reliability problems during this recent cold
    weather event, wholesale energy prices were high, reflecting
    the stress on the system.
        Higher wholesale energy prices that accurately reflect fuel
    costs and current system conditions can be beneficial sending
    important signals that drive operational and investment
    decisions for both utilities and consumers. We also recognize
    that higher wholesale energy prices are ultimately borne by
    retail customers. And so, the Commission is attentive to the
    potential for behavior that takes advantage of extreme weather
    events.
        Just as the Commission and the RTOs and the ISOs drew
    lessons from the Polar Vortex in 2014 and applied them in ways
    that better prepared us for this recent cold weather event, we
    will examine these more recent events very carefully and seek
    to learn from them.
        I would like to emphasize a few points that the Commission
    made in an order issued a couple of weeks ago on the issue of
    resilience, more generally, referred to by Ranking Member
    Cantwell in her opening remarks.
        On January 8th, the Commission responded to the Proposed
    Rule on grid reliability and resilience pricing submitted to
    the Commission by the Secretary of Energy, and we initiated a
    new proceeding to further explore resilience issues beginning
    with the RTOs and the ISOs. As we stated in our order, we
    appreciate the Secretary reinforcing the importance of the
    resilience of our bulk power system as an issue that warrants
    further attention and, as we said in our order, prompt
    attention.
        The goals of our new proceeding are: First, to develop a
    common understanding among the Commission and industry and
    others as to what resilience of the bulk power system actually
    means and requires; second, to understand how each RTO and ISO
    assess resilience within its geographic footprint; and third,
    to use this information to evaluate whether additional
    Commission action regarding resilience is appropriate at this
    time.
        The Commission directed each RTO and ISO to submit within
    60 days of our order specific information regarding resilience
    of the bulk power system within those respective regions, and
    we invited the other interested entities to file reply comments
    within 30 days after the RTOs and ISOs submit their comments.
    We expect to review the additional material and promptly decide
    whether additional Commission action is warranted to address
    grid resilience.
        In our January 8th order, the Commission also recognized
    that the concept of resilience necessarily involves issues that
    extend beyond our Commission's jurisdiction such as
    distribution system reliability and modernization. For that
    reason, we encouraged RTOs and ISOs and other interested
    entities to engage with state regulators and other stakeholders
    to address resilience at the distribution level and more
    broadly.
        I assure you that the reliability and the resilience of the
    bulk power system will remain a priority of the FERC.
        I look forward to answering your questions.
        [The prepared statement of Mr. McIntyre follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The Chairman. Thank you, Chairman McIntyre.
        Assistant Secretary Walker, welcome.

    STATEMENT OF HON. BRUCE J. WALKER, ASSISTANT SECRETARY, OFFICE
    OF ELECTRICITY DELIVERY AND ENERGY RELIABILITY, U.S. DEPARTMENT
                               OF ENERGY

        Mr. Walker. Thank you.
        Chairman Murkowski, Ranking Member Cantwell and
    distinguished members of the Committee, thank you for the
    opportunity to discuss the issue of grid resilience during the
    recent cold weather affecting the Northeast United States.
        Just two months ago I testified before this Committee
    regarding the response and recovery efforts in Puerto Rico and
    the U.S. Virgin Islands. Secretary Perry and the Administration
    remain committed to supporting this restoration.
        The topic of today's hearing is timely. The resilience and
    reliability of the energy sector are top priorities of the
    Secretary and a major focus of the Department of Energy. In
    fact, the first study requested by the Secretary was the Staff
    Report to the Secretary on Electricity Markets and Reliability.
        The report examined the evolution of the wholesale
    electricity markets, the effect on grid reliability and
    resilience as it relates to wholesale energy and capacity
    markets compensating specific attributes and the connection
    between regulatory burdens and the retirement of baseload power
    plants. Many of the findings contained within the study were
    borne out in recent severe weather events across the nation.
        The last several months have been quite demanding on the
    energy sector. From an extremely active hurricane season to the
    2018 Deep Freeze, we have confronted challenges that tested the
    resilience and reliability of our energy infrastructure in
    different ways.
        During the recent cold snap from late December 2017 to
    early January, the Northeast saw record low temperatures for
    several days; however, customer outages were minimal.
        What was apparent during this weather event was the
    continued reliance on baseload generation and a diverse energy
    portfolio. Without action that recognizes the essential
    reliability services provided by a strategically diversified
    generation portfolio, we cannot guarantee the resilience of the
    electric grid. The grid's integrity is maintained by an
    abundant and diverse supply of fuel sources today, especially
    with onsite fuel capability; however, the real question is
    whether or not this diversity will be here tomorrow.
        Resilience for our electric infrastructure has become more
    important than ever as major parts of our economy are now
    totally dependent on electricity. Even momentary disruptions in
    power quality can result in major economic losses.
        At the same time, we are in the early stages of a large
    transformation of our electric supply system, with this process
    of change likely to continue for many years. Keeping the lights
    on during this transformation will require unprecedented
    coordination and collaboration amongst many parties. DOE is
    committed to work with FERC and regional RTOs and ISOs to
    achieve this mission.
        Stakeholders are facing multiple, connected issues. With
    growing asset stress, the integration of increasing amounts of
    distributed energy resources, growing consumer participation,
    dynamic markets, increasing cybersecurity and physical threats
    and the advent of the Internet of Things, the grid that
    sustained us for over a century must be designed to ensure
    reliability and resilience over the next century.
        Today, the marketplace, rather than engineering principles
    focused on building and maintaining a resilient energy system,
    is driving the design of the system. However, it is clear we
    need an in-depth understanding of the resilience of our
    electricity and related infrastructure in order to know how
    best to either modify existing market structures and/or build
    new resiliency standards into the system.
        To that end, I propose that DOE undertake a detailed
    analysis that integrates into a single, North American energy
    infrastructure model of the ongoing resilience planning efforts
    at the local, state and regional levels, including the
    interconnections between Canada and Mexico and also fills any
    gaps and harmonizes any inconsistencies in various efforts at
    those same levels.
        I understand that we currently do not have funds
    appropriated for such a task, so I am taking this opportunity
    to make my position clear. I believe that building this
    resiliency model should be the top priority for DOE's Office of
    Electricity Delivery and Energy Reliability over the coming
    years as does the leadership of the Department of Energy.
        To address challenges posed by events such as the recent
    cold snap as well as systemic energy infrastructure issues, it
    is critical for us to be proactive and cultivate an ecosystem
    of resilience, a network of producers, distributors,
    regulators, vendors and public partners, acting together to
    strengthen our ability to prepare, respond and recover.
        DOE continues to partner with industry, federal agencies,
    states, local governments and other stakeholders to quickly
    identify threats, to develop in-depth strategies to mitigate
    those threats and rapidly respond to any disruptions.
        Resilience is not a one-time activity but a habit. It is
    not something that cannot be done in 24 or 48 hours before an
    event and many events occur with little or no notice.
    Resilience is approaching our energy infrastructure with long-
    term planning in mind, understanding the future benefits
    resulting from investments made today.
        In conclusion, today we are faced with various threats that
    continually become more frequent and impactful. The energy
    system that provides services throughout the nation are prime
    targets. Accordingly, we need to build upon the reliable system
    we have today, realized from the hard work of FERC and the RTOs
    and ISOs, to make them more resilient to stave the deleterious
    effects of these present and real threats. The near-term
    concern is that energy markets are significantly driving the
    investments being made in generation sources throughout the
    nation.
        Indeed, most of these investments are primarily being made
    to address economic dispatch issues within specific regions.
    This has resulted in a significant reliance, in fact, perhaps
    an overreliance in some instances, on less costly fuel, in this
    case today, natural gas.
        The lack of a comprehensive integrated process to drive
    appropriate investments to improve resiliency that take into
    account energy system interdependencies, critical
    infrastructure susceptibilities, essential reliability services
    as well as affordability, increases the risk of a compromised
    energy infrastructure and thus, the security of this nation.
        Thank you for the opportunity to testify and I look forward
    to your questions.
        [The prepared statement of Mr. Walker follows:]

     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The Chairman. Thank you, Assistant Secretary, I appreciate
    your words.
        Mr. Walker. Thank you.
        The Chairman. Mr. Berardesco, welcome.

    STATEMENT OF CHARLES A. BERARDESCO, INTERIM PRESIDENT AND CHIEF
        EXECUTIVE OFFICER, NORTH AMERICAN ELECTRIC RELIABILITY
                              CORPORATION

        Mr. Berardesco. Thank you.
        Chairman Murkowski, Ranking Member Cantwell, members of the
    Committee, thank you for holding today's hearing. I'm the
    Interim President and CEO of NERC, the Electric Reliability
    Organization designated by FERC. In addition to developing and
    enforcing mandatory reliability standards for the bulk power
    system, NERC continually assesses reliability and monitors
    system operations, including in New England and the Mid-
    Atlantic.
        My testimony covers four points: NERC's monitoring of the
    bulk power system and our work with stakeholders, industry and
    government; the performance of the system during the recent
    extreme cold weather; how NERC fosters a continuous learning
    environment to improve reliability; and recommendations based
    on NERC's reliability assessments.
        For NERC, severe weather is, among other things, an
    opportunity to learn from events, to improve reliability for
    the future. Even when nothing bad happens, stress on the system
    points to reliability risks that should be addressed. NERC's
    bulk power system awareness group is our eyes and ears on the
    system and an important part of this process. On a daily basis,
    we continuously monitor operations on the grid working with
    NERC's regional entities, reliability coordinators,
    transmission operators and generators.
        In conjunction with NERC's regional entities, we also
    analyze system disturbances that impact, or could impact,
    reliability. In turn, this information is shared with industry
    operators, FERC and DOE.
        In short, these activities provide daily visibility into
    the system and actionable information to improve reliability.
        During extreme weather events NERC operates on an elevated
    basis. Throughout the severe cold weather period, we held calls
    with NERC's regional entities in the affected areas and
    gathered information from the Reliability Coordinators, such as
    ISO New England and PJM, about concerns and issues associated
    with the impending storm. Multiple coordination calls were held
    daily with regional entities and FERC staff to understand fuel
    levels, natural gas availability and other factors such as fuel
    storage and replenishment plans as well as dual fuel
    capabilities.
        During the extreme cold the primary challenge was reliably
    serving electricity demand during a period of near, and in some
    cases, record-setting winter lows. To manage the situation,
    Reliability Coordinators implemented conservative operations,
    emergency procedures and began heightened planning,
    communications and preparation.
        Throughout, the bulk power system remained stable and
    reliable. A diverse generation mix with adequate flexibility
    and backup fuel was key to meeting increased electricity
    demand, and all forms of generation contributed to serving
    load.
        New England experienced, perhaps, the greatest stress to
    the system. The region experienced increased use of fuel oil
    for generation, due to high natural gas prices, combined with
    record-setting consumption of natural gas for heating and other
    uses. Resupply of depleted oil inventories was delayed due to a
    winter storm impacting New England.
        Finally, the loss of the nuclear power station due to a
    transmission system outage removed 685 megawatts of baseload
    generation for several days. But again, throughout all of this,
    in New England and elsewhere, there was no loss of load due to
    BPS conditions.
        Based on the information we reviewed to date, we are seeing
    improved performance this winter compared to past winters of
    similar or worse severity. In part, this is due to actions
    taken from the lessons of the 2014 Polar Vortex.
        NERC's report analyzing the Polar Vortex underscores the
    need for thorough and sustained winter preparation, close
    coordination and communication between generator and system
    operators and reliable fuel supply.
        NERC and the regions, in close coordination with industry
    stakeholders, conduct annual workshops and webinars concerning
    winter weather preparation, provide lessons learned and share
    good industry practices.
        The regional entities are important to leveraging NERC's
    work with industry at the regional level. For example, the
    Reliability First Corporation, whose footprint includes the
    Mid-Atlantic region, conducted 18 onsite visits to generators
    since the Polar Vortex. These engagements are targeted at
    generating facilities that have experienced freezing or cold
    weather-related issues during prior winters and new generating
    facilities. This collaboration helped remedy winter challenges
    and share lessons learned, thereby contributing to improved
    performance.
