[Senate Hearing 115-498]
[From the U.S. Government Publishing Office]
S. Hrg. 115-498
THE PERFORMANCE OF THE ELECTRIC POWER
SYSTEM IN THE NORTHEAST AND MID-ATLANTIC
DURING RECENT WINTER WEATHER EVENTS,
INCLUDING THE BOMB CYCLONE
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON
ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
ONE HUNDRED FIFTEENTH CONGRESS
SECOND SESSION
__________
JANUARY 23, 2018
__________
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the
Committee on Energy and Natural Resources
Available via the World Wide Web: http://www.govinfo.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
28-695 WASHINGTON : 2019
COMMITTEE ON ENERGY AND NATURAL RESOURCES
LISA MURKOWSKI, Alaska, Chairman
JOHN BARRASSO, Wyoming MARIA CANTWELL, Washington
JAMES E. RISCH, Idaho RON WYDEN, Oregon
MIKE LEE, Utah BERNARD SANDERS, Vermont
JEFF FLAKE, Arizona DEBBIE STABENOW, Michigan
STEVE DAINES, Montana JOE MANCHIN III, West Virginia
CORY GARDNER, Colorado MARTIN HEINRICH, New Mexico
LAMAR ALEXANDER, Tennessee MAZIE K. HIRONO, Hawaii
JOHN HOEVEN, North Dakota ANGUS S. KING, JR., Maine
BILL CASSIDY, Louisiana TAMMY DUCKWORTH, Illinois
ROB PORTMAN, Ohio CATHERINE CORTEZ MASTO, Nevada
SHELLEY MOORE CAPITO, West Virginia TINA SMITH, Minnesota
Brian Hughes, Staff Director
Patrick J. McCormick III, Chief Counsel
Robert Ivanauskas, FERC Detailee
Mary Louise Wagner, Democratic Staff Director
Sam E. Fowler, Democratic Chief Counsel
Spencer Gray, Democratic Professional Staff Member
C O N T E N T S
----------
OPENING STATEMENTS
Page
Barrasso, Hon. John, a U.S. Senator from Wyoming................. 1
Cantwell, Hon. Maria, Ranking Member and a U.S. Senator from
Washington..................................................... 1
Murkowski, Hon. Lisa, Chairman and a U.S. Senator from Alaska.... 4
WITNESSES
McIntyre, Hon. Kevin J., Chairman, Federal Energy Regulatory
Commis-
sion........................................................... 6
Walker, Hon. Bruce J., Assistant Secretary, Office of Electricity
Delivery and Energy Reliability, U.S. Department of Energy..... 17
Berardesco, Charles A., Interim President and Chief Executive
Officer, North American Electric Reliability Corporation....... 24
Clements, Allison, President, goodgrid LLC....................... 50
Ott, Andrew L., President & CEO, PJM Interconnection, L.L.C...... 55
van Welie, Gordon, President & Chief Executive Officer, ISO New
England........................................................ 65
ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED
Barrasso, Hon. John:
Opening Statement............................................ 1
Berardesco, Charles A.:
Opening Statement............................................ 24
Written Testimony............................................ 26
Responses to Questions for the Record........................ 136
Cantwell, Hon. Maria:
Opening Statement............................................ 1
The National Academies of Sciences, Engineering, and
Medicine--A Report entitled ``Enhancing the Resilience of
the Nation's Electricity System''.......................... 3
Clements, Allison:
Opening Statement............................................ 50
Written Testimony............................................ 52
Responses to Questions for the Record........................ 143
King, Jr., Hon. Angus S.:
Chart entitled ``Natural Gas Prices--Massachusetts vs.
