[Senate Hearing 115-503]
[From the U.S. Government Publishing Office]





                                                        S. Hrg. 115-503
 
  THE EVOLUTION OF ENERGY INFRASTRUCTURE IN THE UNITED STATES AND HOW
                     LESSONS LEARNED FROM THE PAST 
                    CAN INFORM FUTURE OPPORTUNITIES

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

                                HEARING

                               BEFORE THE

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                               __________

                            FEBRUARY 8, 2018

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

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                            ______

             U.S. GOVERNMENT PUBLISHING OFFICE 
 28-700                WASHINGTON : 2020        
 
 
 
 
        
        
               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
  Brianne Miller, Senior Professional Staff Member and Energy Policy 
                                Advisor
                    Robert Ivanauskas, FERC Detailee
             Mary Louise Wagner, Democratic Staff Director
                Sam E. Fowler, Democratic Chief Counsel
           Spencer Gray, Democratic Professional Staff Member
           Nick Sutter, Democratic Professional Staff Member
           
           
                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page
Murkowski, Hon. Lisa, Chairman and a U.S. Senator from Alaska....     1
Cantwell, Hon. Maria, Ranking Member and a U.S. Senator from 
  Washington.....................................................     3

                               WITNESSES

Moeller, Hon. Philip D., Executive Vice President, Business 
  Operations Group & Regulatory Affairs, Edison Electric 
  Institute......................................................     5
Mezey, Philip, President and CEO, Itron, Inc.....................    13
Di Stasio, John, President, Large Public Power Council...........    18
Allen, David, Executive Vice President, McKinstry Company........    27
Medlock III, Dr. Kenneth B., James A. Baker, III, and Susan G. 
  Baker Fellow in Energy and Resource Economics, and Senior 
  Director, Center for Energy Studies, James A. Baker III 
  Institute for Public Policy, Rice University...................    32
Santa, Hon. Donald F., President and CEO, Interstate Natural Gas 
  Association of America.........................................    45

          ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED

Allen, David:
    Opening Statement............................................    27
    Written Testimony............................................    29
    Questions for the Record.....................................   258
American Public Gas Association (APGA):
    Statement for the Record.....................................   288
Cantwell, Hon. Maria:
    Opening Statement............................................     3
Di Stasio, John:
    Opening Statement............................................    18
    Written Testimony............................................    20
    Responses to Questions for the Record........................   247
Medlock III, Dr. Kenneth B.:
    Opening Statement............................................    32
    Written Testimony............................................    34
    Responses to Questions for the Record........................   261
Mezey, Philip:
    Opening Statement............................................    13
    Written Testimony............................................    15
    Responses to Questions for the Record........................   239
Moeller, Hon. Philip D.:
    Opening Statement............................................     5
    Written Testimony............................................     8
    White paper entitled ``Transmission Investment: Revisiting 
      the Federal Energy Regulatory Commission's Two-Step DCF 
      Methodology for Calculating Allowed Returns on Equity'' 
      prepared by ScottMadden, Inc. for Edison Electric 
      Institute, dated December 2017.............................   124
    Table A8 entitled ``Electricity supply, disposition, prices, 
      and emissions'' from the U.S. Energy Information 
      Administration / Annual Energy Outlook 2017................   185
    Responses to Questions for the Record........................   199
Murkowski, Hon. Lisa:
    Opening Statement............................................     1
National Association of Regulatory Utility Commissioners (NARUC):
    Letter for the Record........................................   294
National Hydropower Association (NHA):
    Letter for the Record........................................   298
Santa, Hon. Donald F.:
    Opening Statement............................................    45
    Written Testimony............................................    47
    Responses to Questions for the Record........................   270
Spire Inc.:
    Letter for the Record........................................   301


  THE EVOLUTION OF ENERGY INFRASTRUCTURE IN THE UNITED STATES AND HOW 
     LESSONS LEARNED FROM THE PAST CAN INFORM FUTURE OPPORTUNITIES

                              ----------                              


                       THURSDAY, FEBRUARY 8, 2018

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:07 a.m. in 
Room SD-366, Dirksen Senate Office Building, Hon. Lisa 
Murkowski, Chairman of the Committee, presiding.

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

    The Chairman. Good morning, everyone. The Committee will 
come to order.
    Infrastructure. Lots of people have been talking about 
infrastructure. Certainly, here in the Energy Committee, we 
have been doing it for quite some time.
    Senator Cantwell and I, in our bipartisan bill that we 
worked to move last session, last Congress, I think really laid 
the groundwork for some of the good infrastructure pieces when 
we think of energy.
    During his State of the Union address, President Trump 
called for a renewed focus on our nation's infrastructure. And 
again, here at the Energy Committee, we have been working to 
improve our nation's energy infrastructure for the past several 
years, largely focusing on the roadblocks that hinder 
responsible development, challenges related to cybersecurity 
and the pursuit of innovative technologies.
    Our nation's energy delivery systems have benefited from 
significant innovation over the years. Today's hearing will put 
current infrastructure opportunities into perspective by 
examining how America's energy, from production to generation 
to distribution, has evolved over time. This is an opportunity 
to look at what we have, how we came to have it and to examine 
which policies helped the effort.
    I often think back to the development of the Trans-Alaska 
Pipeline System (TAPS) during the 1970s. Prudhoe was the 
largest oilfield ever discovered in North America, but we 
needed a way to transport the oil from the remote North Slope. 
After much study and debate, Alaskans determined that a 
pipeline was our best option, which required Congressional 
approval in the midst of an oil crisis.
    Since TAPS came online in 1977, the 800-mile pipeline has 
successfully transported more than 17 billion barrels of oil 
from the North Slope to an ice-free port in Valdez. More than 
half of the pipeline runs above ground, which is a necessity 
given Alaska's prevalent permafrost terrain. But really, it is 
truly an engineering marvel.
    It is a lifeline for Alaskans. It creates jobs, provides 
revenues and has enabled the creation of our Permanent Fund. It 
is also a critical national security asset for all Americans, 
particularly those along the West Coast.
    Today's technologies, like fracking, have allowed us to 
reach oil and gas resources that were previously unattainable. 
And technological improvements, like horizontal drilling, have 
enabled industry to shrink their footprint while reaching 
resources miles away from the drill site. One thing that has 
not changed is that we still need pipelines to deliver these 
resources to refineries and natural gas plants. It has just, 
unfortunately, become a little bit harder to build them.
    Perhaps no asset has seen more innovation and evolution 
than our nation's energy grid. I think we all recognize that 
the grid is no longer just an energy delivery system for large, 
centralized generation assets.
    Distributed generation, microgrids and energy storage now 
bring electricity closer to home, changing the way consumers 
interact with their electricity providers. At the same time, we 
have seen significant changes in energy consumption. Efficiency 
improvements and retrofits allow us to use less energy to power 
and heat greater space at a lower cost. In some of Alaska's 
more remote communities, simply by switching streetlights to 
more efficient LEDs, we have seen savings in tens of thousands 
of dollars annually.
    Layered on top of the infrastructure evolution is the 
digital revolution. The increased digitalization of our 
nation's energy delivery system provides numerous benefits. 
Real-time monitoring can allow for system optimization and 
identify potential issues in their earliest stages. Better data 
assists consumers in making informed choices about their energy 
usage.
    At the same time, increasing the amount of internet 
connections also increases the number of access points, which 
can leave our critical infrastructure vulnerable to potential 
bad actors. Determining how best to secure our infrastructure 
from ever-increasing cybersecurity threats is one of the 
biggest security challenges that face our nation today.
    As we consider the evolution of energy infrastructure, it 
is impossible to ignore the impact of government policy. There 
have been times when Congress has made a positive impact, such 
as recognizing, again, the value of TAPS during an energy 
crisis. But too often we have seen failed government attempts 
to impose outcomes or, perhaps, pick winners and losers and we 
do not always pick the winners. It is important then that we 
use the lessons learned from the past to inform future 
Congressional actions.
    We have a distinguished panel of witnesses here today. I 
will introduce them all in a moment.
    But now, let me turn to Ranking Member Cantwell for your 
comments.