        While the recent extreme cold weather period was less
    severe than the 2014 Polar Vortex, observations from both
    events point to four recommendations that NERC makes in the
    recent reliability assessments. First, reliable and assured
    fuel supply is essential to electric reliability. In wholesale
    electricity markets NERC recommends that market operators
    develop additional rules or incentives to encourage increased
    fuel security, particularly during winter months. Policies
    should also promote reliable natural gas supply and
    transportation. Second, generator owners and operators should
    maintain and regularly test backup fuel operability. Third,
    regulation of oil-based fuel for backup generation raises a
    potential need for expeditious consideration of air permit
    waivers. And finally, during the extreme cold, a diverse
    generation mix, flexible fuel resources and backup fuel were
    key to meeting increased electricity demand.
        Accordingly, NERC recommends policymakers and regulators
    should consider measures promoting fuel diversity and
    assurance.
        Thank you for this opportunity and I look forward to your
    questions.
        [The prepared statement of Mr. Berardesco follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The Chairman. Thank you, Mr. Berardesco.
        Ms. Clements, welcome.

               STATEMENT OF ALLISON CLEMENTS, PRESIDENT,
                              GOODGRID LLC

        Ms. Clements. Thank you. Good morning.
        Thank you and good morning, Chairwoman Murkowski, Ranking
    Member Cantwell and distinguished members of the Committee.
        I am President of goodgrid, a firm that specializes in
    energy policy and law. In 2016 to 2017, I served on the
    National Academies of Sciences, Engineering, and Medicine
    Committee that produced this consensus report, ``Enhancing the
    Resilience of the Nation's Electricity System.'' While I will
    talk about the report's findings, the views I express today are
    my own, not the Committee's.
        The national dialogue about resilience comes at a critical
    moment. The National Academies Report notes that the U.S.
    electricity grid is increasingly vulnerable to the risk of
    cyber and physical attack and the increased frequency and
    duration of hurricanes, blizzards, floods and other extreme
    weather events caused by climate change.
        The hurricanes you mentioned, Senator Cantwell, in your
    remarks, provide the most vivid examples of the health and
    safety impacts that prolonged electricity outages can have on
    our population, especially our already most vulnerable
    communities.
        Natural disasters reportedly caused $306 billion in 2017,
    making it, by far, the most expensive natural disaster year on
    record.
        As the FERC most recently defined it, resilience is ``the
    ability to withstand and reduce the magnitude and/or duration
    of a disruptive event.'' Importantly, resilience is, at its
    core, a transmission and distribution system concept and not
    one that is specifically focused on power generation types. We
    must distinguish between resilience and reliability, as you
    mentioned. Grid reliability is ensuring that enough generation
    and transmission exists to satisfy all customers' electricity
    needs and avoiding blackouts if a line or a plant goes down.
        While implementing reliability rules is certainly complex,
    the concept itself is relatively straightforward and amenable
    to standards for measuring its sufficiency. Resilience,
    separately, has emerged with this massive new risk brought on
    by the threat of attack and by the impacts of climate change.
        Although the unpredictable nature of the threats, like from
    this mornings canceled tsunami warning, making, defining and
    developing resiliency metrics is difficult; however, existing
    NERC and regional standards for reliability do actually also
    provide some resiliency benefit.
        The recent winter conditions provide three takeaways to
    inform your resilience-related policy thinking.
        First, the transmission system is reliable. We've already
    heard this. Incorporating lessons learned from the 2014 Polar
    Vortex, RTOs reliably managed unexpected outages during the
    Bomb Cyclone, like the manual shutdown of the Pilgrim Nuclear
    Plant in ISO New England. Before we rush to establish
    resilience rules for the transmission system, we should
    determine what markets, planning and operations protocols
    already due in terms of supporting resilience and whether
    additional metrics are necessary. The National Academies Report
    cautions about the difficulties of creating cost-effective and
    non-redundant rules for unpredictable and varied resilience
    needs. This Committee can support the efforts that Chairman
    McIntyre described at FERC on the resilience front.
        Second, efforts to ensure resilience should focus on
    protecting vulnerable communities and ensuring access to
    hospitals, fire stations and other critical services. Despite
    the bulk system reliability in the last month, 80,000 homes and
    businesses had little comfort when they lost power during the
    Bomb Cyclone. To tackle end-use resilience needs where people
    are affected, we depend on resilience planning and emergency
    preparedness at the local and state level. Proactive
    Congressional support outlined in the National Academies
    Report, especially via public-private partnerships, can go a
    long way in supporting this planning and improving resilience.
        Third, renewable energy and distributed energy resources
    are critical components of a reliable grid. The Bomb Cyclone
    and the 2014 Polar Vortex affirmed wind power's role as a
    critical cold weather reliability resource. Wind power
    performed well above its allotted capacity values and did not
    go offline, helping to avoid, generally, helping to avoid price
    spikes and other blackouts.
        Distributed energy resources, especially customers getting
    paid to reduce their power use, can provide significant
    contributions to extreme weather reliability as well.
        This was demonstrated during the Polar Vortex in PJM where
    nearly 3,000 megawatts of voluntary demand reduction played a
    key reliability role. Unfortunately, current ISO New England
    and PJM rules do not provide incentives for economic reductions
    under these conditions in demand and did not facilitate
    significant economic demand response this month, to my
    understanding.
        These takeaways affirm the value of competitive wholesale
    markets and FERC's long tradition of technology-neutral support
    for these markets.
        With the DOE's proposed NOPR behind us, this Committee
    should be wary of other supposed in-market proposals, intended
    to sustain specific types of power generation.
        At this critical moment and through smart resilience
    policy, this Committee has a strong opportunity to support a
    clean, reliable and affordable energy future.
        Thank you.
        [The prepared statement of Ms. Clements follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The Chairman. Thank you, Ms. Clements.
        Mr. Ott, welcome to the Committee.

             STATEMENT OF ANDREW L. OTT, PRESIDENT & CEO,
                      PJM INTERCONNECTION, L.L.C.

        Mr. Ott. Thank you, Chair Murkowski and Ranking Member
    Cantwell and other members of the Committee. I appreciate the
    opportunity to testify in front of you today about PJM's
    experience during the recent cold snap from December 27th to
    January 7th. I wish to offer, also, our perspective on
    activities we need to engage in in the future to ensure that
    our nation's electric infrastructure remains reliable and
    resilient and the supply of electricity is actually met
    efficiently, fairly and cost-effectively.
        As I note in my testimony, we are a FERC-regulated,
    regional transmission organization serving all or parts of 13
    states plus the District of Columbia. We have a population of
    65 million people. So obviously, the reliability of the grid is
    job one for us.
        During recent cold weather, we've experienced three of our
    top ten winter peak demand days of all time. Overall, the grid
    and the generation fleet performed very well. We had very
    sustained high performance throughout the cold snap.
        This cold snap was actually prolonged as compared to the
    Polar Vortex which was much shorter, more deeper cold. This
    cold snap was much more prolonged, and we depended on that
    prolonged improved performance.
        With the support of FERC, we had instituted reforms in our
    capacity market regarding pay for performance based on the
    lessons learned from the Polar Vortex, as the Chairman had
    indicated. And we did see significantly improved performance
    during this cold weather event.
        All resource types, coal-fired generation, gas-fired
    generation, nuclear generation, renewable generation, all
    performed better in this cold weather event than what we saw
    during the Polar Vortex and certainly we see that improvement
    was based on our lessons learned, improvements in investment
    back into those resources to see that they perform well.
        While I can assure you that the grid is reliable today, our
    work is not done. We certainly cannot become complacent. We
    need to look at certain initiatives to undertake, and certainly
    PJM has been undertaking those initiatives to look at the
    resilience of the grid and how we are going to improve the
    robustness and resilience of the grid into the future.
        We look at this from three perspectives: we have to plan
    the grid with an eye toward resilience, go beyond the
    traditional criteria; we need to operate the grid looking at
    the increased risks and increased threats that we see; and
    also, look at recovery of the grid should something happen we
    need to be able to bounce back quickly. So, those are the types
    of things we look at.
        I want to also bring to this Committee's attention some of
    the broader initiatives we'll be actually working in
    partnership with the new FERC Chairman as we go through the
    process of the docket that they opened, as he had mentioned.
        One of the most important things that we have been focused
    on is how does our market, electricity market, actually
    compensate for resources that are providing reliability
    services?
        And we have proposed key reforms and have engaged in
    discussion about key reforms on what we call price formation,
    and I want to spend a little bit of time explaining what that
    means for this Committee and for FERC as a whole.
        Just to be clear, the generating units we call upon to
    serve our customers and produce electricity get paid. They
    recover their offers and their costs and certainly are not
    uncompensated.
        But at times what we find is the total cost of operation of
    those units to provide the reliable power in each day, they
    don't necessarily get those monies in the market. Sometimes the
    market price doesn't reflect the fact that they're online and
    running; therefore, we have to compensate them through what we
    call an ``out-of-market'' payment. To put it in perspective, in
    this recent cold snap normally the out-of-market payments are
    about $500,000 a day for us, which is a very small number
    compared to the total cost of electricity. In the cold snap, we
    saw that increase fairly dramatically to $4 million, sometimes
    $6 million a day.
        What that shows is, so we are running those units to
    provide reliability to the grid, but the fact that they're
    running isn't reflected in the power price, the price of
    electricity. They get paid, but they aren't seeing it in the
    price. Therefore, when they go to sell their electricity
    forward in the market, so they're going to sell it for next
    month or next year, they're selling it at a discount that's not
    reflecting the fact that they were on to serve customers
    reliably in that cold snap.
        So, that's the issue we have to address. That's the issue
    that all resources will benefit from whether it be coal-fired
    resources, gas-fired resources, nuclear, renewable, demand
    response, alternative technologies. If we get the price right,
    all of these resources will see the dollar value of the
    reliability that they're proposing, and that's what we want to
    engage in, is that conversation.
        What we really need, because there's so many things that we
    need to address, we need to put time discipline. We're looking
    for FERC, and certainly we'll work with FERC, to put time
    discipline on these discussions to address these in a timely
    manner.
        I thank you very much. I look forward to questions.
        [The prepared statement of Mr. Ott follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The Chairman. Thank you, Mr. Ott.
        Mr. van Welie?

      STATEMENT OF GORDON VAN WELIE, PRESIDENT & CHIEF EXECUTIVE
                        OFFICER, ISO NEW ENGLAND

        Mr. van Welie. Good morning, Chairman Murkowski, Ranking
    Member Cantwell, members of the Committee. Thank you so much
    for the opportunity to appear before you this morning.
        In 2013, I appeared before this Committee to highlight a
    growing concern in New England which was that we were becoming
    more dependent on natural gas-fired power generation without
    the region making the investment in the natural gas
    infrastructure to supply the fuel to those generators. And
    since that time, we've continued to express our concern over
    the lack of secure fuel arrangements in the region.
        We also highlighted the possibility that both wholesale
    energy prices and emissions would rise when extreme weather
    results in natural gas pipeline constraints.
        In late December and early January, we experienced the
    impacts of the current fuel constraints as bitter cold
    temperatures drove an increase in demand for natural gas in the
    region. We've known for several years that when it gets cold
    the region does not have sufficient gas infrastructure to meet
    demand for both home heating and power generation.
        Constrained pipelines resulted in substantially higher
    natural gas prices causing gas to be priced out of the market.
    As a result, the bulk of the replacement energy was provided by
    burning oil, either through steam generators burning oil or by
    dual fuel units switching from gas to oil.
        These circumstances raise reliability challenges. First,
    the high burn rate for oil-fired generators rapidly diminishes
    oil inventory which inevitably needs to be replaced. And
    however, in a snow or an ice event, replenishment can be
    difficult or even impossible. Second, emission regulations
    limit the run time of oil-fired generators. Finally, both the
    fuel constraints and the rapid depletion of the oil inventory
    dramatically increased the potential of reliability
    consequences of a large transmission or generator outage during
    an extended cold weather event.
        These circumstances caused us to rejoice the operation of a
    number of the oil-fired generators and commit other resources
    into the market in order to manage the fuel inventory through
    the tail end of that extreme weather event.
        So far this winter, we've been fortunate not to experience
    any major contingencies that we could not handle and the bulk
    power system has operated reliably. That said, we know that
    winter is far from over and we will continue to carefully
    monitor regional fuel availability. Regardless of the outcome
    of the remainder of the winter, I believe the last few weeks
    validate our concerns and underscore the importance of a study
    that we released last week.
        In late 2016, we embarked on a study that we call, the
    Operational Fuel Security Analysis, to improve the region's
    understanding of the reliability risks stemming from the lack
    of fuel security.