Marcellus''................................................ 85
Chart entitled ``Natural Gas and Wholesale Electricity Prices
Are Linked''............................................... 87
McIntyre, Hon. Kevin J.:
Opening Statement............................................ 6
Written Testimony............................................ 8
Responses to Questions for the Record........................ 107
Murkowski, Hon. Lisa:
Opening Statement............................................ 4
Ott, Andrew L.:
Opening Statement............................................ 55
Written Testimony............................................ 57
Responses to Questions for the Record........................ 155
van Welie, Gordon:
Opening Statement............................................ 65
Written Testimony............................................ 67
Responses to Questions for the Record........................ 166
Walker, Hon. Bruce J.:
Opening Statement............................................ 17
Written Testimony............................................ 20
Responses to Questions for the Record........................ 119
THE PERFORMANCE OF THE ELECTRIC POWER SYSTEM IN THE NORTHEAST AND MID-
ATLANTIC DURING RECENT WINTER WEATHER EVENTS, INCLUDING THE BOMB
CYCLONE
----------
TUESDAY, JANUARY 23, 2018
U.S. Senate,
Committee on Energy and Natural Resources,
Washington, DC.
The Committee met, pursuant to notice, at 10:18 a.m. in
Room SD-366, Dirksen Senate Office Building, Hon. Lisa
Murkowski, Chairman of the Committee, presiding.
STATEMENT OF HON. JOHN BARRASSO,
U.S. SENATOR FROM WYOMING
Senator Barrasso [presiding]. We call this hearing to
order. I want to welcome everyone here.
Senator Murkowski will be here shortly for this hearing
that is titled, ``Examining the Performance of the Electric
Power System in the Northeast and Mid-Atlantic during recent
winter weather events, including the Bomb Cyclone.''
I would like to start by calling on the Ranking Member,
Senator Cantwell, to give her opening statement.
STATEMENT OF HON. MARIA CANTWELL,
U.S. SENATOR FROM WASHINGTON
Senator Cantwell. Thank you, Chair Barrasso, and good
morning to everyone. I am sure that Senator Murkowski will be
here shortly.
As some people may know, a 7.9 magnitude earthquake hit off
the coast of Alaska, impacting Kodiak and parts of the Pacific
Northwest with tsunami warnings that were issued for activities
that were expected. Those warnings for tsunami waves have been
recalled, but no doubt, I am sure the Senator is dealing with
lots of things this morning related to that and other issues.
I want to thank our witnesses, Chairman McIntyre and Mr.
Walker, for being here. And I want to thank the staff here.
We're glad we're back in operation. So we look forward to
hearing from all our witnesses on the subject on the
reliability of the grid and its performance.
Last year Secretary Perry and his staff reviewed the
reliability of the electricity grid in the light of the
changing fuel mix, and I was relieved when I saw the staff
report in August which I thought was fairly balanced. It
carefully distinguished between the terms ``reliability'' and
``resilience'', and it described emerging techniques to
integrate more renewable resources, including synthetic inertia
and frequency response. It also recommended grid operators
adopt resilience metrics that still needed to be developed.
Unfortunately, when Secretary Perry filed his report as a
proposal to FERC, I was a little more alarmed. The proposal
ignored the conclusion of the Department's own staff. It was a
transparent attempt, in my opinion, to prop up the
Administration's favorite kinds of energies which are getting
outpaced in the marketplace.
There were many problems with this proposal. They never
defined resilience. It picked a single attribute of power
plants--fuel stored onsite--and it elevated it above all other
factors. It promised full recovery for coal in some states that
had chosen to follow a market model years ago. But the biggest
problem was that it would hit consumers with billions of
dollars of additional added costs to multiple, independent
assessments.
Bailing out coal plants isn't just bad policy, it was a
breathtaking raid on the consumer's pocketbooks.
The PJM market monitor found that the Secretary's proposal
could nearly double the cost of wholesale energy in the
nation's largest electricity market. So I want to applaud
Chairman McIntyre and the whole Commission for unanimously
rejecting the Secretary's proposal. At the heart of that
rejection, I believe, are consumers. I think the Commission
wisely reviewed the Federal Power Act's just and reasonable
standard for electricity rates and found that the Secretary had
not met this burden of proving that the current rules are
unjust and unreasonable. Consumers couldn't have asked for a
better defense.
Given some of the troubling stories about coal interests
and lobbying the Department, it has never been more important
for FERC to maintain its tradition of independence.