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

    Senator Cantwell. Thank you, Madam Chair, and thanks for 
holding this important hearing on a variety of issues as it 
relates to our nation's energy infrastructure. I know that you 
and I have been on the same page for a couple of years now 
about making major investments in using the Quadrennial Energy 
Review as a framework for how we move forward.
    Hopefully our colleagues, as we move more to a larger 
infrastructure discussion in the Senate, will look at some of 
these issues that we are talking about today.
    I, too, want to welcome the witnesses. Some people want to 
know how you build an ecosystem of mind share and expertise. 
Well, I feel like the panel in front of us is that ecosystem, 
particularly for the Pacific Northwest.
    Mr. Allen from McKinstry, with whom the Chair and I had an 
opportunity to tour the facility in Seattle, looking at how 
energy efficiency was saving local school districts money; Mr. 
Mezey, from Itron in Spokane; but I need to point out that Mr. 
Moeller, also, we claim you as a Northwest native.
    [Laughter.]
    So there is something to be said for building, and I would 
point out that our public power representative is here too. 
That is what made this ecosystem happen and the continued 
technology and focus and interest in keeping ahead.
    So thank you all for being here. It is a delight to have 
this panel.
    Three decades ago, the average U.S. home used electricity 
to power a television and a couple large appliances and a few 
small appliances. Americans are now connected to the Internet 
and using multiple televisions and appliances and charging 
computers and tablets and cell phones. And now, even, charging 
electric cars and generating their own power with solar panels.
    Consumers and businesses are demanding new services and new 
technologies, and our electricity grid needs to keep pace with 
that, and also the growing threat of cybersecurity attacks.
    We need to invest in modernizing our infrastructure to meet 
demands, help lower consumer's bills and provide security. And 
we know that is a good return on investment. We learned from 
the Recovery Act that when $1 billion was invested in smartgrid 
technologies, it created nearly $7 billion in economic output. 
The investment created nearly 50,000 jobs and more than $1 
billion in tax revenues back to the government.
    Smartgrid and energy efficiency technologies can help 
reduce the need for expensive peak power and shift loads off 
peak. The Department of Energy's Pacific Northwest Smart Grid 
Demonstration Project, partnered with Avista, another one of 
our components to that ecosystem, in Eastern Washington and 
other utilities in the region and they found the use of smart 
meters help consumers reduce their energy consumption by 
anywhere from 4.5 to 9 percent. These real savings for 
consumers are a part of what is an important record in the 
technology performance report that highlights the outcomes of 
those projects.
    Beyond the economic impacts, smartgrid technology has an 
impact on the environment as well, and Pacific Northwest 
National Labs estimated that investments in smartgrid and 
intelligent buildings can reduce U.S. carbon emissions anywhere 
from 12 percent by 2030.
    The Pacific Northwest, as I said earlier, has always been 
about this modernization. I guess that is because of the 
realization of how effective and efficient affordable 
electricity is in building your economy over and over again. 
Some people just recently on a trip home to the Northwest said, 
some people would think that if you had cheap electricity, why 
would you keep building in energy efficiency because you 
already have affordable, cheap electricity? But what happens is 
you have the mind share and awareness of how much that drives 
your economy, so you keep making more and more investments in 
it.
    I think that is why we are hearing from Mr. Allen from 
McKinstry, Mr. Mezey from Itron, and several other witnesses 
today.
    In the 1970s, companies transitioned from designing and 
retrofitting buildings to cutting waste, saving money and 
increasing comfort and they continue to embrace the smart 
building and energy efficiency work that is so important to new 
schools and data centers.
    McKinstry has grown from a company of just 6 to more than 
1,800 employees. Itron, from Liberty Lake, Washington, is a 
leading manufacturer of innovative grid and smart metering 
technology. Their solutions help cities, utilities and 
consumers better manage energy and water resources and move 
toward a cleaner energy economy. Both these companies are 
developing next generation technology that, I believe, should 
be part of our energy infrastructure investment in the future.
    As I mentioned, cybersecurity, I believe, is a critical 
part of our infrastructure investment for the future. From 2012 
to 2016, the number of cyberattacks against U.S. critical 
infrastructure more than doubled. In 2013 and 2014, energy 
infrastructure was the number one cyber target of all U.S. 
critical infrastructure.
    The Russians and foreign actors have the capability to do 
significant damage to our economy by bringing down that 
electricity grid. In October, NBC News reported that hackers 
linked to North Korea targeted U.S. electric power companies. 
If we don't make the necessary investments here to protect 
against cyberattacks, we are creating the opportunity for 
people to create widespread havoc on our grid.
    At his confirmation hearing last year, Secretary Perry 
committed in the record that he would support spending on 
cybersecurity and I hope he will follow through on this 
commitment.
    I hope today we also hear about the workforce needs of 
these industries and sectors. The Department of Energy's 
Quadrennial Energy Review estimated that we needed 1.5 million 
new energy jobs to fill by 2030, including 200,000 workers with 
STEM skills. I know how much McKinstry focuses on this at their 
facility in the state being a lead on the discussion of how we 
get more STEM workers. Our energy infrastructure is upgraded 
with new technology to be smarter, so the workforce needs to 
also be upgraded with those skills.
    That is why we need to make this infrastructure investment 
and I hope that our colleagues, after today's hearing, will see 
the benefit of it, no matter what the source of base energy is, 
energy efficiency is a big winner for our consumers and 
businesses.
    Thank you.
    The Chairman. Thank you, Senator Cantwell.
    We will now begin with testimony from each of our 
witnesses.
    Again, welcome to each of you. Thank you.
    I know several of you have come, as Senator Cantwell says, 
from the Pacific Northwest. We appreciate the fact that you are 
giving your time here with the Committee this morning.
    We will be led off by Mr. Phil Moeller, who is the Vice 
President of Edison Electric Institute (EEI). You have been 
before this Committee numerous times, in different capacities, 
formerly with your role at the FERC, but we welcome you back, 
Mr. Moeller.
    Mr. Philip Mezey, who is the CEO of Itron.
    And John Di Stasio, the President for the Large Public 
Power Council. We welcome you this morning.
    As Senator Cantwell mentioned, we had an opportunity to 
visit with Mr. David Allen, who is the Executive Vice President 
of McKinstry. It was good to be with you at your facility and 
to really understand so much of what is going on. It was really 
very enlightening. I appreciate that.
    Dr. Ken Medlock is with the Committee this morning. He is a 
senior fellow with the Baker Institute for Public Policy at 
Rice University. We welcome you.
    And also, Mr. Don Santa, also not a stranger to this 
Committee, you have been before us before. We welcome you back 
as the President and CEO of the Interstate National Gas 
Association of America, INGAA.
    Thank you all.
    Mr. Moeller, if you would like to begin this morning? We 
would like to keep comments to about five minutes, and your 
full statements will be included as part of the record.

STATEMENT OF HON. PHILIP D. MOELLER, EXECUTIVE VICE PRESIDENT, 
BUSINESS OPERATIONS GROUP & REGULATORY AFFAIRS, EDISON ELECTRIC 
                           INSTITUTE