        Our recent experience leads us to the conclusion that no
    new incremental gas infrastructure will be built to serve power
    generation; therefore, the study does not assume the build out
    of additional gas supply infrastructure for power generation.
        We examined 23 different scenarios to analyze whether or
    not fuel would be available to meet demand and to assess the
    operational risk that materialized, in particular, with the
    retirement of non-gas-fired resources or the outages of
    critical resources in infrastructure on the system. The
    analysis saw that energy shortfalls due to inadequate fuel
    would occur with almost every future fuel mix scenario
    requiring frequent use of emergency actions, including load
    shedding to protect grid reliability.
        So the ISO will discuss the results of this analysis with
    stakeholders, policymakers and regulators in the region
    throughout 2018 to understand the level of fuel security risk
    and hopefully determine what level of risk the region and the
    grid operator should accept.
        It will be costly to remedy these fuel security challenges;
    however, the alternative is negative impacts on system
    reliability, chronic price spikes during cold weather, higher
    emissions when it's more economic to burn oil than natural gas
    and the possibility of further interventions by the ISO into
    the market to delay the retirement of critical resources.
        Wholesale markets and the transformation of New England's
    bulk power system have resulted in significant economic and
    environmental benefits to the region; however, the fuel
    security difficulties are real and they are significant.
        If we're able to meet these challenges I think it will
    result in a more reliable, efficient and clean power grid
    benefiting the entire region.
        I appreciate your Committee's focus on this important
    matter and look forward to any questions that you might have.
        [The prepared statement of Mr. van Welie follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The Chairman. Thank you, Mr. van Welie, we appreciate it.
    We appreciate the testimony of each of you this morning.
        Senator Manchin has indicated he has a pressing matter
    somewhere else and he asked very politely, so I am going to
    yield my time. You may take the first round of questions.
        Senator Manchin. I begged.
        [Laughter.]
        Senator Manchin. I begged.
        I want to thank Chairman Murkowski. Thank you so much and
    my dear friend, Ranking Member Cantwell, for allowing me to
    have this opportunity, but also for this hearing.
        Full disclaimer: West Virginia, as you know, has been a
    heavy-lifting state for a long time. We are very blessed and
    very pleased to be able to provide the energy the country has
    needed, starting way back when--for building, making the steel
    to build the ships that defend our country. So we are very
    proud of the energy part that we play in this great nation.
        With that, I think you all know that I am an all-in energy
    portfolio and the State of West Virginia is too, even though
    coal has been a dominant factor now that the Marcellus shale
    has come on so strong and Utica and even Rogersville. We have
    been blessed, and we're going to be able to help the country
    for many years to come.
        With that, as you know, I have been vocal about ensuring
    the reliability and resilience of our grid for some years,
    particularly since the Polar Vortex of 2014, which you all
    alluded to, and also the recent cold snap, the cold period that
    we hit.
        I supported the recent Department of Energy grid study and
    its subsequent proposal by FERC rulemaking. I have been asking
    questions about reliability and resilience in this Committee
    for some time and will continue to do so, particularly because
    we continue to see coal and nuclear plants going offline.
        We know the market forces that are at play. But over the
    most recent deep freeze of the Bomb Cyclone, as many are
    calling it, the grid performed well. I think you all recognize
    that, and I applaud each of you in your role, particularly you,
    Mr. Ott, in staying vigilant to make sure West Virginia homes
    stayed warm and the lights stayed on, since PJM is over West
    Virginia.
        I want to stress three points. We need to stay vigilant
    because coal-fired power performed well during the latest cold
    snap, yet many plants are fighting to survive. We need to
    better protect consumers from the shock and hardship of high
    electric bills when these events happen. West Virginia bills,
    as my colleague, Senator Capito will tell you, have risen
    exorbitantly in a very short period of time through no fault of
    its own. And I continue to be concerned that without criteria
    or standards for resilience it is truly hard to know whether
    our grid is actually resilient or not.
        So, for those people who believe that we can do without
    fossil completely, I want us all to be completely honest and
    accurate with them. We cannot. Maybe that day will come in the
    future. It's not here. And for what period of time and how soon
    that will happen, I don't know.
        I want to make sure we can provide what this country needs
    immediately and now and continue to do so for the time that it
    is going to be called upon.
        If I can start with you, Mr. McIntyre, and go down the line
    and ask one question. What would this country have done without
    the backup of coal-fired plants in the Polar Vortex and also
    this last Bomb Cyclone, if you will? And what critical position
    would it have put our country in, if any, so we can put that to
    rest and find out how we can stabilize and keep coal vibrant so
    it is there for that resilience that we need and the
    dependability this country needs?
        Mr. McIntyre. Thank you for the question, Senator.
        Coal did, as you heard from a couple of our witnesses
    here----
        Senator Manchin. Sure.
        Mr. McIntyre. ----perform well alongside other----
        Senator Manchin. I guess the question I am asking, would
    the system have been able to be flexible enough to provide the
    energy we needed during these periods of time?
        Mr. McIntyre. I think in this recent weather event, we
    wouldn't have seen any widespread outages absent coal. That
    said, coal was the key contributor. It wasn't exempt from
    operational problems. There were some issues, as I understand
    it, with frozen coal piles in certain sites and so on. But it
    was, no question, the key contributor.
        I share your overall view that all-of-the-above needs to be
    our philosophy of the different types of resources.
        Senator Manchin. Coal needs to have a place in this energy
    mix.
        Mr. McIntyre. Absolutely.
        Senator Manchin. Okay.
        Mr. Walker?
        Mr. Walker. Yes, sir, thank you for the question.
        So, you said something that I just want to--there's a
    little bit of a nuance. It's whether or not we could or should
    survive without the coal.
        And I think----
        Senator Manchin. There are some people that think that we
    should.
        Mr. Walker. Right.
        And I think it's very important to point out----
        Senator Manchin. I think they're wrong.
        Mr. Walker. ----that the evolution of the electric grid has
    inextricably tied together the vast energy systems throughout
    the United States--coal, natural gas, oil, insomuch as what
    we've done is we've put ourselves in a position where we now
    have more infrastructure to have to protect to ensure the safe
    and reliable distribution of bulk power.
        And so, you know, coal did play an important part here. And
    on average, it presented and provided 38 percent of the load
    during this event.
        So----
        Senator Manchin. Do you think that 38 percent, if it was
    not available, we would have had serious problems?
        Mr. Walker. The markets would have met the need with just
    simply much higher resources, but the point I'm trying to make,
    and perhaps not well, is that when we start relying on those
    other resources, things like natural gas and things like oil,
    we also increase our exposure because now the critical
    infrastructure in this country is not the coal sitting at a
    plant or a nuclear facility where I've got the nuclear fuel
    there. I've got to rely on thousands of miles of pipeline or
    transportation systems to get oil to locations.
        So the challenge to manage this, particularly in facing the
    threats we have today with, mostly, physical and cybersecurity,
    really, really should give us pause to step back and think
    about the diversity mix and whether or not we could ever get
    rid of oil. I think the better question for us is should we get
    rid of oil because it does--or coal, rather.
        Senator Manchin. Yes, I am not worried about oil.
        Mr. Walker. Because each one of those has certain unique
    characteristics that are very important.
        And I apologize for that.
        On page 86 of the staff report there's a chart that defines
    the different values of different types of generation add. And
    it's really, I think, what we have an opportunity going forward
    with and I look forward to working with FERC and the respective
    RTOs, is really finding that optimal mix that gives us the
    diversity for the resiliency and also minimizes our exposure
    from the cyber and physical threats that we face today.
        Senator Manchin. Madam Chair, I know my time is up. Can I
    just ask Mr. Walker--Mr. Ott, with PJM, he's responsible for
    delivering the 56 million, I think, was it 56 million?
        The Chairman. You are pressing your luck here this morning.
        [Laughter.]
        Mr. Ott, if you could reply, please.
        Senator Manchin. Mr. Ott?
        Mr. Ott. I'll make it very short.
        The reality is, again, for this past event, 45,000
    megawatts of the electricity that we delivered which is 40
    percent or more, was coal-fired. We could not have served
    customers without the coal-fired resources. That's the reality.
        The point is, are the prices reflecting the fact that those
    resources are running? My answer is no, it's not. We need to
    fix that. We clearly need it for now. The question is how does
    it transition?
        Clearly some coal plants don't run. They never run. They
    don't produce electricity. They're just hanging on. They should
    go.
        The ones that are running and online every day to serve
    customers should be reflected in the price. So, we need those.
    Some can go. Some have to stay.
        Senator Manchin. Thank you all.
        Thank you, Madam Chairman, for being so considerate and
    kind.
        The Chairman. It is a new day.
        Senator Cantwell.
        Senator Cantwell. Thank you, Madam Chair.
        Mr. Walker, obviously you've heard some of the
    recommendations on resiliency. Which one of those ideas in the
    report stand out to you as good things to implement?
        Mr. Walker. I think the position that FERC is taking in re-
    establishing what was previously the NOPR, in bringing the RTOs
    and the ISOs together to evaluate that the resiliency on their
    respective systems will provide an excellent baseline. And I've
    had the opportunity to meet with Mr. van Welie and go over his
    New England report and looked at the work that was done by PJM
    with the Polar Vortex.
        Those are two fantastic baseline analyses that will enable
    FERC, DOE, the RTOs and the ISOs to move forward with really
    having a fundamental understanding of where the
    interdependencies are on the system so that we can actually
    build a better and more resilient system informed by where the
    actual risk is and not the markets.
        Senator Cantwell. Well, I appreciate your comments about,
    first of all, compromised infrastructure and cybersecurity. I
    mean, given the Quadrennial Energy Review, that is where it
    said we should be spending our attention.
        And I'm reminded of this debate we had in this Committee in
    2015 about just that very issue, where oil and coal were
    competing for rail supremacy, and left upper Midwest utilities
    without the ability to serve their customers, simply because of
    congestion. So the dynamic is changing.
        And so I appreciate Ms. Clements' reports and the
    recommendations of those reports because you are citing the
    changing nature of economics and the challenges that then
    deliver to the utilities and to those who regulate the
    utilities.
        And that is why, Chairman McIntyre, I am so glad that you
    guys resisted what I thought was undue political pressure on
    the NOPR to try to force a bailout.
        I know that last week, Commissioner Chatterjee filed an ex
    parte notice about First Energy, a coal plant transfer. I think
    that was the right thing for him to do. But the news was
    troubling to me because it said to me that there were those who
    were trying to influence FERC on a political aspect as opposed
    to the thorny economic issues that are at stake here.
        What do you plan to continue to do to make sure that FERC
    is an independent agency? I will just give a little context--
    when ENRON manipulated the energy markets, I don't think
    anybody in my state really understood who or what FERC was. But
    after that, I guarantee you, it has become a household word
    because they know it is those that protect them from being
    gouged unfairly on energy prices, something so important to the
    economy of the Northwest.
        Mr. McIntyre. Yes, well, thank you for the question,
    Senator.
        The independence of FERC as an agency, as a federal agency,
    is essential to, first of all, it's that way by design,
    statutorily in its construction.
        And it's very important to me, personally, as I stated here
    in my confirmation hearing. I intend to do my utmost to ensure
    that it lives up to that independence.
        In this particular instance, I am delighted that we had a
    five to nothing vote reflected in our January 8 order. As you
    know, that reflects a bipartisan commission, three Republicans,
    two Democrats. And I'm just so pleased that we were able to
    see, kind of, a common path forward in terms of pursuing this
    very important issue of resilience.
        Senator Cantwell. So, you will make sure that politics
    stays out of it?
        Mr. McIntyre. Thus far, honestly, it hasn't been a problem.
    I have not personally felt any undue influence into any efforts
    to affect my decision-making.
        Senator Cantwell. Great.
        Mr. McIntyre. And I would expect that to continue.
        Senator Cantwell. Great, thank you.
        Ms. Clements, what about the Northeast and getting more
    supply? A lot of attention has been focused on increasing
    natural gas. What are some of the other options? I certainly
    understand the value of supply, but what do you think are some
    of the other solutions for the region for reliance and
    resilience?
        Ms. Clements. Thank you for the question, Senator.
        I think there is a couple of realities that we have to
    start with when we answer that question.
        And one is that this transition toward a different resource
    mix, one that has low marginal cost, free fuel from the sun and
    the wind as a predominant choice on parts of communities, on
    the parts of companies, on the parts of citizens, is already
    underway. It's already happening.