I hope that Secretary's proposal hasn't given resilience a
bad name. The difference between the grid's recovery from
hurricanes in Florida and Texas versus Puerto Rico shows that
resilience really does affect lives and quality of life. It
deserves more attention.
So I am pleased that we have Allison Clements testifying
today, along with our other witnesses. She serves on the
National Academies Committee that wrote an excellent report
last summer on grid resilience, and I would like to submit that
report for the record.
[The information referred to follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Cantwell. It also has a series of concrete
recommendations to Congress, to FERC and the Department of
Energy that I hope we can explore today.
Again, Madam Chair, thanks to all the witnesses for being
here and for calling this hearing.
STATEMENT OF HON. LISA MURKOWSKI,
U.S. SENATOR FROM ALASKA
The Chairman [presiding]. Thank you, Senator Cantwell.
My apologies to our witnesses, as well as our Committee
members. We have had a busy morning in Alaska this morning. I
am told all is well, but I appreciate more than ever the value
of things like the earthquake and tsunami early warning
systems. It is important that they are there and that they were
actually operating now that the government is back to order.
Last week I outlined the busy agenda that we will have this
year. While we will maintain our focus on legislation and
nominations, oversight is also a very critical part of our
role. We are obligated to examine the performance of agencies
under our jurisdiction. Today is an opportunity to gauge
whether federal policy is helping or hindering improvements in
energy system performance.
While it may not have been up to Alaska standards, the
cold, snow and ice endured by many in the lower 48, especially
along the Eastern Seaboard, was quite notable over the holidays
and into the New Year. While the worst of it occurred over and
on the shoulders of a holiday period and we didn't reach the
extremes felt in the 2014 Polar Vortex, we did experience a so-
called ``Bomb Cyclone'' event.
I understand that a Bomb Cyclone is a cyclone storm system
in which the pressure drops precipitously in a short period of
time. Apparently these happen relatively often off the
northeast coast but this recent storm was a record-breaker with
the largest pressure drop in a 24-hour period since 1976. As
such, it presented a kind of informative stress test for the
electric power system.
Now I have often said that federal law and policy must
enable energy to be affordable, clean, diverse and secure. With
this hearing, we return to a subject I have been following
keenly since at least 2010 about how changes in the nation's
electric grid and the mix of primary electricity sources are
stressing system reliability and what federal changes may be
necessary to address those stresses. The Secretary of Energy's
Notice of Proposed Rulemaking (NOPR) issued in September and
the recent FERC Order in response were focused on these same
issues.
In 2014, following the Polar Vortex, we held a similar
hearing to examine challenges to the electric system. I said
then that we needed to redouble a properly scaled and
continuously improving approach to grid reliability and
security. I am pleased to see that today's testimony shows that
there were many lessons learned from that extreme weather
event.
For example, there now appears to be improved coordination
between the electric and the gas systems. The RTOs and FERC
have reformed market rules and improved business practices,
NERC has updated its approaches and that is all good news. The
bad news is that we have not addressed the more difficult and
fundamental challenges for electric and gas infrastructure.
For example, gas pipeline infrastructure remains too
constrained. Broader policy changes are not sufficiently taking
into account increasing risks that, in future years, system
operators may have to turn to intentional service
interruptions, otherwise known as ``load shedding'' or rolling
blackouts or brownouts, to manage certain peak periods. One of
our witnesses will speak about the situation in New England,
which in some respects could serve as a harbinger of challenges
in other parts of our nation.
We must ensure that our nation's natural gas supply, which
is a boon to our economy and to our national security, can be
reliably delivered to a changing marketplace.
At the same time, it is not clear what the reliability and
economic impacts will be of a grid whose primary electricity
resources are less diverse over time as baseload nuclear and
coal units continue to retire.
Meeting all of these challenges, while also strengthening
competition for the benefit of energy customers, should be a
shared priority. After all, promoting competition has been a
tenet of federal electricity policy that has enjoyed wide
bipartisan support for more than two decades and should remain
so.