    Mr. Moeller. Well, thank you, Chairman Murkowski, Ranking 
Member Cantwell and members of the Committee. I'm Phil Moeller 
with EEI. Thank you for having us and speaking on this 
important topic.
    EEI is the trade association of the investor-owned energy 
companies throughout the country. We serve over 220 million 
people out of 60 international members.
    We appreciate, also, the fact that you're focusing on 
infrastructure and transmission. You asked me to go through a 
little bit of a history of the transmission system with some 
lessons learned going forward.
    One of the things that's important about this is that, I 
think, transmission is generally, kind of, the unappreciated 
segment of American infrastructure, partly because it does 
remarkable things and it's very reliable, so it's, kind of, 
invisible. But the system is getting more and more reliable 
according to NERC and to think about instantly being part of an 
energy delivery system that provides electricity to over 320 
million Americans is remarkable in itself.
    It's important, also, because the transmission system in 
this country has been called the most complex machine in the 
world. And that, in itself, is remarkable. We have connections 
with Mexico. We have extensive connections with Canada. Canada 
really doesn't have much of an east-west transmission system so 
they rely on us. And we have three interconnections in this 
country. The one in the East, which is roughly the eastern two-
thirds of the country, one in the West and one solely within 
Texas, known as ERCOT.
    The great thing about transmission is that it provides a 
lot of optionality. Optionality similar to a robust system of 
highways and roads. Highways get congested, so do power lines. 
You have a robust system, you can decrease that congestion, 
that lowers costs. A transmission system can allow for access 
to lower cost energy over a larger footprint, also resources 
that are generated far from load. A lot of our renewable 
resources are far from load and it contributes to the 
reliability and the resiliency of the system, all at, I would 
argue, a very surprisingly low price, about 11 percent on 
average of the typical customer's bill.
    In terms of the history, our nation really started off as a 
series of distributed microgrids. And you can see the first one 
up in Manhattan at the Pearl Street Station. And pretty soon 
people figured out that it was a lot more efficient and it was 
a lot less costly and more reliable if we connect these systems 
through a transmission system.
    And so, gradually, people did and then created these 
transmission power pools, the first of which was created in 
1927, when the states of Pennsylvania, New Jersey and Maryland, 
PJM, got together. That footprint is now 13 states and the 
District of Columbia.
    So gradually more and more of these power pools were 
developed and we decided that we should get coal out of 
people's basements and instead burn it in bigger power plants 
far from cities, cheaper, more efficient, generally better for 
customers throughout the world, throughout the country.
    In 1965, we had a major event. The Northeast blackout led 
to, eventually, the creation of the predecessor of NERC, 
realizing that voluntary standards were necessary to prevent 
blackouts again.
    Another major event in 1992, you, as Congress, passed the 
Energy Policy Act. That lead to a couple of things. Mostly 
though, emphasizing this concept of open access of the 
transmission system so that everybody could get on it under 
comparable rates, terms and conditions. That led to a very 
competitive, vibrant, wholesale market. The premise being, 
again, open access of the transmission system that was 
incorporated by Order No. 888 from FERC in 1996.
    And 2003 was another major event in which the Northeast 
blackout affected 50 million customers. Again, Congress 
responded in 2005 with the Energy Policy Act directing FERC to 
designate an electric reliability organization, which is NERC, 
to have mandatory standards on the transmission system that 
were lacking before that. FERC has subsequently adopted scores 
of standards that are developed through the NERC process.
    The other part of the 2005 bill that was significant is 
that Congress recognized there had been underinvestment in the 
transmission system for several decades, so part of that very 
extensive Act was to promote transmission incentives which did 
lead to a period of expansion of the transmission system and it 
was effective.
    However, today we face a number of uncertainties that are 
based on a number of factors.
    First that, as you mentioned, siting and permitting is 
quite a challenge and, under your bipartisan bill that you 
introduced, some of those issues are addressed to make more 
accountability, timelines for the resource agencies 
particularly, and vegetation management is related to that so 
that power lines can be secured and run efficiently as well.
    My former colleagues at the FERC have a number of issues 
that they can address to create better certainty in this 
investment climate. Dealing with the uncertainty over ROEs 
after a court remand, dealing with these ongoing pancaked rate 
cases which is a challenge, probably not the intent of the 
Federal Power Act when rate cases can go on and on.
    Transmission incentives have been limited.
    We also have a little bit of uncertainty over Order No. 
1000 and what it means for various planning regions throughout 
the country.
    But because these are such long-lived and capital-intensive 
projects, often 40 and 50 years or longer, and in terms of how 
long they're used, the investment certainty up front is very 
important and both Congress and my former colleagues at FERC 
can make a number of decisions and actions that will increase 
the certainty of these investments.
    Again, thank you for having me. I look forward to answering 
any questions.
    [The prepared statement of Mr. Moeller follows:]
    
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    The Chairman. Thank you, Mr. Moeller, we appreciate you 
being here.
    Mr. Mezey.

         STATEMENT OF PHILIP MEZEY, PRESIDENT AND CEO, 
                          ITRON, INC.

    Mr. Mezey. Thank you, Madam Chair Murkowski, Ranking Member 
Cantwell, distinguished Senators.
    So as we've heard, Itron is a company that started about 35 
years ago, actually, in Hauser Lake, Idaho, and has now grown, 
headquartered outside Spokane, Washington, to over $2 billion 
in revenue and 8,000 employees.
    The company started on the simple premise of trying to make 
it easier to collect electricity, gas and water information. 
That mandate has really grown well beyond that, that we realize 
that having better connections and better information from the 
distribution grid allows utilities to understand how 
effectively they're distributing electricity, gas and water and 
how effectively customers are using it. We have relatively 
little of this information historically and now are getting 
much more insight about how we can better manage and measure 
and secure the grid.
    I just wanted to provide a couple of very quick examples. 
Because we face the challenge which, as we've seen estimates as 
high as $1 trillion of required investment into aging 
infrastructure. And the question is, how do we manage that kind 
of investment and target it more effectively? Because the kind 
of smart technology from smart metering to networks and sensors 
that can be placed out there give us the tools to allow us to 
understand where to invest the money and when so that we can 
allocate capital more effectively. We can manage our existing 
assets for longer and we can reduce operations and maintenance 
costs so that we can help our utilities to be more successful 
and, of course, help our customers to understand more 
effectively how they're using these critical resources.
    As an example, Center Point Energy, which is the utility of 
Houston, was just hit by Hurricane Harvey and managed with this 
smarter infrastructure to restore power much more quickly than 
they had before. They saved 45 million outage minutes. So the 
grid has become more resilient, and the utility is providing 
more effective power. They've improved their overall 
reliability by 25 percent. As a result of the smart 
infrastructure that they've invested in, they've saved over 17 
million truck rolls because they're able to see what's going on 
out in the field. This has been a tremendously positive 
business case, and they continue to explore how they can drive 
even greater benefits.
    Hurricane Irma took out 4.4 million customers in Florida 
who all were restored under ten days as a result of the smart 
investments, grid investments, that they had made.
    On the gas side, through pressure and flow sensing, we're 
able to more quickly identify where potential leaks will occur. 
We have corrosion monitoring, pressure sensing and are starting 
to deploy methane sensing to improve the safety of the grid and 
also to be able to target and understand where problems will 
occur.
    Using the smart technology, we can also defer when 
investment is necessary. So our customer, Central Hudson, has 
implemented a demand response program. And that program allows 
them to balance their load so that they can defer a new 
generation asset. They've been able, through their demand 
response program, to get back 6 megawatts of peak power of a 
program that's intended to get 16 megawatts of power reduction. 
So again, manage infrastructure investments and be able to 
defer capital when necessary.
    A really exciting development in our space is the 
integration between the electric utilities and cities which 
we're starting to see more. EEI recently joined the Smart 
Cities Council. I just wanted to cite an example, Envision 
Charlotte, in which Charlotte, teaming with Duke and Itron 
among others, have reduced energy usage in downtown Charlotte 
by 19 percent. This is a very significant reduction that drives 
economic vitality in Charlotte.
    We're also involved in a deep partnership in Spokane, a 
project called Urbanova, in which a number of local players are 
coming together in order to create better outcomes in downtown 
Spokane.
    We deeply believe that the investments in this smartgrid 
technology are not only showing basic business case benefits, 
they're helping utilities to better understand how to allocate 
scarce resources, manage their assets more effectively and, as 
Senator Cantwell mentioned, prepare for the 21st century grid 
requirement which is a more dynamic grid and a better 
connection to customers to give them better information over 
time.
    I thank you very much. Happy to answer any questions and 
for Itron to be a resource at any point to you or your staff.
    [The prepared statement of Mr. Mezey follows:]
    
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    The Chairman. Thank you, Mr. Mezey, we appreciate you being 
here.
    Mr. Di Stasio, welcome.