        And what the grid operators have always done as the energy
    mix has transitioned over time from back in the 50s all the way
    up until today, is manage that transition very well. And so the
    idea that this new set of resources coming on can't be reliable
    is a false place to start.
        And then the last reality, to inform. The answer to your
    question is that fuel diversity is one aspect of a resilient
    grid and of a reliable grid. It's not the only aspect.
        So when you're looking at the Fuel Security Report that
    just got released from New England, it is a great input into
    what is the standard regional planning practices for Regional
    Transmission Organizations and Integrated System Operators.
    It's a set. It's a piece. It showed 23 different scenarios. The
    assumptions that are included in the report have yet to be
    vetted through the stakeholder process, and certainly there's
    views by different stakeholders on whether or not those are the
    correct assumptions. But the report doesn't look at energy
    efficiency, the cheapest, most effective resource at protecting
    both resilience and reliability.
        Senator Cantwell. Thank you.
        Ms. Clements. It doesn't look at energy storage or any of
    those other options.
        Senator Cantwell. Thank you.
        Thank you, Madam Chair.
        The Chairman. Thank you, Senator Cantwell.
        Senator Barrasso.
        Senator Barrasso. Thank you very much, Madam Chairman.
        Mr. McIntyre, Wyoming is the nation's leading coal and
    uranium producing state. The industries are responsible for
    thousands of Wyoming jobs, billions in state and local
    government revenues. Coal and uranium also play a critical role
    in the electric grid reliability and resilience.
        During this recent cold snap, coal-fired and nuclear power
    generation resources were critical to meeting the electricity
    demand during the most extreme conditions. I am concerned about
    both the economic impact and the electric reliability impact of
    the continued retirement of these vital resources across the
    country.
        As FERC deals with this grid resiliency question, is the
    Commission going to evaluate pricing of reliability and
    resiliency in terms of the attributes of coal and nuclear
    resources? How do you plan to look at that?
        Mr. McIntyre. Thank you for the question, Senator.
        I don't think we're doing a complete job if we don't take
    that into account. And so, we've been fairly broad in the range
    of the questions that we have put to the boots on the ground
    here which are the RTOs and ISOs. And we need them to give us
    their best-informed views on, not only the operational aspects
    of keeping the lights on, as we say, but also what is needed
    from a market standpoint since they run the organized markets
    and the respective footprints as well. What is needed in a
    market sense to ensure that resources that are indeed
    contributing resilience benefits to our grid are properly
    compensated.
        Senator Barrasso. Alright.
        Now following up on that, both for Mr. van Welie and I'll
    ask you, Mr. Ott, to weigh in as well. Data from the Department
    of Energy shows that New England was heavily reliant on
    baseload coal and nuclear generation during this recent cold
    snap. Specifically, the data shows that at the peak of the cold
    snap, coal-fired generation accounted for 7 percent of the
    dispatch to capacity despite being only 2.6 percent of
    installed capacity in the region, so, really called upon to
    perform. Additionally, nuclear generation accounted for 23
    percent of dispatched capacity despite being only 12 percent of
    the installed capacity.
        Isn't it fair to conclude that when your region needed
    power the most, it was the reliable coal and nuclear power
    plants that were necessary to keep the lights on?
        Mr. van Welie. Well, I think coal and oil definitely, coal
    and nuclear definitely, contributed.
        I think the prospect for coal in New England is limited.
    There are two coal-fired power stations left on the system, one
    of which will retire fairly soon. We have four nuclear
    reactors, one of which will retire soon. And you know, what was
    surprising to us was 35 percent of the energy was coming from
    oil burned in the region, and many of those oil units are 40
    years old.
        So, I think the issue for us in New England is that we are
    definitely transitioning to a different power system as the
    region strives to decarbonize. By definition, we have to reduce
    the amount of fossil fuel burnt in the region.
        The question is, you know, what's the game plan looking
    forward in terms of to do so reliably. And the idea behind the
    study is to demonstrate the consequences of doing nothing, in
    the first instance, which we think are severe and to lay out
    for policymakers the various paths forward.
        I think we're looking forward to engaging a conversation on
    how best to orchestrate that transition.
        Senator Barrasso. Okay.
        Mr. Ott, would you like to add anything about PJM's
    experience?
        Mr. Ott. Yes, sir.
        Certainly from PJM's experience, of course, we have a much
    bigger proportion of our total resource mix being coal and
    nuclear. And in fact, during this recent cold weather event,
    obviously, more than half of the total supply was coal and
    nuclear. And certainly, let me be clear, we couldn't survive
    without gas. We couldn't survive without coal. We couldn't
    survive without nuclear. We need them all, in the moment. And I
    think the key, what we're focused on is, the key is each of
    these bring to the table reliability characteristics. Each of
    these were online when we needed them.
        The point was, as I had made in my opening comments, the
    pricing doesn't always reflect that, therefore, when they go
    sell their energy forward the fact they were on for reliability
    during the cold weather isn't reflected in the forward price.
    That's unfair. It puts them at a disadvantage and we need to
    fix it.
        And I think, really, this debate over there are certain
    coal plants, frankly, that are old and don't run much and
    didn't run during this period. Those need to retire. The ones
    that are online running every day, we need to keep them, and
    that's the reality.
        Senator Barrasso. Are there some specific actions that you
    might recommend that FERC take to ensure that baseload coal and
    nuclear generation resources are paid for the value that they
    bring to the grid?
        Mr. Ott. Yes, certainly. We've discussed that with FERC and
    certainly we'll continue the discussion with the Chairman as
    part of this new docket. And really it focuses on the energy
    price formation that we just discussed in saying we really need
    to take a hard look at that.
        FERC had already looked at fast-start pricing and the
    phenomena I'm describing here, the fast-start pricing won't
    affect that. We need to look at the pricing related to these
    types of events where it's not the resources that flexible and
    moving around, it's the ones that are online and serving
    customers that we need to address.
        Senator Barrasso. Thank you.
        Thank you, Madam Chairman.
        The Chairman. Thank you, Senator Barrasso.
        Senator Smith.
        Senator Smith. Thank you, Madam Chair, for organizing this
    very important hearing and I very much appreciated reading your
    testimony, though I am sorry I missed your comments here today.
        It is apropos because Minnesota is, this morning, digging
    out from a major snow event. And in Minnesota that means a lot
    of snow, not a little bit of snow. And so it is uppermost on my
    mind about the impact of dangerous weather events on the
    resilience of the whole community. I really appreciate how
    important this is to all come together.
        Last week, we heard in this Committee from the
    International Energy Agency Director, Dr. Birol, about
    renewable energy and how renewable energy, like wind and solar,
    is going to be the lowest cost new generation around the world
    within maybe the next 10 years, and how energy storage costs
    are dropping as well.
        So I would be very interested in hearing from this panel
    about how you think these changes will affect the reliability
    and the resilience of the grid. It seems to me that
    diversifying would contribute to that, but I would be very
    interested to know what your perspectives are on this.
        Really anybody.
        Mr. McIntyre. I'll jump in briefly first, Senator.
        And I say again, welcome to Washington.
        [Laughter.]
        Renewable generation is already, clearly, in the column of
    success story. It gets better every year, and it is
    contributing reliably to the satisfaction of our nation's
    electricity needs today. And I expect that trend to continue.
    It performs well during harsh weather, as we heard, including
    improved performance of wind resources in cold weather
    conditions.
        That said, it's still the case that it presents operational
    challenges in that the wind isn't always blowing and the sun
    isn't always shining. So, that presents some realities to it.
        I think that energy storage which your question referenced
    also will be something that will advance the ball significantly
    toward addressing that. It's not so much today, at least in my
    view, a compensation issue, as a technological one. We need the
    technology to take that next big step. But with that, I think
    the picture of that side of the industry is good already and
    improving.
        Senator Smith. Yes, please go ahead.
        Mr. Walker. Senator, thank you for the comment.
        I would note that the diversity that you speak to, I think,
    does in fact add to the capability to provide resilient power.
        And I think, in particular, the integration of the
    renewables provides strategic use of those resources to meet
    certain demands and certain requirements to certain areas that
    they really can have a tremendous level of capability.
        That being said, storage, as I noted in my confirmation
    hearing, I consider it the Holy Grail of the electric system.
    And that being said, it is one of the top five goals in my
    specific department to focus in on really moving grid megawatt
    scale storage forward so that we can integrate that as a
    resource and help enable some of the integration of renewables
    and other resources to be really key parts of our resilient
    grid.
        Senator Smith. Thank you.
        Maybe I could just follow up with Ms. Clements on this?
    What role do you see energy efficiency, and you also have
    talked some about demand response, play in resilience? In
    Minnesota, we've had some success weatherizing homes, for
    example, to lower energy consumption and take some of the
    pressure off the grid. I would be interested in hearing your
    thoughts on that.
        Ms. Clements. Thanks for the question, Senator.
        Energy efficiency is the most underrated resource we have.
    It's the cheapest, by far. We've been talking about it for a
    long time. So perhaps it's not as exciting and new, but the
    potential is still high.
        And a different National Academy's report suggests on the
    order of magnitude of 25 to 30 percent, economy-wide potential
    reductions are available still.
        In the states that have pursued as a policy matter all
    cost-effective energy efficiency, they are taking down
    decreases in total demand at the level of three percent a year.
        Together with other distributed energy resources, like
    demand response, which PJM has provided as high as in some
    years, 12,000 megawatts of resources, meaning that's 12,000
    megawatts of power plants you don't need in certain instances
    and are really exciting.
        I think three things about distributed energy resources, in
    addition to bringing down these numbers of megawatts. They
    provide the flexibility, the resource flexibility, to integrate
    the high penetrations of this lowest cost renewable energy
    potential that you describe. And they can provide the
    flexibility. And finally, they are a great resilience resource.
    If you think about the storage during Hurricane Sandy when
    microgrids were able to island themselves and continue to
    provide power at hospitals and at fire stations. That's a real
    opportunity on the resilience side.
        So, I think that the potential is just tremendous and
    that's where we should start.
        Senator Smith. Thank you very much.
        The Chairman. Thank you, Senator Smith.
        Senator Capito.
        Senator Capito. Thank you, Madam Chair.
        I thank the panel. This is, obviously, of great interest to
    me being the other Senator from West Virginia and coal,
    obviously, a very important part of our, not just our economy,
    but as Senator Manchin said, very proud of the history of
    energy production that we have had in our state. We also have
    the Marcellus shale development which is very exciting.
        Just a quick question. Mr. Ott, Mr. van--if I say your
    name, van Welie? Did I get it right?
        Mr. van Welie. Perfect, thank you.
        Senator Capito. Okay.
        Mr. Ott, he mentioned how many retiring nuclear and coal
    plants are going to be in his area. What is that figure for PJM
    until 2020 say?
        Mr. Ott. Yes, as far as PJM, we do have one nuclear
    station, a 620 megawatt nuclear station, that's scheduled to
    retire coming up before 2020.
        As far as coal plants, we've experienced 20,000 megawatts
    of coal plants retiring previously.
        Senator Capito. Right.
        Mr. Ott. For the next few years we're looking, probably, in
    the 4,000 range of announced. Certainly, there could be more
    go.
        Senator Capito. Which is 17 different units. Is that--that
    is what I have here.
        Mr. Ott. Yes, in that realm.
        But again, some of them have not formally announced. Some
    have formally announced. There are some that are having
    concerns financially, but as far as formally announcing, it's a
    little bit less than that.
        Senator Capito. So, let me continue with you.
        At peak load during the cold snap, natural gas generators
    provided only 48 percent of what you had predicted, and coal
    overtook that. Is that correct? Could you talk about that a
    little bit?
        Mr. Ott. Yes, certainly.
        In PJM, what we saw was the coal during the recent cold
    snap, we saw more coal production than normal. I think it was
    an economic displacement. In other words, the gas prices went
    up, therefore, the gas units dispatched down, coal came on at a
    higher level. So, certainly we saw a lot more coal production,
    coal-fired production, if you will, than we normally would in
    that cold snap.
        Senator Capito. Chairman McIntyre, can you help me with
    this?
        The pricing of natural gas spot prices spiked up to an all-
    time high during this time, maybe 60 times their normal price.
    Do you know that, Chairman?
        Mr. McIntyre. I don't know if it was an all-time high. I
    know that we did experience significant price increases. And as
    I mentioned earlier, that's the kind of thing that can, in a
    broad sense, be helpful. It's important that we have market
    signals that reflect shortages, including in this case, short-
    term spikes in demand.