This morning we will hear from leaders of two agencies
under our jurisdiction, FERC and the Department of Energy. We
will hear from the heads of three regulated entities with
quasi-regulatory responsibilities, the North American
Electricity Reliability Corporation, or NERC, and the two
regional transmission organizations, PJM and ISO New England.
We also have a member of a committee of the National Academies
of Science, Engineering, and Medicine with us.
So I welcome each of you to the Committee this morning and
look forward to your testimony. I would ask that you try to
limit your testimony to about five minutes. Your full
statements will be included as part of the record.
This morning we are joined by the Honorable Kevin McIntyre,
who is the Chairman of the Federal Energy Regulatory Commission
(FERC). This is the first time that you have appeared before
the Committee in your capacity as Chairman. We welcome you.
The Honorable Bruce Walker is also with us as the Assistant
Secretary for the Office of Electricity Delivery and Energy
Reliability at the U.S. Department of Energy (DOE). It is good
to see you again, Bruce.
Mr. Charles Berardesco is the Interim President and the CEO
for NERC, the North American Electric Reliability Corporation.
We welcome you.
Ms. Allison Clements is the President of goodgrid LLC.
Senator Cantwell has mentioned your contributions. We thank
you.
Mr. Andrew Ott is the President and CEO for PJM
Interconnection, L.L.C. Welcome.
Mr. Gordon van Welie is the President and CEO of ISO New
England.
Welcome to each of you.
Chairman McIntyre, if you would like to begin with your
comments this morning.
STATEMENT OF HON. KEVIN J. MCINTYRE, CHAIRMAN, FEDERAL ENERGY
REGULATORY COMMISSION
Mr. McIntyre. Yes, Senator.
Chairman Murkowski, Ranking Member Cantwell and members of
the Committee, thank you for the opportunity to appear before
you today to discuss the performance of the electric system
during the recent weather events.
I am honored to serve as the Chairman of the FERC. Our
Commission takes seriously the responsibilities that Congress
has entrusted to us concerning the reliability of the bulk
power system (BPS) in this country.
We are still receiving and reviewing the data related to
the performance of the bulk power system during the cold
weather event that has taken place over the past month. Based
on what we know to date, it appears that notwithstanding stress
in several regions, overall, the bulk power system performed
relatively well amid challenging circumstances. Looking
forward, we must both learn from this experience and remain
vigilant with respect to challenges to the reliability and
resilience of the bulk power system.
The performance of the bulk power system during the 2014
winter event you referred to, now commonly known as the Polar
Vortex, did provide useful context for understanding the
performance of the bulk power system under the more recent
winter events of the past month.
During the 2014 Polar Vortex, much of the U.S. experienced
sustained and, at times extreme, cold weather. The challenges
presented by these conditions and high electric demand were
compounded by unplanned generator shutdowns of various fuel
types. These combined circumstances tested grid reliability and
power supplies and contributed to high electricity prices.
Drawing on that experience, FERC took numerous actions, as
you have referenced, to address reliability and resource
performance issues. For example, the Commission directed
Regional Transmission Organizations and Independent System
Operators, or RTOs and ISOs, as we usually call them, to report
on fuel assurance issues, and the Commission revised its
regulations to enhance coordination between the natural gas and
the electric industries in light of the increasing use of
natural gas as fuel for electric generation.
For certain regions, the Commission approved capacity
market reforms that are intended to increase financial
incentives for improved resource performance and to penalize
non-performance or poor performance. The Commission also
approved temporary winter reliability programs in New England.
Turning to the winter weather events of the past month, it
is useful to consider the impact of the recent weather events
on both the provision of service and the associated costs of
that service. Importantly, there were no significant customer
outages that resulted from failures of the bulk power system,
generators or transmission lines. While there were no
significant reliability problems during this recent cold
weather event, wholesale energy prices were high, reflecting
the stress on the system.
Higher wholesale energy prices that accurately reflect fuel
costs and current system conditions can be beneficial sending
important signals that drive operational and investment
decisions for both utilities and consumers. We also recognize
that higher wholesale energy prices are ultimately borne by
retail customers. And so, the Commission is attentive to the
potential for behavior that takes advantage of extreme weather
events.