            STATEMENT OF JOHN DI STASIO, PRESIDENT, 
                   LARGE PUBLIC POWER COUNCIL

    Mr. Di Stasio. Thank you very much, Chairman Murkowski, 
Ranking Member Cantwell, Committee members. Thank you for the 
opportunity to provide this testimony in support of a national 
effort to enhance our nation's energy infrastructure.
    I'm John Di Stasio. I'm the President of the Large Public 
Power Council (LPPC). We represent 26 of the largest municipal 
utilities across the country serving over 30 million consumers 
in 13 states.
    We are significant infrastructure investors, owners and 
operators. Together, we own about 70,000 megawatts of 
generation and approximately 90 percent of all the public, non-
federal transmission in the United States. We also belong to 
the American Public Power Association who has some 2,000 
utilities in 49 states across the country.
    This morning I'd like to speak to the importance of 
investment in new electric infrastructure, the role public 
power plays in the electric grid and our interest in partnering 
with the Federal Government. I'd also like to share my thinking 
on how certain barriers to investment might be addressed and 
the important role played by the federal Power Marketing 
Administrations, or the PMAs.
    First, the nation's electric infrastructure, it is reliable 
as was mentioned, but it does face significant challenges. 
There's much we need to do to modernize certain aspects of the 
grid and to address emerging risks.
    While average nationwide annual loads have been relatively 
flat or even declined in some cases, the need for new 
transmission infrastructure is driven by changing resource 
mixes and also opportunities to improve reliability and 
resilience.
    In addition to investment in large-scale transmission 
projects, the industry is investing substantially in smartgrid 
technologies aimed at optimizing the grid. These investments 
incorporate a range of technologies to facilitate such things 
as improved transparency for consumers, driving better energy 
choices, energy efficiency, grid situational awareness, the 
integration of distributed energy resources, electric 
transportation and also a big focus on cybersecurity. These are 
all areas of opportunity and need, and we look forward to 
assisting based on the lessons learned today.
    Second, LPPC supports the role for the Federal Government 
in partnering to build infrastructure, and we urge you to work 
with public power. Over the last decade, public power utilities 
have invested more than $100 billion in infrastructure to serve 
our communities.
    There's merit in the idea for partnerships between the 
government and non-federal entities. My own experience speaks 
from the time I spent as the CEO of the Sacramento Municipal 
Utility District, affectionately called SMUD. We implemented a 
$127.5 million grant from the Department of Energy, added $180 
million of matching funds and did a very, very substantial 
smartgrid investment grant project that, I think, is paying 
dividends even today. I believe this experience is a useful 
model for a federal municipal partnership.
    Third, LPPC believes that the exercise of federal authority 
over electric transmission siting can be improved. As was 
mentioned before, transmission is a necessary element, but it 
involves multiple agencies and we've been supportive of a 
federal role and assisting in that process. Some of the things 
that were outlined in your proposal go a long ways toward 
improving some of the timelines and the risk of those projects.
    We also see room for improvement in the hydroelectric 
relicensing project. And I know you've also addressed this. 
Hydropower is economical, renewable and carbon free, yet the 
licensing process governing the development of new facilities 
and relicensing of existing plants is lengthy.
    Again, my own experience while at SMUD was that our 12-year 
relicensing process for our hydro facilities was typical, if 
not better than most. We support initiatives such as those 
advanced by this Committee to reform that process.
    Finally, LPPC urges Congress to be respectful of the role 
played by the federal Power Marketing Administrations. We 
strongly urge the Committee to reject proposals now circulating 
that call for the sale of transmission assets owned by federal 
PMAs to private entities. Each of the PMAs provide critical 
service to members of the public power community and none are a 
drain on the Treasury since we provide the investment and 
support for those facilities, paid for through the electric 
rates. These entities are responsible for administering federal 
energy infrastructure vital to the regions they serve.
    To conclude, we're very supportive of an increased focus on 
the nation's infrastructure and stand ready to be a resource 
and a partner to this Committee and Congress.
    Thank you.
    [The prepared statement of Mr. Di Stasio follows:]
    
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    The Chairman. Thank you, Mr. Di Stasio.
    Mr. Allen, welcome.

 STATEMENT OF DAVID ALLEN, EXECUTIVE VICE PRESIDENT, McKINSTRY 
                            COMPANY

    Mr. Allen. Well, good morning, Chairman Murkowski and 
Ranking Member Cantwell. We thank both of you for visiting 
McKinstry. We appreciate our elected officials coming out and 
seeing what happens on the ground in our companies.
    I'm David Allen. I'm the Executive Vice President of 
McKinstry Company. Thank you for the invitation to speak. I've 
traveled a long way to get here and it is very important for me 
to be here.
    I am here to share lessons we've learned from more than 50 
years as a company designing, building, operating, maintaining 
and managing facilities across the United States. I represent 
about 2,000 employees of all levels: union workers, 
construction workers, engineers, marketing people, project 
managers and so on. We believe any responsible infrastructure 
legislation argued before Congress must: one, include funding 
to update our aging and failing power grid; two, prioritize 
conservation over consumption; and three, test market readiness 
through demonstration projects.
    I assume the first point will be thoroughly discussed by my 
industry colleagues here that actually are, kind of, humbling 
for me since I, kind of, come from Main Street. Instead, I'll 
use my time to focus on some of the things that the Senators 
saw that we see in investing in energy efficiency.
    We obviously favor conservation over consumption. The 
potential to make our built environment more energy efficient 
is virtually limitless.
    Approximately 80 billion square feet of non-industrial 
facility space uses 70 percent of the electricity of the United 
States which is staggering, and which is more staggering is 
that we believe, and a lot of experts believe, that half of 
that energy from generation to consumption is wasted which 
probably could make energy efficiency one of the largest pools 
of renewable resources at the cheapest price to get of all the 
renewables out there.
    To find an example of this opportunity we needn't look 
further than a local school district. K-12 schools are crippled 
with deferred maintenance and shrinking operational budgets. 
Energy efficiency projects are an attractive solution for many 
of our clients to upgrade critical health and life safety 
systems with little to no out-of-pocket funding.
    Infrastructure needs are addressed in the short-term, and 
scarce operational dollars are freed up over the long-term, to 
continually fund competing needs like teacher salaries, class 
size reduction and STEM programming.
    More broadly, a recent analysis by Oregon-based economists 
found that energy efficiency investments increase overall 
economic productivity across all sectors of our economy.
    When you think about it, spending money on wasted energy is 
about the least productive thing we can do as a society. 
Eliminating energy waste and freeing up that capital allows 
people to spend in ways that improve the underlying 
productivity of their economies.
    We have enormous opportunities to gain productivity and 
efficiency with targeted approaches to public policy and 
funding that prioritizes conservation over consumption.
    Smart and connected communities are the future. There's no 
debate about that. The world is heading that way, and the 
United States is heading that way.
    We encourage this Committee to continue to inspire 
innovation by funding demonstration projects. The lessons we 
learn from these demonstration projects have been the 
foundation for the next wave of innovation. In fact, Phil 
mentioned a couple of them.
    There are two areas of these demonstration projects we 
encourage the Committee to get more familiar with.
    One, invest in rural, hard-to-reach communities. Energy 
costs are disproportionately high in many corners of our 
country where the centralized grid has limited reach. We must 
be open to new technologies and approaches to securing a 
reliable and cost-effective energy future.
    As an example, which is incredible, Costa Rica has been 100 
percent off grid using renewable energy, energy-efficient 
technology and battery storage to meet their needs for almost 
one full year, which could be a metaphor for our smaller 
communities across the country. We urge the Committee to bring 
to market these off-the-shelf technologies across rural America 
through these demonstration projects. No community should be 
left behind as we upgrade our energy infrastructure, and the 
best ideas should be encouraged to surface.
    Finally, tailor funding and legislation to fuel the shared 
economy through ECO district systems as a federal demonstration 
project. An ECO district arrangement is one where one entity's 
waste heat becomes another entity's fuel source. ECO district 
demonstration projects have the potential to significantly 
shift the utility infrastructure paradigm driving waste out of 
our built environment and ultimately increases economic 
productivity for all. In addition, ECO districts interconnect 
smart buildings and smart systems--exploding the need for the 
Internet of Things, which is upon us right now, and American 
invention of new technology.
    We have the responsibility to think differently about the 
development of our cities and incite exploration of shared 
infrastructure that requires multi-party cooperation for the 
good.
    Thank you for the opportunity to share, and I'd be happy to 
answer questions down the road.
    Thank you.
    [The prepared statement of Mr. Allen follows:]
    
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    The Chairman. Thank you, Mr. Allen.
    Dr. Medlock, welcome.