        Senator Capito. Right.
        Mr. McIntyre. It sends proper signals both to providers of
    the resource and to consumers.
        Senator Capito. Mr. van Welie, do you want to make some
    more comments?
        Mr. van Welie. Well, to affirm what you just said, the
    prices got up in the $100 range. So, if you look at it when the
    pipes aren't constrained, in the $2 to $3 range from an----
        Senator Capito. Well, that gets me to another issue that we
    have, sort of, talked around but certainly in the New England
    area the accessibility to natural gas and the permitting with
    pipelines. I mean, we are having difficultly, even the State of
    West Virginia sometimes, permitting our pipelines.
        The Chairwoman can speak about this as well. New England
    does not seem to have the appetite to permit the pipeline, so I
    read in the Financial Times that says that gas from Russia,
    Arctic is going to warm homes in Boston and there is LNG coming
    from Russia. We have a natural resource in my home state and
    region we would love to be selling our natural gas in this
    country, into the Northeast. So, how do you respond to that?
        Mr. van Welie. Well, I think the first problem in New
    England is to find a customer for the gas pipeline. So I think
    the structural issue is that there's no customer prepared to
    sign the long-term contract to have the pipeline built.
        The second issue is once you have a customer, then you have
    to confront the siting issue. And I'd say there's a siting
    problem both in New England and in New York.
        For us to move the gas from the Marcellus shale into New
    England, you'd have to overcome those two obstacles.
        I think the decision from a policy point of view for the
    region is do regional policymakers want to make those
    investments to relieve those constraints or do they live with
    the constraints and work around them?
        And if you're going to work around the constraints, then
    you either have to turn to alternative fuels, like oil or LNG
    and then in that sense, the Jones Act doesn't make a lot of
    sense to me because we're importing LNG from faraway places
    when we're exporting it from terminals a few hundred miles
    south of us.
        Senator Capito. So, with the Russian LNG that has come in,
    obviously they already have a customer that is purchasing this
    because the supplies got so low during the Bomb Cyclone. Is
    that correct?
        Mr. van Welie. Yeah. So what happens is the dynamic is when
    the LNG inventory of the gas supply drops, you know, below
    certain levels, customers in the gas markets, local
    distribution companies, for example, will start calling for
    spot gas supplies.
        Senator Capito. Right.
        Mr. van Welie. And so, you get contracting happening in the
    world markets for LNG.
        Senator Capito. Interesting to me from another perspective
    is while that is occurring the Russian gas coming here, we have
    two cargo vessels with LNG from our southern ports or Louisiana
    shipping into Europe to try to help them meet their challenge.
        I mean, if we are looking at an overall system here, from
    cost, from emissions and all kinds of things, that does not
    seem to make a whole lot of sense to me.
        Mr. van Welie. It doesn't make a lot of sense to me either.
        Senator Capito. No.
        Thank you.
        The Chairman. And our job is to make sense of all of this.
        [Laughter.]
        Let's go to Senator King.
        Senator King. I hate to follow the admonition to make
    sense. It makes it difficult.
        [Laughter.]
        Mr. van Welie, I very much enjoyed seeing you. I remember
    meeting with you in 2013 about this very issue.
        And first, Madam Chair, I love this panel. We should take
    them with us everywhere. You all have done a really good job of
    illustrating a lot of issues, important issues, in a brief
    time.
        I do want to promote something for the audience and anybody
    interested in these issues, and it is an app called ISO to Go,
    produced by ISO. It gives you moment-to-moment prices all over
    New England, where the demand curve--by the way, Mr. van Welie,
    the demand is exceeding the forecast at this moment by about
    half a megawatt. You may want to call your office----
        [Laughter.]
        ----when we finish here.
        But it also gives where all the resources are--renewables,
    oil, gas, coal and nuclear. This is very, very useful. Thank
    you for this. It is incredibly helpful.
        Now I want to put up some visuals, I learn visually, to
    what we have been talking about here today.
        [The information referred to follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator King. The bottom red line on this chart is the
    Marcellus shale cost in the region, around in Pennsylvania
    going back to the beginning of December. The blue line is the
    cost in New England. What this tells us is it is not a natural
    gas price problem, it is a delivery problem. And that is what
    we have been talking about today. It is the infrastructure
    problem that we have been talking about.
        The problem with the infrastructure is, does anybody want
    to build a $2 or $3 billion pipeline to deal with this if it is
    not going to be necessary the rest of the year. And that is
    where we get into the tradeoffs between storage and LNG as an
    option and building the infrastructure. I just want to indicate
    how these things all interrelate.
        The other piece is the relationship between what we just
    saw, which is natural gas prices and electricity--an absolute,
    almost entire, straightforward correlation, as you see.
        [The information referred to follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator King. This goes back 15 years.
        Hurricanes hit the Gulf. Gas goes up. Electricity in New
    England goes up. Same thing over the winter of 2014, the Polar
    Vortex, and we're up in this area--I saw $32 a megawatt hour
    recently. So these things are all interrelated.
        One of my favorite comments was from a friend of mine in
    Maine who said there is rarely a silver bullet, but there is
    often silver buckshot. That is what we are talking about here
    is a multiplicity of resources.
        Ms. Clements, you talked about efficiency. The cheapest
    kilowatt hour is the one you never use. So we have efficiency
    opportunities. We've got renewables. We've got demand response.
    We've got storage. We've got infrastructure. We've got rate
    structure, Mr. McIntyre. We've got rate structure which will
    influence how we use power in terms of efficiency during the
    day.
        I realize I am making a speech here. If you can find a
    question in here, you are welcome to it.
        [Laughter.]
        Mr. van Welie, talk to me about this, how we deal with
    this. Let's make it specific. Do we build a pipeline or do we
    do more storage?
        Mr. van Welie. So, I think it's going to come down to what
    policymakers decide to do. I think there's two parallel tracks
    in terms of this conversation in New England.
        The one track that we're going to be the lead on is how do
    we make sure that the constraint is appropriately priced in the
    market because, to Chairman McIntyre's point, unless we price
    that constraint, we're not going to get the reliability that we
    seek. I think we learned some things over the past few weeks
    that make us think that we've still got a lot of work to do.
        I think the separate and parallel discussion is how to
    relieve these constraints.
        So to Ms. Clements' point, and I agree with you, energy
    efficiency is one tool in the toolbox.
        Ms. Clements, you may have missed it in our analysis, but
    we take into account and project forward all the energy
    efficiency efforts that the states are making. And the New
    England states have made significant efforts. I think they lead
    the nation now in terms of energy efficiency.
        But I think the evolution is occurring faster than what the
    states are doing with regard to these efficiency investments.
    And my fear, really, is that the retirements will happen more
    quickly than these investments will be made.
        And the other thing, I look out----
        Senator King. One of the problems I see here is that gas is
    the cheapest capital cost, and yet you are taking the price
    risk. That is one of the tradeoffs, but the way our system is
    working now everyone is looking for low rates next year and the
    year after, but we do not have long-term, 15-year power
    purchase agreements that will support the capital investment
    necessary for some of the other options.
        Mr. van Welie. Yes, I think the peakiness of the demand for
    this fuel is the issue. And I think the--we're going to be
    stuck with this problem for a long time. Because if you think
    about where the region is going in the long run, we want to
    take carbon out of transportation and heating which means we're
    going to drive the demand for wholesale electricity up in the
    region. And so, over time we're going to have less utilization
    of the pipeline, but when you need it you're going to really
    need it in a big way. And you can offset some of that through
    electric storage, but our issue really is seasonal storage. So,
    I think the region needs to work through the various
    possibilities and understand what the cost benefit trade----
        Senator King. Again, you are talking about grid level
    storage, but it is hard to justify the cost of grid level
    storage if you only need it two weeks of the year. Correct?
        Mr. van Welie. Exactly. And grid level storage in terms of
    today's technologies are not very useful in a multi-day, multi-
    week event.
        The Chairman. Thank you, Senator King.
        Senator King. Thank you.
        The Chairman. Senator Daines.
        Senator Daines. Thank you, Chair Murkowski, Ranking Member
    Cantwell.
        It seems like each winter and each summer when energy
    demands peak we are reminded of the importance of reliable and
    affordable energy.
        I am from one of those northern states, Montana. We respect
    terms like Polar Vortex and Bomb Cyclones. Of course, in
    Montana, we call that January, but that is the way it goes.
        [Laughter.]
        The importance of keeping the supply on hand to keep the
    lights on and the infrastructure necessary to support that
    system and this winter has been no different.
        This hearing is timely as my office is kicking off planning
    efforts for our Montana Energy Summit. We do this every couple
    years. It will be in Billings in May. We have invited FERC
    Chairman, Kevin McIntyre, to attend, Secretary Perry and
    others. We hope to have important conversations related to
    energy infrastructure and the jobs energy creates in our
    states, and we hope they can both attend.
        As you have probably heard me say more than you want to,
    one critical piece of our energy infrastructure in Montana and
    across the Pacific Northwest is the Colstrip Power Plant. It
    supports about 750 direct jobs, generates enough power for
    about 1.7 million homes and businesses across Montana and the
    Pacific Northwest. Through heavy-handed regulations, litigation
    and some state policies, the future of this plant is actually
    at risk.
        I was out there a couple years ago on a visit that is
    memorable to me. They were taking their boilers down for
    maintenance. It was July. I walked in and they were scrambling.
    The plant manager had been up since early, early morning,
    middle of the night, in July. And so, what's the problem? He
    says, well, here's the problem. He said, we have tremendous
    balanced energy portfolio in Montana. We are truly an all-of-
    the-above state. We are developing our renewables. We have
    great hydro resources. We have wind resources. But this high-
    pressure system moved into the Northwest. And when high-
    pressure systems move in, what happens? The temperature goes up
    and the wind stops blowing, and because they had Colstrip
    down--one of the major units down for boiler maintenance--we
    were struggling to keep up with baseload at that moment because
    the wind stopped blowing.
        We refer to wind as intermittent power, and it is not a
    critique of that renewable source of energy, but we still have
    to solve the storage issue with wind to make it a more reliable
    part of our energy portfolio.
        I just came back from Taiwan last year. It was September.
    If you remember what happened in Taiwan in August, they lost
    electricity to about half the homes across Taiwan. It was a
    major outage. And why? Because they were too aggressively going
    forward on eliminating nuclear energy from their balanced
    portfolio. They had a plant that was ready to go, back in 2014,
    but it was battling some of the regulatory issues to get it up
    and running. With that peak load on a hot day in August, they
    lost their baseload.
        I understand that while a lot of coal-fired generation has
    retired in recent years, New England had to rely on its
    existing coal and oil-fired generation for this winter event.
        And as more states' energy mixes are changing toward more
    renewable generation due to policies and so forth, I remain
    convinced that we must find ways to keep a diverse, truly all-
    of-the-above, energy mix in this nation, especially during
    these peak times of load.
        My question for Mr. Walker: In your experience, how
    important is it to keep a diverse energy portfolio at all
    times, but especially during peak load?
        Mr. Walker. Thank you for the question, Senator.
        I believe it's extremely important. And it's not only
    during peak load, I think it's throughout the year.
        You know, importantly, the diversity of the load provides
    the opportunity for us to build resiliency into the model.
        With the threats we have today with cyber and physical
    security, which are very real. They're emerging. They're
    evolving. They're increasing. And the impact of these could be
    very significant in the country.
        So as we look at the portfolio of generation sources that
    we have, the diversity component is extremely important. And as
    we work with the RTOs and with FERC to evaluate the proposal
    set forth by FERC, those are things that we will identify and
    look at.
        I mentioned earlier on page 86 of the staff report, there's
    a diagram that illustrates the different capabilities of just
    different generation sources, things that provide for the
    baseload, the essential reliability services of each of the
    different types of generators.
        As you look at this, it's like an optimization equation.
    When you look at all the different variables and you look at
    what the underlying goal is, which is to provide a safe,
    reliable and resilient grid, it's about optimizing the
    generation components that we have as well as the underlying
    systems that tie into those generation sources to be able to
    get and achieve the reliability and resilience we need to.
        Senator Daines. My last comment, and I know I am out of
    time.