Just as the Commission and the RTOs and the ISOs drew
lessons from the Polar Vortex in 2014 and applied them in ways
that better prepared us for this recent cold weather event, we
will examine these more recent events very carefully and seek
to learn from them.
I would like to emphasize a few points that the Commission
made in an order issued a couple of weeks ago on the issue of
resilience, more generally, referred to by Ranking Member
Cantwell in her opening remarks.
On January 8th, the Commission responded to the Proposed
Rule on grid reliability and resilience pricing submitted to
the Commission by the Secretary of Energy, and we initiated a
new proceeding to further explore resilience issues beginning
with the RTOs and the ISOs. As we stated in our order, we
appreciate the Secretary reinforcing the importance of the
resilience of our bulk power system as an issue that warrants
further attention and, as we said in our order, prompt
attention.
The goals of our new proceeding are: First, to develop a
common understanding among the Commission and industry and
others as to what resilience of the bulk power system actually
means and requires; second, to understand how each RTO and ISO
assess resilience within its geographic footprint; and third,
to use this information to evaluate whether additional
Commission action regarding resilience is appropriate at this
time.
The Commission directed each RTO and ISO to submit within
60 days of our order specific information regarding resilience
of the bulk power system within those respective regions, and
we invited the other interested entities to file reply comments
within 30 days after the RTOs and ISOs submit their comments.
We expect to review the additional material and promptly decide
whether additional Commission action is warranted to address
grid resilience.
In our January 8th order, the Commission also recognized
that the concept of resilience necessarily involves issues that
extend beyond our Commission's jurisdiction such as
distribution system reliability and modernization. For that
reason, we encouraged RTOs and ISOs and other interested
entities to engage with state regulators and other stakeholders
to address resilience at the distribution level and more
broadly.
I assure you that the reliability and the resilience of the
bulk power system will remain a priority of the FERC.
I look forward to answering your questions.
[The prepared statement of Mr. McIntyre follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The Chairman. Thank you, Chairman McIntyre.
Assistant Secretary Walker, welcome.
STATEMENT OF HON. BRUCE J. WALKER, ASSISTANT SECRETARY, OFFICE
OF ELECTRICITY DELIVERY AND ENERGY RELIABILITY, U.S. DEPARTMENT
OF ENERGY
Mr. Walker. Thank you.
Chairman Murkowski, Ranking Member Cantwell and
distinguished members of the Committee, thank you for the
opportunity to discuss the issue of grid resilience during the
recent cold weather affecting the Northeast United States.
Just two months ago I testified before this Committee
regarding the response and recovery efforts in Puerto Rico and
the U.S. Virgin Islands. Secretary Perry and the Administration
remain committed to supporting this restoration.
The topic of today's hearing is timely. The resilience and
reliability of the energy sector are top priorities of the
Secretary and a major focus of the Department of Energy. In
fact, the first study requested by the Secretary was the Staff
Report to the Secretary on Electricity Markets and Reliability.
The report examined the evolution of the wholesale
electricity markets, the effect on grid reliability and
resilience as it relates to wholesale energy and capacity
markets compensating specific attributes and the connection
between regulatory burdens and the retirement of baseload power
plants. Many of the findings contained within the study were
borne out in recent severe weather events across the nation.
The last several months have been quite demanding on the
energy sector. From an extremely active hurricane season to the
2018 Deep Freeze, we have confronted challenges that tested the
resilience and reliability of our energy infrastructure in
different ways.
During the recent cold snap from late December 2017 to
early January, the Northeast saw record low temperatures for
several days; however, customer outages were minimal.
What was apparent during this weather event was the
continued reliance on baseload generation and a diverse energy
portfolio. Without action that recognizes the essential
reliability services provided by a strategically diversified
generation portfolio, we cannot guarantee the resilience of the
electric grid. The grid's integrity is maintained by an
abundant and diverse supply of fuel sources today, especially
with onsite fuel capability; however, the real question is
whether or not this diversity will be here tomorrow.