 STATEMENT OF DR. KENNETH B. MEDLOCK III, JAMES A. BAKER, III, 
AND SUSAN G. BAKER FELLOW IN ENERGY AND RESOURCE ECONOMICS, AND 
SENIOR DIRECTOR, CENTER FOR ENERGY STUDIES, JAMES A. BAKER III 
          INSTITUTE FOR PUBLIC POLICY, RICE UNIVERSITY

    Dr. Medlock. Thank you, Senator Murkowski, Senator 
Cantwell.
    My written testimony lays out a basic framework for 
understanding the role that infrastructure plays in market 
function, price formation, the facilitation of innovation. I 
want to focus on a few very specific aspects of that. I'm 
actually encouraged to hear the testimonies so far because they 
tie very closely into what I'm going to say, and I'm sure Don's 
testimony will do the same.
    A lot of times when we talk about infrastructure, we--and I 
think this has, kind of, played out so far--we tend to focus on 
infrastructure for delivery, infrastructure to facilitate end 
use through the application of new technologies and energy 
efficiencies, but oftentimes we leave out the most important 
part of actually leading to all of that which is the energy 
development phase. And this extends to all aspects of the 
energy spectrum--oil and gas, coal, wind, solar--all of these 
things, if we're going to use them, require infrastructure 
investment up front at the very upstream tail of the investment 
life of the entire energy cycle. So when we think about the 
role that infrastructure plays in facilitating market function 
and price formation, we have to really think about the entire 
value and that's something that cannot be lost.
    When we talk about connecting markets, connecting consumers 
and producers to one another, that's really the most vital 
function we often think about as infrastructure playing. We've 
heard that with regard to transmission and power. We've seen a 
great example of where infrastructure is facilitated, a virtual 
explosion of wind capacity in the State of Texas, for example. 
The State of Texas, as you likely know, has more wind capacity 
than any other state in the country. And you might ask the 
question, well, why is that?
    Well, first of all, there's a fantastic wind resource in 
the State of Texas. So that coupled with policies have actually 
helped propel the expansion of wind capacity generation assets 
in the state. But there was a potential stopping point. Namely, 
there was limited ability to move the power that's generated 
from that wind capacity to the place where people live which is 
in the eastern and southeastern part of the state. There was 
roughly $7 billion of infrastructure investment made to build 
power lines to connect those assets to the place where 
consumers were demanding them.
    This also gets to another very important point which is the 
role of market structure and facilitating infrastructure 
investment. One of the things that's actually occurred in the 
State of Texas is the introduction of competition at the 
wholesale and retail levels in power markets. And you might 
say, well, what implication does that have for infrastructure?
    Well, on the retail end, when you introduce competition 
providers all of a sudden had to differentiate themselves to 
capture market. In doing so they were able to capitalize on 
something called revealed consumer preference. This is the 
notion that some consumers might actually want to have a higher 
portfolio of renewable energy in their energy mix, so providers 
could actually market that. As that occurred it sent a demand 
signal that as long as there's infrastructure in place, works 
its way all the way back through the value chain to the 
upstream and that creates demand pull for new types of assets.
    The same thing can be said, actually, of energy efficiency 
investments. The reference was made to Harvey, which was a 
fantastic reference by the way, and we've talked about this in 
Houston quite a bit. But the simple fact that when you compare 
the reality in the wake of Harvey to the reality in the wake of 
Hurricane Rita, for example, when it hit the region, power 
outages were much shorter in duration and it had a lot to do 
with the fact that smart technologies enabled Center Point to 
identify locations very quickly and dispatch crews much more 
efficiently to address issues.
    These types of infrastructure investments effectively make 
the system that we're talking about much more resilient. That's 
something that, I think, cannot be underappreciated because as 
we move forward we really have to think about resilience, 
particularly in the broader context of energy security.
    This gets into a host of other things that are actually 
addressed in my written testimony that relate to reliability 
and the role that infrastructure actually plays in maintaining 
reliability to end users.
    At the end of the day, that's actually why we're here 
talking about this stuff. It's because constituencies around 
the country are concerned about access to energy.
    The market has done a fantastic job in this country of 
ensuring, to date, that electricity reaches consumers reliably, 
that natural gas reaches power generation stations and 
industrial users and homeowners reliably, and that really is a 
function of market structure and regulatory institutions that 
make this country unique in many ways, very different from most 
other countries around the world. And it's something that 
really does lend itself to a competitive advantage for the 
United States overall.
    Thank you. I'll be happy to address any questions.
    [The prepared statement of Dr. Medlock follows:]
    
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    The Chairman. Thank you, Dr. Medlock.
    Mr. Santa, welcome.

     STATEMENT OF HON. DONALD F. SANTA, PRESIDENT AND CEO, 
         INTERSTATE NATURAL GAS ASSOCIATION OF AMERICA

    Mr. Santa. Good morning, Chairman Murkowski, Ranking Member 
Cantwell and members of the Committee.
    My name is Donald Santa, and I'm the President and CEO of 
the Interstate Natural Gas Association of America, or INGAA. 
Our members transport the vast majority of the natural gas 
consumed in the United States through a network of 
approximately 200,000 miles of interstate transmission 
pipelines.
    Thank you for the opportunity to share INGAA's perspective 
on the evolution of the nation's natural gas transmission 
pipeline infrastructure and the lessons learned from that 
experience. My perspective on this subject is informed not only 
by my current role, but also by my experience as a member of 
the Federal Energy Regulatory Commission.
    My testimony today will summarize four recommendations.
    First, recognize that enhancements to the existing natural 
gas pipeline network will continue to be needed. While the U.S. 
has a robust, well-developed, natural gas pipeline network, 
sources of natural gas supply and consumption patterns will 
continue to evolve. Consequently, the U.S. will need a flexible 
and responsive natural gas pipeline network that can adapt to 
meet the public interest. This evolving situation is 
illustrated by the recent emergence of the Permian Basin as a 
significant source of associated gas that is close to markets 
on the Gulf Coast and in Mexico. Additional pipeline capacity 
will be needed to bring this gas to market.
    Second, value of the Natural Gas Act framework. The Natural 
Gas Act framework has been remarkably durable and should not be 
upset. The choice by Congress in 1938 to provide the Federal 
Power Commission and its successor, FERC, with latitude to 
interpret key statutory terms has enabled the Commission to 
adapt efficiently to the evolving market and public policy 
imperatives. Congress vested FERC with exclusive authority to 
authorize the construction of an interstate natural gas 
pipeline found to meet the public convenience and necessity. 
This exclusive authority is important for two reasons: first, 
FERC exercises its authority in the national interest; and 
second, while other federal agencies have mandates to issue 
impact-specific permits connected with proposed pipeline, only 
FERC has the project approval mandate.
    Third, while FERC has overall responsibility for reviewing 
applications to construct new interstate natural gas pipelines, 
other federal agencies, and in some cases the states, review 
and permit discreet activities associated with pipeline 
construction. Experience demonstrates that the pace of action, 
or inaction, on these other permits can delay and frustrate the 
timely and predictable approval of pipeline projects. Congress' 
attempt to address the situation in the Energy Policy Act of 
2005 by strengthening FERC's role as the lead permitting agency 
for interstate natural gas pipelines has not been entirely 
successful. We encourage the enactment of legislation now 
pending before Congress that would improve this process 
incrementally such as the House-passed H.R. 2910, Senator 
King's Senate-introduced S. 1844, and parts of S. 1460, 
introduced by the Committee's Chairman and Ranking Member. 
These goals are also being advanced through Executive Branch 
reform initiatives such as Executive Order 13807 on 
establishing discipline and accountability in the environmental 
review and permitting process for infrastructure.
    Fourth, cooperative federalism must be restored. As noted, 
federal law assigns to the states certain permitting 
responsibilities. For many years this worked smoothly as states 
reviewed applications for permits required by federal law and 
imposed reasonable conditions to protect their resources. Now, 
however, states are using this authority to dictate national 
energy policy. Specifically, the State of New York is 
attempting to use its authority under Section 401 of the Clean 
Water Act effectively to veto FERC's determination that a 
pipeline project is in the public convenience and necessity.
    We respect the rights of states to protect the resources 
within their borders and support the cooperative federalism 
framework upon which many of these environmental statutes are 
based. This, however, is about more than just the respective 
roles of federal and state authority because one state's abuse 
of its role in this relationship can affect the ability of 
other states and their citizens to enjoy the benefits of 
interstate commerce. This is not cooperative federalism.
    We do not believe that this result was intended by 
Congress. We encourage Congress to remedy the situation by 
providing guidance to the appropriate role of the state under 
Section 401 and by providing meaningful recourse should a state 
abuse its authority.
    In conclusion, the United States has benefited greatly from 
a natural gas transmission pipeline network unlike any other in 
the world. These benefits include lower energy prices for 
consumers and industry, cleaner air through the displacement of 
less benign fuels and greater energy security. This would not 
have been possible without the pipelines that link the 
suppliers and consumers of natural gas.
    Thank you.
    [The prepared statement of Mr. Santa follows:]
    
