[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

                               __________
                               
                               
                               
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                       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:]
    
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    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:]
    
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    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:]
    
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    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:]
    
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    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:]
    
    
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    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:]
    
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    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:]
    
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    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

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