Resilience for our electric infrastructure has become more
important than ever as major parts of our economy are now
totally dependent on electricity. Even momentary disruptions in
power quality can result in major economic losses.
At the same time, we are in the early stages of a large
transformation of our electric supply system, with this process
of change likely to continue for many years. Keeping the lights
on during this transformation will require unprecedented
coordination and collaboration amongst many parties. DOE is
committed to work with FERC and regional RTOs and ISOs to
achieve this mission.
Stakeholders are facing multiple, connected issues. With
growing asset stress, the integration of increasing amounts of
distributed energy resources, growing consumer participation,
dynamic markets, increasing cybersecurity and physical threats
and the advent of the Internet of Things, the grid that
sustained us for over a century must be designed to ensure
reliability and resilience over the next century.
Today, the marketplace, rather than engineering principles
focused on building and maintaining a resilient energy system,
is driving the design of the system. However, it is clear we
need an in-depth understanding of the resilience of our
electricity and related infrastructure in order to know how
best to either modify existing market structures and/or build
new resiliency standards into the system.
To that end, I propose that DOE undertake a detailed
analysis that integrates into a single, North American energy
infrastructure model of the ongoing resilience planning efforts
at the local, state and regional levels, including the
interconnections between Canada and Mexico and also fills any
gaps and harmonizes any inconsistencies in various efforts at
those same levels.
I understand that we currently do not have funds
appropriated for such a task, so I am taking this opportunity
to make my position clear. I believe that building this
resiliency model should be the top priority for DOE's Office of
Electricity Delivery and Energy Reliability over the coming
years as does the leadership of the Department of Energy.
To address challenges posed by events such as the recent
cold snap as well as systemic energy infrastructure issues, it
is critical for us to be proactive and cultivate an ecosystem
of resilience, a network of producers, distributors,
regulators, vendors and public partners, acting together to
strengthen our ability to prepare, respond and recover.
DOE continues to partner with industry, federal agencies,
states, local governments and other stakeholders to quickly
identify threats, to develop in-depth strategies to mitigate
those threats and rapidly respond to any disruptions.
Resilience is not a one-time activity but a habit. It is
not something that cannot be done in 24 or 48 hours before an
event and many events occur with little or no notice.
Resilience is approaching our energy infrastructure with long-
term planning in mind, understanding the future benefits
resulting from investments made today.
In conclusion, today we are faced with various threats that
continually become more frequent and impactful. The energy
system that provides services throughout the nation are prime
targets. Accordingly, we need to build upon the reliable system
we have today, realized from the hard work of FERC and the RTOs
and ISOs, to make them more resilient to stave the deleterious
effects of these present and real threats. The near-term
concern is that energy markets are significantly driving the
investments being made in generation sources throughout the
nation.
Indeed, most of these investments are primarily being made
to address economic dispatch issues within specific regions.
This has resulted in a significant reliance, in fact, perhaps
an overreliance in some instances, on less costly fuel, in this
case today, natural gas.
The lack of a comprehensive integrated process to drive
appropriate investments to improve resiliency that take into
account energy system interdependencies, critical
infrastructure susceptibilities, essential reliability services
as well as affordability, increases the risk of a compromised
energy infrastructure and thus, the security of this nation.
Thank you for the opportunity to testify and I look forward
to your questions.
[The prepared statement of Mr. Walker follows:]
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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:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The Chairman. Thank you, Mr. Berardesco.
Ms. Clements, welcome.
STATEMENT OF ALLISON CLEMENTS, PRESIDENT,
GOODGRID LLC
Ms. Clements. Thank you. Good morning.
Thank you and good morning, Chairwoman Murkowski, Ranking
Member Cantwell and distinguished members of the Committee.
I am President of goodgrid, a firm that specializes in
energy policy and law. In 2016 to 2017, I served on the
National Academies of Sciences, Engineering, and Medicine
Committee that produced this consensus report, ``Enhancing the
Resilience of the Nation's Electricity System.'' While I will
talk about the report's findings, the views I express today are
my own, not the Committee's.