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    The Chairman. Thank you, Mr. Santa.
    Welcome to all of you. Thank you for your comments and what 
you have provided, not only from a historical perspective but 
how we might move forward.
    Mr. Allen, I am intrigued with what you have outlined for 
the potential for demonstration projects in rural Alaska. We 
had an opportunity to describe the situation in many of my 
communities that are not only not part of a broader grid, they 
are the very definition of what a true microgrid is.
    Mr. Moeller, you mention in your testimony that initially, 
back in the day, we began as, basically, distributed 
microgrids. In many cases, I feel in Alaska we are going back 
to the future. We are letting you know what it is like to be 
that little independent microgrid.
    I would welcome you to come to Alaska, to come out to some 
of our rural communities, and then give us your insight and 
guidance. I have an imagineer at Chena Hot Springs that, I 
think, the two of you could share some very interesting ideas 
about how we might be able to demonstrate at a very small level 
in our remote and rural communities, some of the innovations 
that are out there. So I would welcome you to do that.
    I want to ask a question to both you, Mr. Moeller, and to 
you, Mr. Santa, with regards to comments that are made in your 
written statements. I will begin with you first, Mr. Santa, 
because you made a statement and said, ``The U.S. natural gas 
transmission pipeline industry has been funded entirely with 
private capital.''
    Mr. Santa. That is correct.
    The Chairman. I think that is important to highlight, not 
only to the Committee but to others, to recognize that not all 
solutions require federal involvement, federal funding.
    As we talk about an infrastructure package here, there is 
no shortage of ideas as to what might go into a broader, 
economy-wide infrastructure package. What it all comes down to 
is, how are we going to pay for it?
    When we understand that, in fairness, what we have seen 
with some very significant infrastructure has been a level of 
investment within the industry that demonstrates that given the 
right investment climate, these projects can proceed.
    Mr. Moeller, you have also suggested, you made a statement 
that, again, we do not often see here in testimony before 
Congress. You said, ``EEI members are not advocating for 
additional federal funds for transmission investment.'' Again, 
I want to highlight that because, same situation, not all 
solutions necessarily require federal funding.
    So, if I can ask the two of you, in terms of the necessary 
investment climate for whether those in the natural gas 
transmission industry to be able to proceed with projects or 
your members within EEI to be able to proceed to projects, what 
is it that can and should be done to ensure that we have that 
necessary investment climate to allow for these particular 
investments?
    Mr. Santa. I would begin by saying, I think what the 
investors in pipelines need, and the investors more broadly in 
energy infrastructure, is certainty and predictability.
    In my testimony, I talked about the Natural Gas Act 
framework and how favorable that has been to encouraging 
private investment to develop the infrastructure to support 
this industry.
    What we have now though is, and I've noted, there are 
multiple other permits that are required. That permitting 
process, I think, can be coordinated more without violating the 
purposes of many of those statutes that are intended to protect 
the environment and various resources.
    So I would encourage as a complement to whatever may be 
done on publicly-funded infrastructure in a bill, to also look 
with an eye toward what can be done to improve permitting for 
infrastructure.
    The Chairman. So permitting, certainty, coordination.
    Mr. Moeller?
    Mr. Moeller. Thank you, Madam Chairman.
    The written statement that I have elaborates more on this, 
but similarly to what Mr. Santa said, siting and permitting 
reform and certainty and accountability, along with the 
emphasis on cooperative federalism so that one state doesn't 
deny the benefits to the citizens and customers of many other 
states in infrastructure that really is affecting interstate 
commerce is important.
    Specific to the investment climate at FERC, you know, there 
are some good challenges FERC has based on a period of 
interesting monetary policy where the formula that was come up 
with that was rejected by the courts are, frankly, not putting 
the commensurate return given the risk of transmission 
investments.
    The Commission has to deal with this. We've got a white 
paper out that's trying to help them on that, and I'll happily 
give you copies of it.
    The Chairman. Great.
    [The white paper information follows:]
    