        My training was in engineering. And so, when I tell this
    quick little story about engineers it is not meant to be
    disparaging because I is one. I was in a debate one time about
    capacity--I was running operations for Proctor and Gamble--and
    the variation and demand and so forth and need to be able to
    have capacity available to cover spikes. We believed it needed
    to be over here and the engineers were off in their ivory tower
    doing some calculations. Thankfully we had a senior executive
    that, kind of, was listening to this Hatfield/McCoy debate, and
    stepped back. He said, first of all, I always err on the side
    of the operation folks because they deal with reality. But
    number two, if an engineer were to design the amount of beds
    needed for a family of three, in terms of capacity, they would
    say you only need one bed for a family of three because on
    average, everybody sleeps eight hours a day.
        [Laughter.]
        It is something to think about as we relate to peak
    capacity.
        Thank you.
        The Chairman. Thank you, Senator Daines.
        Senator Heinrich.
        Senator Heinrich. Senator Daines can get away with that
    because he is an engineer. Unfortunately, I am too. It is a
    curse and sometimes a blessing.
        [Laughter.]
        I wanted to start out and talk a little bit about that
    term, baseload power, because we hear a lot more of it today
    than we did 10 or 15 years ago. And I find that fascinating.
        I grew up in a utility family where my dad was a lineman
    when I was young. He was the manager later. Those were the days
    when coal and nuclear and hydro were the only games in town.
        But I bring that up because I think baseload, oftentimes
    today, is more of a political term than an engineering term. It
    tends to come up, oftentimes, at times when it is, sort of,
    code for trying to subsidize generation that is no longer
    competitive in the marketplace.
        I would just point out that when those coal-fired
    generators go down, and oftentimes that is unplanned
    maintenance and it is not unusual, they are providing zero
    baseload megawatts to the grid. We need to find ways today to
    think about our grid and meet supply and demand together and
    know what the weather is going to be tomorrow and the next day
    so that we can match those things up from whatever generation
    sources we are using.
        I want to go to Mr. Walker first because you said something
    to Senator Manchin, and I do not want to misquote you. I want
    to understand if I understood you correctly that inherently
    coal at a coal generation station is less exposed to the
    threats of physical or cyber threat to the grid than say, oil
    and gas pipelines.
        The reason why I bring that up is because from my
    perspective once you use that coal to generate, you have to get
    it to the customer. You have to do that over transmission lines
    and then distribution lines. And it seems to me that all of
    these infrastructures are equally exposed to those threats.
        You have the same SCADA systems at substations and relating
    to transmission and distribution on the electric grid that you
    would use in pipelines. You have the same physical threats to
    both of those distribution networks.
        So, I do not see the difference in terms of exposure, in
    terms of critical infrastructure. Am I missing something?
        Mr. Walker. No, that's a fair question.
        And I'll be--so what you heard me say, let me reiterate, is
    that what I do believe. And from, you know, the perspective
    that we're taking and I'm taking right now is DOE is focused on
    protecting critical national infrastructure. As FERC deals with
    the marketplace and we focus in on the resiliency, the
    capability that provides that safety and resilience in the
    grid.
        If I have a stockpile of coal, in this sense it's at a
    location for a sufficient period of time, I'm not placing at
    risk the infrastructure as if it were natural gas.
        So, if we take the----
        Senator Heinrich. What if that coal is too frozen or too
    wet to actually burn?
        Mr. Walker. And those are possibilities that were realized
    during the Polar Vortex.
        Senator Heinrich. Right.
        Mr. Walker. So, and I think through much of the work that
    was done after the Polar Vortex, provisions have been placed at
    the utilities and the generation plants that utilize things
    like coal to prevent, you know, through weatherization
    techniques and things like that.
        Senator Heinrich. So when I think of the Polar Vortex or
    even this latest Bomb Cyclone, if I am getting that term
    correct, the unsung hero that I think about that gets very
    little attention is actually demand response.
        I would be curious to hear from the folks at PJM and ISO
    New England, how important is demand response at this point in
    these sorts of events? And has a market been fully implemented
    and are there federal policies in place that assure that demand
    response is allowed to compete as effectively as possible in
    these kinds of events?
        Mr. van Welie. So, a market has been fully developed for
    demand response.
        We speak of demand resources broadly in New England and I
    say they're two categories. The one is passive, demand
    resources like energy efficiency. And that's very well
    developed in New England because of all the state programs
    supporting that investment. The active demand response which is
    active reduction during system events and so forth. We have
    lower penetration in New England, but the market exists. I
    think the issue has been the economics. It's not competitive in
    the market relative to some of the other resources.
        If you'd give me a minute I just wanted to reinforce
    something else you said as well. I think there's a policy
    conundrum here with regard to this discussion between fuel
    diversity and fuel security. I think the policy conundrum is
    that the term fuel diversity is at odds with the idea of a
    competitive wholesale market because it implies a central
    planning orchestration of the different resources on the
    system.
        Whereas the market is what you're really trying to do is
    create a competitive construct where the most economic
    resources come forward to produce the reliability service which
    is why you don't hear us using the term fuel diversity. We use
    the term fuel security.
        Senator Heinrich. Right.
        The Chairman. Thank you.
        Senator Cassidy.
        Senator Cassidy. Thank you.
        Gentlemen, I am going to refer to some testimony we
    actually had in June 2016 from a fellow, Jonathan Peress, who
    is the Director of Air Policy, Environmental Defense Fund. It
    was a very good hearing last time which I will now, kind of,
    raise questions from that.
        Mr. McIntyre, seeing that there was this price spike in
    fuel cost. LNG was imported. It had a spot price going far
    higher in the Northeast. This gentleman last year said that
    there was actually a lot of unused capacity in our Northeast
    pipeline system and that FERC was working to add flexibility to
    the schedule and to better use that capacity.
        One, do you agree with it? It is an assertion from two
    years ago, I guess, a year and a half ago. Do you agree with
    that assertion? And two, has FERC now worked to add flexibility
    in terms of delivering of gas?
        Mr. McIntyre. I know that we have worked on reforms in the
    market structures and practices and schedules in the
    interrelationship between natural gas pipelines which we
    regulate and electric transmission which, of course, is
    critical to gain the power from where it's generated, to where
    it's consumed.
        Senator Cassidy. Now, I think, he was speaking of the gas
    and he said that at times only 54 percent of the capacity was
    used in the Polar Vortex, the event to which he was referring.
    I guess I am asking is that still an issue or has that been
    addressed specifically?
        Mr. McIntyre. Well, we do have, as you heard, I think
    most----
        Senator Cassidy. I had to step out, I am sorry if I missed
    that.
        Mr. McIntyre. No, it's quite alright.
        But Mr. van Welie has presented the situation in New
    England and that is where, indeed, we have ongoing, long-term
    challenges in transportation infrastructure.
        Senator Cassidy. Is that related to lack of efficient use
    of current capacity? And I am sure it is not either/or. Or is
    it due to lack of capacity, sir?
        Mr. van Welie. In New England, it's really lack of capacity
    at this point.
        Senator Cassidy. Now, this gentleman, again, made the point
    and it was very provocative, that if you look at the lack of
    capacity it was only like two weeks out of the year in which
    there was lack of capacity. And his point, it is cheaper to pay
    high spot prices on those two weeks out of the year as opposed
    to pay for the infrastructure that would be underutilized for
    the remaining 50 weeks of the year.
        Any thoughts about that?
        Mr. van Welie. Well, I think it depends on one's view of
    the cost and benefits of rolling blackouts, for example. So I
    think there's a point beyond which we will maintain the supply
    and demand balance by taking demand off the system.
        So I think that's the tradeoff. I mean, one could look at
    it and say it's not worth making an investment in a pipeline
    infrastructure because we only use it a month a year, let's
    say, the incremental capacity. But you have to weigh that
    against the other consequences as well.
        I think what our study attempts to do is to show that we're
    very close to the edge in New England and we need to find a way
    of relieving this constraint, one way or another, either
    through investment in the pipeline infrastructure or continued
    investments in other sources of energy that will take the
    pressure off the gas pipeline and/or reducing demand on the
    systems. Those are the three avenues available to the region. I
    think they differ in implications with regard to cost.
        Senator Cassidy. So, importation of LNG would not be
    adequate for those two to four weeks a year in which you truly
    are constrained?
        Mr. van Welie. Well, I think imports of LNG, if you look at
    our study, we will become much more dependent than today on
    imports of LNG.
        I think our market monitor has raised another question
    which is there are two suppliers of LNG into the region, one of
    which is in Boston, the other which is in New Brunswick,
    Canada. They are pivotal suppliers into the marketplace.
        So one should expect to pay very high prices for natural
    gas when we have these constraints. And I think the policy
    tradeoff is do you want to pay these high prices on an episodic
    basis whenever it gets cold or do you want to soften those
    economics by investing in infrastructure that will relieve
    those constraints?
        Senator Cassidy. But again, this gentleman's point, I don't
    mean to belabor, but I think it is a critical question that
    pipelines are so expensive, particularly a green field
    investment, that it is actually cheaper to do the episodic high
    price than it is to do the infrastructure. Now, he is not here
    to make his point directly, but it sounds almost like you are
    disagreeing with that.
        Mr. van Welie. I think that the region needs to work
    through those cost benefit tradeoffs.
        Senator Cassidy. Okay. I yield back.
        Thank you.
        The Chairman. Thank you, Senator.
        Senator Duckworth.
        Senator Duckworth. Thank you, Chairwoman Murkowski and
    thank you for convening this very important conversation.
        Unfortunately, my two engineering colleagues are not here,
    but I just wanted to remind them that multiple people sharing
    the same bed in the United States Navy is called hot racking
    and there are young sailors, submariners, who are doing it
    right now in order to defend our nation. So, let's say a quiet
    prayer for them of thanks for what they are willing to put up
    with to keep us safe.
        My question goes back to the work that states have been
    doing for renewable energy. Illinois, my home state, has made
    tremendous gains in this area. In addition to requiring 25
    percent renewable energy by 2025, we also prioritize
    investments in jobs training programs that are focused on low
    income individuals to create thousands of clean energy jobs.
    These investments will help make our grid more reliable and
    more resilient, not less, while also creating jobs.
        Ms. Clements, in your opinion, how will Illinois' renewable
    energy policies impact the power system in the context of
    extreme weather events?
        Ms. Clements. Thank you, Senator.
        I think the recent Illinois Energy Act is one of the great
    examples of the smart way that states are leaning into this
    energy transition and saying we are going to use American
    ingenuity to harness the resources that we have and to create
    economic opportunity and jobs from making the grid more
    resilient and reliable.
        By increasing the diversity of the resources on the system,
    through increased wind and solar under the RPS standard in the
    law and through increasing energy efficiency, excuse me, it is
    increasing resource diversity. At this point, nationally, only
    about seven percent of the resource mix is non-hydro
    renewables.
        And when you think about the characteristics, every kind of
    resource has a set of benefits and issues that we've just been
    talking about. And so, narrowing the conversation to just gas
    versus coal and LNG versus new pipelines is an overly narrow
    view of the opportunities.
        The wholesale energy markets have done a good job of what
    they've intended to do which is to provide low-cost, reliable
    energy.
        As the mix changes and as states like Illinois take these
    exciting actions, the markets are going to have to start
    valuing things like resource flexibility that the Illinois Act
    is going to bring in through new distributed energy resources.
    And that's exciting.
        But when we're talking about price formation in the
    markets, let's not forget that we can't undervalue the benefits
    that the renewable energy resources and the distributed energy
    resources and energy efficient are also bringing to the table.
    So, when they're overperforming and providing extra services to
    the grid, they should also be getting paid for those services.
        And so, I think Illinois along with Minnesota and Hawaii
    and New York and California are just showing the way that other
    states can look to as an example.
        Senator Duckworth. Thank you.
        Can you speak a little bit to the cost of the renewables
    during extreme weather events and how they compare to other
    fuels?
        Ms. Clements. Well, on a marginal cost basis, Senator, the
    beauty of renewables, of course, is that the wind and the sun
    are free. And so, they were able to help by, wind, specifically
    in the Polar Vortex and we're still getting the information
    from the Bomb Cyclone, but the, you know, what they served, the
    role that wind, in particular served, was to help avoid those
    price spikes or to mitigate some of those natural gas marginal
    cost price spikes by over-performing at low marginal cost.
        Senator Duckworth. Thank you.
        In every tragedy there is some opportunity, and even though
    four months have passed since Hurricane Maria made landfall and
    clear evidence of the storm remain, the lack of electricity,
    running water, and reliable communications remain a central
    challenge to Puerto Rico as it struggles to return to semblance
    of life.