The national dialogue about resilience comes at a critical
moment. The National Academies Report notes that the U.S.
electricity grid is increasingly vulnerable to the risk of
cyber and physical attack and the increased frequency and
duration of hurricanes, blizzards, floods and other extreme
weather events caused by climate change.
The hurricanes you mentioned, Senator Cantwell, in your
remarks, provide the most vivid examples of the health and
safety impacts that prolonged electricity outages can have on
our population, especially our already most vulnerable
communities.
Natural disasters reportedly caused $306 billion in 2017,
making it, by far, the most expensive natural disaster year on
record.
As the FERC most recently defined it, resilience is ``the
ability to withstand and reduce the magnitude and/or duration
of a disruptive event.'' Importantly, resilience is, at its
core, a transmission and distribution system concept and not
one that is specifically focused on power generation types. We
must distinguish between resilience and reliability, as you
mentioned. Grid reliability is ensuring that enough generation
and transmission exists to satisfy all customers' electricity
needs and avoiding blackouts if a line or a plant goes down.
While implementing reliability rules is certainly complex,
the concept itself is relatively straightforward and amenable
to standards for measuring its sufficiency. Resilience,
separately, has emerged with this massive new risk brought on
by the threat of attack and by the impacts of climate change.
Although the unpredictable nature of the threats, like from
this mornings canceled tsunami warning, making, defining and
developing resiliency metrics is difficult; however, existing
NERC and regional standards for reliability do actually also
provide some resiliency benefit.
The recent winter conditions provide three takeaways to
inform your resilience-related policy thinking.
First, the transmission system is reliable. We've already
heard this. Incorporating lessons learned from the 2014 Polar
Vortex, RTOs reliably managed unexpected outages during the
Bomb Cyclone, like the manual shutdown of the Pilgrim Nuclear
Plant in ISO New England. Before we rush to establish
resilience rules for the transmission system, we should
determine what markets, planning and operations protocols
already due in terms of supporting resilience and whether
additional metrics are necessary. The National Academies Report
cautions about the difficulties of creating cost-effective and
non-redundant rules for unpredictable and varied resilience
needs. This Committee can support the efforts that Chairman
McIntyre described at FERC on the resilience front.
Second, efforts to ensure resilience should focus on
protecting vulnerable communities and ensuring access to
hospitals, fire stations and other critical services. Despite
the bulk system reliability in the last month, 80,000 homes and
businesses had little comfort when they lost power during the
Bomb Cyclone. To tackle end-use resilience needs where people
are affected, we depend on resilience planning and emergency
preparedness at the local and state level. Proactive
Congressional support outlined in the National Academies
Report, especially via public-private partnerships, can go a
long way in supporting this planning and improving resilience.
Third, renewable energy and distributed energy resources
are critical components of a reliable grid. The Bomb Cyclone
and the 2014 Polar Vortex affirmed wind power's role as a
critical cold weather reliability resource. Wind power
performed well above its allotted capacity values and did not
go offline, helping to avoid, generally, helping to avoid price
spikes and other blackouts.
Distributed energy resources, especially customers getting
paid to reduce their power use, can provide significant
contributions to extreme weather reliability as well.
This was demonstrated during the Polar Vortex in PJM where
nearly 3,000 megawatts of voluntary demand reduction played a
key reliability role. Unfortunately, current ISO New England
and PJM rules do not provide incentives for economic reductions
under these conditions in demand and did not facilitate
significant economic demand response this month, to my
understanding.
These takeaways affirm the value of competitive wholesale
markets and FERC's long tradition of technology-neutral support
for these markets.
With the DOE's proposed NOPR behind us, this Committee
should be wary of other supposed in-market proposals, intended
to sustain specific types of power generation.
At this critical moment and through smart resilience
policy, this Committee has a strong opportunity to support a
clean, reliable and affordable energy future.
Thank you.
[The prepared statement of Ms. Clements follows:]
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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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