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    Mr. Moeller. In addition there are serial complaints, the 
15-month issue, I mentioned. There's the capping of 
transmission incentives which, I think, is probably counter to 
the intent of Congress from the 2005 Act.
    And then the ongoing very general issue of cost allocation 
on these multi-decade assets where figuring out who pays how 
much, there's a lot of art and science in that because flows 
change over the decades. But adding more certainty, very 
generally, to that will improve the investment climate.
    The Chairman. Very good. Thank you both.
    Senator Cantwell.
    Senator Cantwell. Thank you, Madam Chair.
    I had a very interesting meeting earlier this week when the 
National Association of Office Parks came to visit and their 
whole focus was energy efficiency. I kept thinking, really? 
They want infrastructure investment, of course, but they kept 
going on and on about energy efficiency and how the building 
standards help us get the energy efficiency.
    We described to them how much we had worked here as a 
Committee to get those kinds of new things in place and passed 
the bill over to the House and they still hadn't supported it. 
Even now as we talk about moving another energy bill back over 
and getting the House to agree with us, we still have stumbling 
blocks with our House colleagues who basically don't see the 
advantages of energy efficiency from a building code 
perspective.
    I said, I don't know how to break through. And the 
gentleman said, ``just tell them we don't want our buildings to 
suck.''
    [Laughter.]
    I thought, okay, you are right. That is a much better 
message.
    [Laughter.]
    Just, we do not want our buildings to suck.
    Okay.
    [Laughter.]
    Mr. Allen, you didn't really expound on the Amazon project. 
Can you describe that a little bit, about how Amazon and the 
Westin Hotel are sharing in a heat exchange that is driving 
down the cost by something like four times the need for a HVAC 
system and how we need to keep going on this innovation?
    Mr. Allen. Yeah, thank you.
    Yeah, I'd be glad to and I'd first like to say, Senator 
Murkowski, we learned as much about how to help small cities 
from them than they did about us. So it's more about 
exploration and ideas, innovation, so that's the thing.
    The NAIOP folks, we're members of, is a real estate, 
commercial real estate organization and they are getting 
religion. They fought it.
    Real estate developers and building owners fought this for 
a long time and then they finally figured out that two things 
were happening that the sophistication of the mechanical 
electrical systems and how occupants occupy a building and some 
of the demands of the changing office and hospitals and data 
centers were causing their utility costs to go up. They figured 
out that they maybe should take a look at energy efficiency as 
a source to fund, to get more efficient and fund other things 
with their savings.
    The Amazon ECO district was interesting and I want to 
remind everyone, it's more of--it's small and it's a metaphor 
for what is possible in a big way around the country. And 
here's how it started.
    The Westin Hotel, the Westin building, next to Westin 
Hotel, was a telecom building, now a data center building. We 
managed it. We installed a lot of the equipment there and an 
engineer on a unicycle that worked for McKinstry met me in the 
lobby eight years ago and said, welcome to the largest boiler 
in Seattle. And what he meant was, lots of heat was dissipating 
from the building from the data centers, lots of rejected hot 
water was going down the drain. That was a genesis of starting 
to think about, eight years ago, how do you use that lost 
energy? So we signed a contract with the building owner in a 
partnership. We became a utility with lots of regulations and 
lots of partners and figured out that there was enough wasted 
heat going into the air and hot water down the drain to provide 
Amazon's four high-rise towers across the street with all the 
preheated hot water forever. So, it doesn't sound small; it's 
small on what is possible.
    I think, Senator Cantwell, what you're talking about is 
there are no bad ideas and that the building stock in America 
is totally right for all kinds of that idea. Basically, that's 
a waste to energy and it exists all over the country, in all 
kinds of campuses, in all kinds of buildings.
    Senator Cantwell. So you're saying we should take these ECO 
district ideas, or put funding toward a variety of our states 
and look at what they come back with----
    Mr. Allen. Right.
    Senator Cantwell. ----as it relates to what might be 
demonstrations. Just like you said that one----
    Mr. Allen. Yeah.
    Senator Cantwell. ----came to you as you guys realized 
where the waste was.
    Mr. Allen. Yeah, well we're working on one in Spokane. We 
just announced it yesterday with Avista. So working with a 
utility and the city and the university district in Spokane, 
it's going to be a big ECO district where lots of buildings 
participate in--and I think what the answer is, it needs 
startup money because unlike, not like--like other industries, 
that first chunk of money that helps mitigate the risk and get 
it started helps you build the field that they will come to.
    Senator Cantwell. Thank you.
    Thank you, Madam Chair.
    The Chairman. Thank you, Senator Cantwell.
    I am going to turn to Senator Capito.
    Just for purposes of the Committee's information, we do 
have a vote that apparently is scheduled at 11:30 this morning. 
I am going to be popping in and out between different 
committees, but we will continue this hearing throughout the 
vote. We will just make sure that we have somebody here 
watching the gavel, but I want to respect the time of those who 
have traveled so far. If you have not yet had a chance to ask 
your question, pop out for the vote and then come on back.
    Senator Capito.
    Senator Capito. Thank you, Madam Chair and Ranking Member 
and thank the panelists too. Thank you.
    Mr. Santa, during the Committee's oversight hearing that we 
had last week or the week before, we talked about the Polar 
Vortex and what happened in the Northeast during that very cold 
part of our weather. It came to light that the ISO New England 
was having to import LNG sourced from companies in Russia. I 
asked a question about it, and it is a direct result of a lack 
of infrastructure necessary to move gas from Marcellus and 
Utica. I am from West Virginia, so Marcellus and Utica are big 
plays in West Virginia and in our state. Senator Manchin, 
obviously, is here as well. So the outcome of this was the 
higher prices for consumers and buying from foreign sources of 
energy and also ships passing in the night--American LNG going 
abroad while we are importing LNG from Russia, Putin's Russia, 
no less.
    You mentioned the Natural Gas Act of 1938 was/is in 
conflict with this, you mentioned, cooperative federalism. I 
would like to have you talk a little bit more about that. You 
mentioned specifically, New York, and obviously in the case of 
Marcellus and Utica, getting those resources to the 
Northeastern states is difficult, trying to get through New 
York, if not impossible. Could you speak to that a little bit 
more broadly, please?
    Mr. Santa. You're right. It is a remarkable situation. I 
mean, for example, during the so-called Bomb Cyclone on January 
5th, gas for delivery on January 6th, gas priced going into 
Boston was priced at about $78.80 per million BTUs and yet gas 
in Leidy, Pennsylvania, the heart of the Marcellus shale and 
coastal water storage, was priced at $4.20 per MMBTU. And if 
there are no pipeline constraints, that differential should be 
a little more than the price of pipeline transportation. So 
that market is clearly capacity constrained.
    While FERC can authorize new pipelines, while pipeline 
companies are interested in market opportunities, it requires 
demand on the other side. In particular, customers willing to 
sign up for pipeline capacity on a long-term basis to finance 
those projects.
    In New England, the wholesale electricity markets are 
structured in a way that does not provide incentives for 
generators to contract for that pipeline capacity, nor on the 
electric side is there the equivalent of the natural gas local 
distribution company that can aggregate demand and then sign up 
for capacity based on that.
    And so, that's why we have the highly anomalous result that 
while Marcellus gas is only a couple hundred miles away from 
New England, imported LNG, and as you know, LNG originating in 
Russia, is an economically attractive alternative because of 
that scarcity.
    Senator Capito. Do you see, in terms of your past 
experience with FERC, that there is in the national interest, 
any way to move forward with more infrastructure as we see this 
supply just----
    Mr. Santa. Well, it's interesting.
    In the early days of the Federal Power Commission (FPC), 
there were a number of instances where the FPC chose to approve 
pipelines over the objections of states that had a parochial 
interest in keeping the gas for themselves----
    Senator Capito. Keeping it in.
    Mr. Santa. ----or for not expanding the market.
    The problem we've got now, and we mentioned it in the 
testimony and Phil Moeller mentioned it as well, is this 
cooperative federalism issue that the State of New York has 
utilized its authority under the Clean Water Act to effectively 
veto FERC's approval of a pipeline. And there, I think, what we 
need is both clarification from Congress on the scope of 
state's authorities under the Clean Water Act and certainly 
respecting their role. And then, also some effective recourse 
should a state overstep its bounds or act in a way that's 
contrary to the national interest.
    Senator Capito. Mr. Moeller, do you have a comment on that?
    Mr. Moeller. I agree with Mr. Santa in that we have 
challenges. I think we need a focus on all types of 
infrastructure. Obviously, I'm here representing the electric 
industry and that's an alternative, but increasingly, the 
electric industry is using natural gas to generate power. That 
trend line has been going on for a while and it's increasing. 
And so these are a set of issues that we look forward to you 
addressing.
    Senator Capito. Well, in the last hearing too, we also 
heard that coal and nuclear have been insufficiently 
compensated for, particularly during that cold snap when it was 
so critical to have the baseload capacity, for their baseload 
generation to the grid. So they slid backward in the dispatch 
curve.
    I am wondering if you believe the market imbalances that 
fail to adequately compensate coal and nuclear for their 
important base generation?
    Mr. Moeller. There's an active discussion going on, 
particularly in the PJM market, about what we call those 
inflexible units and whether they should be compensated better.
    We will see, probably, as part of the RTO responses to the 
FERC order of January 8th that were due 60 days after being 
published in the Federal Register, their responses.
    I think it's very likely, although it's not a prediction, 
that PJM will probably raise these issues of inflexible unit 
compensation in their response. And then, there will be a 30-
day period, I think, for people to respond to what the RTOs put 