        I am committed to developing and advancing policy that will
    enable the island to remain operational during the next
    superstorm. And so I would like to see in Puerto Rico some
    investments made so that they are not put in the same place
    that they were in before Maria hit.
        Ms. Clements, in your opinion, will policies that help
    stimulate solar and batteries be useful in this endeavor to
    better position them for the next storm? Because we know with
    global warming and every extreme event, they are going to get
    hit again.
        Ms. Clements. Thanks for the question.
        Absolutely. I mean, I think just as of yesterday, 32
    percent of Puerto Rico's customers remained without power. So,
    that's all of October, November, December and now most of
    January.
        And the government also announced that they're considering
    privatizing the utility. That might help, in and of itself,
    with creditworthiness of the offtakers and bringing in the
    expertise that can really provide that innovative, new model
    grid.
        But anything that the Congress can do to provide those
    incentives, to help get that solar and get that energy storage
    online in Puerto Rico is critical and will facilitate a model
    that, per the National Academy recommendations, can serve as a
    best practice which then can be shared with other states and
    regions within the continental U.S.
        Senator Duckworth. Thank you, and I look forward to working
    with members of this Committee on securing legislation that
    will help us achieve these goals.
        Thank you, Madam Chair.
        The Chairman. Thank you, Senator Duckworth.
        Senator Hoeven.
        Senator Hoeven. Thank you, Madam Chairman.
        I have two questions for each of you, which relate to the
    Bomb Cyclone, but certainly to capacity and reliability.
        One goes back to a question that Senator Daines was getting
    at and that is essentially how do we make sure that we have
    enough baseload power for those type of events, so we are ready
    for those type of events? So one, how do we make sure we have
    enough baseload power? And number two, how are we going to
    build the transmission and the pipelines to make sure that we
    have an adequate distribution system?
        We are running into incredible difficulties building any
    type of pipeline for oil or gas and we are also running into
    the same kind of problems with transmission. So, it is
    actually, whether you are a fan of traditional or renewable
    energy, we are running into the problem of building enough
    infrastructure.
        And I can cite examples to you, including most recently,
    the Dakota Access Pipeline in our state which now moves half a
    million barrels of oil a day to East Coast refineries that need
    our light, sweet crude. If they don't get it from us, they get
    it from Saudi Arabia. I would rather they get it from North
    Dakota.
        So you could each take a swing at it. Those two issues, how
    do we make sure we have enough baseload power, how are we going
    to get people to support building this transmission we need to
    have the reliability we want? Chairman McIntyre, do you want to
    lead the effort here?
        Mr. McIntyre. Why not?
        Thank you, Senator, thank you for the question.
        As to baseload, as was pointed out, it's a term that means
    different things to different people these days. I think of it
    as the big, large-scale power plants that are intentionally
    designed to, kind of, run 24/7, essentially. And that is
    changing as technology changes and the economics of the market
    change.
        To answer your question, how do we ensure we have enough of
    it? I think we ensure we have the right market structures in
    place that compensate those resources, compensate them
    appropriately.
        Second, you raised the question of the difficulty of
    getting sufficient new energy infrastructure built. I fully
    share that concern. It's unquestionably a problem. We have to
    look at ways to mend and improve our permitting processes so we
    can get over some of these obstacles.
        Senator Hoeven. Okay.
        Mr. Walker.
        Mr. Walker. Thank you, Senator.
        With regard to the baseload, one of the things I learned
    early on being an electrical engineer is we're not very
    creative. So, we name things for exactly what they do and
    baseload referred to basically the bottom of the stack, the
    economic stack and for what was going to meet the base
    requirements of load. And I think that, as the Chairman
    recognized, I think recognizing them from a market standpoint
    and placing value on things like the central reliability
    services as part of the economics will help drive that.
        I think also, in recognizing and taking a different
    perspective and looking at it from a resiliency standpoint,
    there are values that will not be captured in the economic
    component that have value to the economic and national security
    of the United States. And I think those, in conjunction with
    the work that FERC does, need to be integrated together to help
    drive the investment.
        And then, once we've identified those critical components
    that are both valuable to the market from an economic
    standpoint to drive costs down and valuable from a physical and
    cybersecurity perspective to ensure the national security, we
    blend those together to help work through the processes.
        DOE works with the states and local, you know, components
    of the United States municipal governments to work through
    these issues, as does FERC. And I think, with the proper data,
    the proper analysis and the evaluation that really identifies
    the right locations, we'll work through the process and get
    them in.
        Senator Hoeven. I like your pin.
        Mr. Walker. Thank you. I got it from Northcom.
        Senator Hoeven. Yes, good job. Glad to see you wearing it.
        Mr. Walker. Thanks.
        Senator Hoeven. Charles? I am not going to take a swing at
    your last name there.
        [Laughter.]
        Mr. Berardesco. Thank you.
        Senator Hoeven. Do pronounce it for me though.
        Mr. Berardesco. Berardesco.
        Senator Hoeven. Thank you.
        Mr. Berardesco. So NERC has identified fuel diversity as
    being critical to the operation of the bulk power system in the
    long run.
        We are in the middle of a significant transformation of our
    system, and having that fuel diversity is what's going to allow
    us to have the reliable operations.
        And I tend to move away from terms like baseload or other
    kinds of adjectives and simply talk about that different
    generation provides different attributes and has different
    risks attached to it.
        So the policymakers need to consider what's the appropriate
    mix of that kind of generation that's going to give you the
    best risk outcome, risk-based outcome, for operating your
    system in a local area.
        But what's really important to us is we move to an
    environment where we are more and more thinking about
    renewables as part of our mix, is the stability of the bulk
    power system behind it. That system is critical in order for
    renewables to, in fact, be attractive to people because to the
    extent that there is no wind or no sun, you're drawing power
    from the grid. And so, having the grid operating reliably is
    critical to the success of renewables being inserted into our
    system.
        And we need to really consider carefully what are the
    attributes that different generations provide to that stability
    of that system and making sure that everyone is fairly
    contributing to that stability of the system from each of the
    different generation portfolios.
        I'm not much of an expert on transmission siting or
    incentives, but I will say just listening to the testimony here
    today, it seems obvious to me, if you're going to move,
    particularly in the case of gas generation, if you're going to
    move to more gas generation is being part of it, whether it's a
    bridge to a more renewable-based system or simply part of the
    basic power structure, you're going to need more capacity. I
    mean, we're hearing that testimony today. So, providing some
    types of incentives that get better capacity for gas, seems to
    me, a fairly important consideration for policymakers going
    forward.
        Senator Hoeven. Well, you have to get support for siting
    it.
        Ms. Clements?
        Ms. Clements. Thank you.
        I go with the description of baseload as an operating
    characteristic, as a sum subset of power plants and that we are
    going to, as we move forward, we're able to move away from that
    particular characteristic as the primary goal.
        However, the sheer number of megawatts that resources
    provide on the system is important and we've got lots of power,
    the country, across the country, planning reserve margins are
    very strong and so, from, in general, how do we have enough?
    There's already lots there.
        Senator Hoeven. So go to the infrastructure piece then?
        If you have the power you have to get it to where you need
    it.
        Ms. Clements. Absolutely. And I think this is an
    opportunity for the Committee to have real bipartisan work
    together on a well-designed policy to build out transmission
    lines to support the movement of wind from the windy places to
    the cities that need it and the sun from the sunny places. That
    development has to uphold environmental protections and it has
    to be done carefully, but it can be done well.
        Senator Hoeven. It has to uphold environmental protections,
    but you have to build it.
        You cannot take 10 years to build a transmission line or a
    pipeline. You can get all kind of power, but it does not do you
    any good if it is not in the right place when you need it,
    right?
        Mr. Ott?
        Mr. Ott. Thank you. I'll be brief given the time.
        Essentially, for the baseload resource, again, it's really
    the reliability characteristics you're looking for to run the
    power grid and making sure those are appropriately compensated,
    as the Chairman had indicated. And certainly, I think that we
    have a track record in the capacity markets that those have
    been effective in targeting performance of resources.
        I think the Polar Vortex lessons learned was a success
    story. And certainly, I think we can do some things in the
    energy market to address some of the concerns I've raised.
        As far as infrastructure, I do believe RTO regional
    planning processes have been successful in getting a lot of
    infrastructure built. Certainly, in PJM $20 billion worth of
    transmission investment in the past 15 years.
        As far as gas pipeline infrastructure, I see that as an
    issue we do need to figure out a way to get the siting process
    for gas pipelines moving.
        Senator Hoeven. It has really changed from this battle
    between renewable or traditional to both have the commonality
    in this interest of actually getting approval for construction
    of this infrastructure. It should be working together.
        Mr. Ott. Right, agreed.
        Senator Hoeven. Sir?
        Mr. van Welie. So I think baseload is rapidly becoming an
    obsolete term because I think, I think of baseload as what's
    producing energy with the minimum price, and I think that's
    changed over the years. We've come from a world where we had
    coal and nuclear and we're now with gas and renewables going
    forward.
        I think if I look at the problem, I think we've got
    structures in place to ensure that we've got enough resource on
    the system. We've got structures in place through the
    transmission planning authorities that the RTOs have with FERC
    oversight to make sure that we can get transmission built.
        I think siting is a problem. I think the big regulatory
    gap, the structural problem has only been restructured, the
    markets, 20 years ago. We didn't understand the dependency that
    would be created on the gas system. And so, we have a gas
    system where the business model is completely different from
    the electric system in the restructured markets. That leads to
    the situation where you don't have a customer for the
    incremental pipeline investments needed to serve the gas
    generation. So, I think that's a problem we're going to
    struggle with for a while.
        Senator Hoeven. I think that is right. It is a problem.
        Madam Chairman, thank you for your indulgence. I apologize
    for going over my time, I appreciate it.
        The Chairman. You went well over, but this is exactly what
    this Committee hearing was designed to dig into was these types
    of questions.
        So----
        Senator Hoeven. When you say well, you mean qualitatively
    or quantitatively?
        The Chairman. Both. Both.
        [Laughter.]
        It was good though. These are questions that, I think, are
    very important and the answers on the records are equally
    important.
        So, well done, sir.
        Senator Cortez Masto.
        Senator Cortez Masto. Thank you, and I appreciate that as
    well, the comments and the conversation we are having today is
    so important. Thank you to the Chairman as well.
        Mr. McIntyre, it is good to see you again. Let me start
    with you.
        When you were before the Committee for your nomination
    hearing, we briefly discussed integrating renewable energy into
    the power grid. In Nevada we actually have an Energy Bill of
    Rights that allows consumers to generate, export and store
    renewable energy on their property.
        Mr. McIntyre, do you believe there are additional actions
    that FERC can take to allow distributed energy resources access
    to wholesale electricity markets?
        Mr. McIntyre. There may well be, Senator.
        Thank you for the question.
        There is already a lot of work that has been undertaken
    within the Commission prior to my arrival, and we have a record
    of materials that have been submitted to address this very
    question. That is part of the work that remains before me,
    personally, and before the Commission as well. It's a very
    important issue and it's something that we're going to turn our
    attention to in due course.
        Senator Cortez Masto. I know in late 2016, FERC issued a
    Proposed Rule that would eliminate barriers to the
    participation of renewable energy and electric storage in the
    wholesale markets. What is the status of that effort?
        Mr. McIntyre. And that's precisely the work that I was
    referring to.
        Senator Cortez Masto. That is what you are talking about.
    Is there a timeframe or do you have a sense of how----
        Mr. McIntyre. It's something that we'll be turning to in
    the coming months. I don't have a specific calendar in mind for
    it.
        Senator Cortez Masto. Okay.
        Mr. Berardesco, in your testimony you provide a number of
    key findings and recommendations on how to increase resiliency
    for cold weather, but I am curious if you have any
    recommendations for extreme heat. In Nevada, it can get up to
    115 degrees in the summer.
        Senator Berardesco. I don't, off the top of my head.
        Senator Cortez Masto. Okay.
        [Laughter.]
        Senator Berardesco. Thank you.
        Senator Cortez Masto. Thank you.
        Ms. Clements, one of your recommendations on how to enhance
    resiliency efforts is to ensure that resilience efforts focus
    on protecting vulnerable communities. What exactly could be
    done to better protect vulnerable communities, and can you
    elaborate a little bit more on that?
        Ms. Clements. Sure.
        If you think about the--well, first of all, let's remember
    that there's a lot of institutions involved in protecting
    communities in the event that something very bad happens, like
    a hurricane or a drought or some other kind of storm. And
    critical services like hospitals and fire stations and police
    stations and shelters and food banks need support and to be
    able to figure out their plans for how they're going to respond
    in emergencies. Now remember, a lot of this is subject to state
    and local jurisdiction.
        Senator Cortez Masto. Right.
        Ms. Clements. And so, what we recommend in the National
    Academy's report is that Congress provide funding and support
    and field disseminations and best practices so that we can try
    this. We can support the local communities who have to figure
    this out and then help to share that information and socialize
    those, excuse me, best practices by region and across the
    country.
        Senator Cortez Masto. Thank you.
        Mr. Walker, I know my colleague from Illinois talked a
    little bit about this--Puerto Rico and the devastation there
    and the work that is being done to modernize their electric
    grid.
        I just saw a report that notes that DOE's long-term plan
    for Puerto Rico is to begin with new microgrid power
    installations at three manufacturing sites on the island. Can
    you elaborate a little bit more on DOE's long-term plan?
        Mr. Walker. Sure.
        We've--that project is actually not a DOE project.
        Senator Cortez Masto. Oh, it is not?
        Mr. Walker. It's a PRIDCO, which is the Puerto Rico
    Industrial Development Corporation, owns about 200 pieces of
    property on the island of Puerto Rico.
        Senator Cortez Masto. Okay.
        Mr. Walker. And as the Industrial Development Corporation
    they own the property and they lease it back, back to
    customers. So, customers like Johnson & Johnson, Honeywell.
        And so, we've been working very closely with PRIDCO and
    their staff and the Puerto Rican government to give them
    technical expertise with regard to how to site these microgrids
    at various locations on the island in an effort to ensure
    better power quality for these bigger manufacturing customers
    and then and in an effort to reduce their energy costs to
    encourage them to stay on the island and further expand their
    employment opportunities for the people of Puerto Rico.
        Senator Cortez Masto. Anything else that you are doing?
    Long-term plans to address their energy needs there in Puerto
    Rico?
        Mr. Walker. Yes, we are working with all the stakeholders
    that put together plans and integrating them and distilling
    them down into one so it's a better document. And we're adding
    whatever technical capabilities we've got to do that.
        Just yesterday, my team and I met with the TAC Committee,
    the Technical Advisory Committee that was put together by
    PREPA, to coordinate our efforts and, you know, walk through
    what our plan is moving forward.
        Senator Cortez Masto. Okay.
        Thank you. Thank you, all.
        The Chairman. Thank you, Senator.
        Assistant Secretary Walker, thank you for your efforts with
    Puerto Rico and all that is going on there. I appreciated the
    opportunity that we had when we were over there to have that
    following conversation. Obviously, there remains a great deal
    more to be done, but I appreciate your ongoing efforts.
        Several members have commented about the quality of the
    witnesses that we have had this morning and the discussion. One
    of the benefits of holding the gavel here is I get to stay for
    the full morning.
        [Laughter.]
        It has been as important and, I think, enlightening in
    certain areas as any hearing that we have had in a while. So I
    thank you for that.
        I hear from most of you that okay, we are beyond the
    discussion about baseload power and how we define it. I forget
    which of you referred to the policy conundrum between diversity
    versus security. I think it is often very easy to say we need
    to have this diverse portfolio, but if the diversity does not
    give you the security of access to--you fail when it comes to
    your resiliency. You fail in terms of your ability to really
    meet the expectation there.
        And so, I think it is important that as we talk about these
    very serious challenges that we see as you have a grid that is
    evolving and changing and aging and how we do a better job with
    the integration of all of this that we keep in mind this
    distinction between diversity and security and recognize that
    has to be part of our issue.
        We have heard several colleagues state that we can have all
    the supply that we need, but if we cannot move it, it does not
    get us anywhere. I think Alaska is a poster child for that. We
    have extraordinary resources, but our challenge has always been
    moving that to the market.
        I really do appreciate so much of what we have heard here
    today. You will notice that I have deferred my questions,
    holding them until the end so I do not have the clock running
    on me and I do not want to keep you all too long, but I do feel
    like I can bat cleanup here a little bit.
        Let me begin with you, Chairman, and again, I appreciate
    all that you are doing within the Commission there.
        I do not know if it is fair to ask you your personal
    opinion, but I will ask you your personal opinion about what
    you believe is the risk to the grid presented by the ongoing
    retirements that we are seeing in nuclear with coal
    retirements, and just for purposes of conversation here, if you
    have a scale of one to ten with ten being the most severe risk
    to the grid, where do you put us?
        Mr. McIntyre. Thank you, Madam Chairman, for the question.
        Quantification is an inherently tricky business and I feel
    so particularly here, but I can tell you conceptually that
    we're probably, clearly, at a five. I say that on the basis
    just of what we know today of the resilience challenges that
    have presented themselves in prior weather events and other
    circumstances.
        And I say that because of the potential irreversibility of
    the situation of unit retirements and individual unit
    retirement of a particularly sizable plant is a serious matter
    to the grid, let alone an entire class, an entire class of
    power plants.
        So, it's something that as of today, I'd say merits a five
    ranking on your scale, but I will have a better informed
    personal opinion after we have heard from the RTOs and ISOs
    about what specific needs they see and concerns they have in
    their respective----
        The Chairman. Let me ask you about that because you, the
    FERC really has, kind of, kicked that to the RTOs and the ISOs
    to define what the concerns are with regards to resiliency. I
    guess the question is are they the best organizations to make
    that assessment or that determination? What about the EROs, the
    Electricity Reliability Organizations, whether it is NERC, its
    various regional entities? What about DOE? How do all the
    others factor into this? I think we recognize that the RTOs and
    the ISOs, they do not own the grid. You do have owners of the
    grid.
        I understand why FERC moved forward as you did in rejecting
    the NOPR. And I understand, I think, where you are trying to go
    with gathering this assessment back, but does it need to be
    broader, I guess is my question, than just the RTOs and the
    ISOs?
        Mr. McIntyre. I'm happy to say, Madam Chairman, it is
    broader.
        The Chairman. Okay.
        Mr. McIntyre. The most immediate and directed request was
    to the RTOs and ISOs to report back and answering some specific
    questions we put to them.
        But we have invited broader stakeholder input. I'm happy to
    say we already have initiated outreach and had some good
    communications already with Mr. Walker's organization in the
    Department and with Mr. Berardesco's organization, NERC. And I
    would expect that to continue, in addition to hearing from
    other stakeholders as well.
        So I do agree with your suggestion. It needs to be beyond
    just the RTOs and ISOs.
        The Chairman. Well, I appreciate that and do feel that is
    an important part of any analysis that might move forward.
        Assistant Secretary Walker, you spoke to cooperation and
    collaboration that needs to go on. I think you said it is going
    to take unprecedented cooperation and collaboration to keep the
    lights on or something to that effect.
        Mr. Walker. That's correct.
        The Chairman. To that end then, with the resiliency model
    that you have indicated is a top priority for DOE, have you or
    your staff, have you reached out to FERC's reliability or
    security staff or been working with the RTOs on this? Tell me
    how you are going to do this----
        Mr. Walker. Sure, sure. It's a good question.
        I do believe that it does and will take a significant
    amount of collaboration. Chairman McIntyre and I have already
    spoken about this with regard to this model. Yesterday, I had
    the opportunity to meet with Gordon down at the end of the
    table here with regard to the New England study. My team, back
    at DOE, has already reached out and gone through looking toward
    integrating all of the work that FERC's initiative will yield.
        And so, we work pretty regularly within DOE with the ISOs
    and the RTOs and as well as through the Electricity Sector
    Coordinating Council, we reach back throughout the United
    States and with NERC, with all the partners that we've got
    there.
        But in this case, it's even bigger than the electric side
    because it's really where the nexus to bring together the oil
    and natural gas component.
        So presently we actually have two separate coordinating
    councils which we're looking to bring together under this
    rubric because of the interdependencies between oil, natural
    gas and the electric system. We've already laid out a schedule
    of all of those participants that we need to pull together to
    work with FERC, NERC and the regional RTOs in an effort to
    ensure that we get the best answer we can. And that's the
    essence and where this model comes from. Once we've got all of
    the information, we then can take the actual technical
    components of the system which we already have.
        We've already started gathering that and that's part of the
    reason I was out at Northcom with my team last week is starting
    to define some of the resiliency work that's already been done
    in the United States at the Department of Defense and with the
    Army Corps. That's why there was a specific reason to be there.
        So we've already started that initiative to gather all of
    the components that we've got around. In fact, yesterday I met
    with DOE security organization to identify work that's been
    done for resilience at our nuclear power plants and through our
    NNSA groups to be able to coordinate that and provide that
    information, effectively to FERC, as we progress this forward.
        We're very much in lock step with this moving forward
    because it is so critically important to the national security
    components that we address day-to-day and we, obviously, can
    dovetail very well into the marketplace to solve a lot of these
    issues.
        The Chairman. Well, that is good to know because this is
    exactly what we need. It is good to know that there are
    reports, there is analysis, but if we are not really
    coordinating and learning from other entities and what they
    have done or how they have advances, it is not as valuable, I
    think, as we would hope.
        Let me ask another question of you, Chairman McIntyre,
    because there has been discussion about price formation and
    making sure that value is in place. I guess that the quick
    question is how prompt will FERC be when it says that it will
    act promptly if it sees a need to take action?
        I raise this because FERC opened up its price formation
    dockets just after the Polar Vortex, a couple months into early
    2014. That work still has not been completed on price
    formation.
        I think what would be important to know is, given the
    reality of time that it takes, I mean, when you say that FERC
    is going to take prompt action, does this mean that it is
    technical conferences or staff memos and white papers? What can
    actually be expected?
        I think we know that oftentimes this is complicated and
    lengthy, but we also speak frequently about this paralysis of
    analysis and the situation of this review, of ensuring
    reliability. I raised it eight years ago, maybe even longer now
    since I have raised these concerns, and we continue to see
    growing levels of retirements. I would hope that FERC
    recognizes that we need to move beyond technical conferences
    and more white papers and that we actually need to see that
    action. Can you speak to what----
        Mr. McIntyre. Yes, Madam Chair.
        It's a very valid question and certainly when I was in the
    private sector I shared those occasional frustrations as well.
        The Chairman. You were pushing everybody along.
        [Laughter.]
        Mr. McIntyre. But in terms of our January 8 order on our
    grid resilience initiative, there is a certain calendar spelled
    out there--60 days first for the RTOs and ISOs to get back to
    us with their responses to our specific questions, 30 days for
    stakeholder input thereafter. And then, yes, our commitment to
    prompt action thereafter. I cannot say now how much time will
    be involved in such a prompt action, because it will depend on
    the quality of the information which we get back which I expect
    to be very good in general.
        But it's something where I have declared it and our order
    declares it to be a matter of priority for this Commission.
    Those are not words we utter very often, is a declared priority
    of the Commission now to get this right and to move with speed.
        And I should say that in the meantime, we have stated as
    well in the very same order, that should any short-term
    concerns arise within a given RTO or with a given utility, we
    want to know about it immediately. We will not sit idly by if
    there is some sort of legitimate concern regarding reliability
    or resilience of the grid.
        The Chairman. Well, I appreciate that.
        I think that it helps that you have been on the other side
    and just very recently so that you know, not only of the need,
    but have been one who has been in the situation where you are
    urging the action. I think that will help on the inside as
    well.
        I think given what members have covered throughout, I had
    many, many questions when I started and I think we received
    good information before the Committee, and so many of the
    questions I had have been answered.
        But I recognize that this is a challenging space, most
    certainly. We see the challenges pronounced when we have
    weather events that push, kind of, the energy status quo that
    we might get pretty comfortable with. It is a reminder that we
    need to be vigilant in understanding, again, the security, the
    reliability, the resilience of our energy supply.
        I mentioned just a few minutes ago that this hearing has
    probably been the most educational. It is right up there with
    the one that we had several weeks back when we had the head of
    the IEA here, Dr. Birol, who spoke about the energy trends
    internationally. He had four upheavals. I won't go through all
    of them, but his fourth upheaval was what is happening with
    electricity and how that whole sector is being impacted.
        We have a lot of work to do, but this has been a very
    instructive and helpful hearing to all members, so I thank you
    for the time.
        With that, we stand adjourned.
        [Whereupon, at 12:32 p.m. the hearing was adjourned.]

                          APPENDIX MATERIAL SUBMITTED

                                  ----------

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]