in. This will be a lively discussion going forward for the 
foreseeable future.
    Senator Capito. Alright, thank you.
    Senator Barrasso [presiding]. Senator Stabenow.
    Senator Stabenow. Thank you, Mr. Chairman.
    First, this question relates to our mobility sector. Coming 
from Michigan we are very excited about electrification and 
autonomous vehicles.
    I first want to thank our Chair and Ranking Member for 
holding a hearing at the Washington, DC, Auto Show a week ago. 
I appreciate that very much. And we invite everybody to come to 
the North American Auto Show in Detroit which is the big, big, 
big one. So we would welcome everybody to come.
    But, particularly for Mr. Moeller and Mr. Mezey and Dr. 
Medlock, and anyone else that would like to respond, I am 
interested to hear your perspectives on the role of utilities. 
What role will utilities play in vehicle charging 
infrastructure?
    We heard about that last week. I hear about that everywhere 
as we try to move this industry forward and whether there are 
actions the Federal Government can take to accelerate 
coordination to speed the deployment of electric charging 
stations which are a major impediment right now for us to move 
this industry forward.
    Mr. Moeller. Well, thank you, Senator. You've got a great 
leader and CEO, Patty Poppe from Michigan----
    Senator Stabenow. She is great.
    Mr. Moeller. ----who's been part of our effort to expand 
discussions on expanding EVs.
    It's a great question because EVs are coming. Other nations 
are mandating them. We're seeing a significant market growth of 
up to seven million of those vehicles on the road by 2025. 
Charging stations are a key part of that.
    They are often--we want the utilities to be able, our 
energy companies, to be able to deploy them, not to the 
exclusivity of others, but making sure that our companies can 
provide that. Sometimes that gets into relatively complicated 
issues of how those are paid for through the rate structures, 
but states have been moving forward, I think, quite 
progressively.
    I would contrast what happened in California in 2011, the 
California Public Utility Commission prohibited our energy 
companies from actually owning these facilities. They realized 
that was a mistake and by 2014 reversed that because we need to 
be in that game. And again, not to the exclusivity of others.
    A lot of that's going to play out at the state and local 
level, and I'll be happy to get back to you on recommendations 
on federal policy to promote that.
    Senator Stabenow. I would appreciate that.
    Mr. Mezey?
    Mr. Mezey. Thank you.
    I would defer to Mr. Moeller on our utility customers. Of 
course, we're very excited about the potential of the 
electrification of the grid and the more efficient utilization 
of the grid through the electrification of transportation.
    What I would say, because this ownership issue is really 
outside my grade, but what is very important is that the 
utilities have a role in the siting of these charging stations 
because improper siting will create tremendous infrastructure 
costs.
    The ability to use the information, the kind of information 
that we're collecting through our systems, to understand usage 
patterns, properly site and potentially control when charging 
is going to occur, will speed the adoption of charging stations 
because they'll make them more manageable on the electric grid 
for utilities at a much more economical level.
    While the debate may rage on the who owns the asset, 
certainly encouraging some active participation from the 
utilities on the proper siting and control of those units 
within the grid will promote grid stability and adoption rates.
    Thank you.
    Senator Stabenow. Thank you.
    Dr. Medlock?
    Dr. Medlock. Yeah, thank you for the question.
    You sort of, when you start talking about siting of 
recharging stations, in a lot of ways in the electric power 
space, you can open up Pandora's box because it was mentioned 
the need to have utilities being coordinated in the effort with 
regard to siting.
    But, you know, I draw your attention to the way gasoline 
stations are currently sited around the country. This is 
actually done in such a way to reduce consumer's cost 
associated with driving from Point A to Point B.
    So how many of you, when you get in your car, think about 
where the gasoline station is, unless you're near E? Right? You 
don't. You just go out and you say I need to go fill up, and do 
it.
    Well, in the current infrastructure environment, you 
actually have to know exactly where those recharging stations 
are if you have an EV. So that presents a challenge.
    Of course, as EVs begin to grow we're going to have to see 
more siting and more fungibility with regard to the ability to 
refuel these electric cars. Of course, that then begs the 
question, how you get power to those stations? This is where, I 
think, utilities play a critical role, particularly in areas 
where you've got competition having been introduced and 
utilities are not actually owners of generation assets, but 
they do actually own wires.
    And so, you've got to think about coordinating with 
utilities and coordinating with Departments of Transportation. 
It becomes a very big issue. It's not an unsolvable issue, but 
it's one that, I think, has to be recognized, certainly in the 
world that we're, sort of, moving toward today.
    Senator Stabenow. Right, thank you.
    Anyone else?
    Mr. Di Stasio. Senator, may I?
    Senator Stabenow. Yes, Mr. Di Stasio?
    Mr. Di Stasio. On behalf of utilities that I work with and 
also my own experience from California with electrification, 
some of the things that are current barriers really don't so 
much relate to charging.
    Most charging is done at home and a lot of it's done in the 
workplace and the residual charging, really, is on corridors 
that may not have adequate electrical infrastructure.
    So some of the discussions and some of the opportunities 
are starting to look at this as complementary infrastructure 
where we could put charging at airports. We could put charging 
at other transportation modal centers.
    There is an opportunity to change the paradigm. I would 
agree with Phil that utility's charging infrastructure is a 
natural extension of our infrastructure and it's a beneficial 
end use of electricity that can actually help regulate other 
intermittent resources on the grid at different times.
    The other thing I would say is that, and it's not a federal 
role, necessarily, but standardization of the infrastructure so 
consumers don't have different charging infrastructure that 
creates barriers to widespread adoption.
    Then the last thing is, we're probably the only industry 
that charges our commodity on the metric system, so people 
don't always understand the value proposition. Creating 
transparency of what am I paying for, how much of it is the 
infrastructure, how much is the commodity, will allow people to 
make an informed comparison to how much am I paying for this 
versus gasoline?
    I do know the automakers are working diligently to offer 
several new models with longer range. Most every automaker now 
is going to have some electric options. And so, I do think that 
consumer adoption is going to happen, and I think utilities are 
well-suited to help inform how to make that transition a good 
one.
    Senator Stabenow. Thank you very much.
    Senator Barrasso. Thank you, Senator Stabenow.
    Mr. Moeller, in your testimony you highlight several 
factors that create uncertainty in transmission infrastructure 
development. Specifically, one of those factors is permitting 
and siting delays which can delay projects, as we know, for 
more than a decade. Now, I agree Congress should act to 
streamline and improve the processes of excessive unnecessary 
delays. They threaten security, jobs, economic growth, all of 
it.
    What improvements should Congress make to the transmission 
permitting and siting process that would actually advance 
energy infrastructure in a responsible way?
    Mr. Moeller. Well, thank you, Senator.
    A lot of those have been put in, those policies have been 
proposed by bills both here in the Senate and in the House, but 
essentially it comes down to the resource agencies being 
accountable with reasonable timelines and some kind of an 
appeal process if the decisions are such that they need to be 
appealed.
    Vegetation management is a huge part of this. There are 
liabilities incurred and yet, many times, energy companies 
aren't allowed to clear out dead, decaying and potentially 
threatening vegetation that can have major impacts if left 
undealt with.
    So it's a variety of areas. We're happy to provide you with 
more perspective on more language, but the ideas are out there. 
It is a serious set of issues and we've seen it play out, 
particularly in a number of areas, California notably, over the 
last----
    Senator Barrasso. Mr. Di Stasio, anything that you would 
like to add to that?
    Mr. Di Stasio. The only thing I would say is that some of 
the reasons that these things take a long time is that the 
agencies don't always work in a concurrent fashion, so you end 
up with a serial process that anywhere in that process it could 
get kicked back and you start over. It's very, it's not 
predictable and it's extended by the virtue of the fact that 
there isn't a clear outcome that everybody's working 
concurrently to achieve.
    Senator Barrasso. Mr. Moeller, in 1978 Congress passed the 
Public Utilities Regulatory Policy Act, PURPA, and it was 
responding, I believe, to the skyrocketing oil prices that were 
caused by the '73 oil embargo. The goal was to reduce the use 
of foreign oil in power generation and foster American energy 
independence, so to achieve the goal they required all electric 
utilities to purchase power at inflated prices from renewable 
energy sources known as, they called them qualifying 
facilities.
    Times have changed since then. Renewable energy now 
accounts for about 15 percent of electric generation and oil 
only produces about 1 percent of electricity generation. I am 
concerned this is an outdated law, and significantly raises 
cost for consumers. What changes should be made to that law to 
reflect the realities of the modern energy market?
    Mr. Moeller. Well, thank you, Senator.
    The realities are that, particularly as it pertains to 
renewable generation, we can generate that power at much less, 
often half, the cost of smaller generating units of the same 
type of fuel, wind and solar especially. So if we're really 
talking about promoting those fuels, presumably we'd want to 
promote them in the least cost possible and that's usually done 
with larger scale. And PURPA, essentially, favors smaller 
development.
    Legislation will definitely--is something that we support. 
There's a mandatory purchase obligation which and sometimes is 
very problematic because we've had, due to the success of 
energy efficiency and a number of other factors, we have many 
areas of the country that are either in flat or declining load 
patterns. And yet, when our energy companies and then our 
customers behind them have to purchase power they essentially 
don't need and then you add the cost to it, that's very 
inefficient and not, essentially, good for the economy or the 
customers themselves. So the one mile rule, the megawatt 
thresholds can be addressed by FERC, legislatively. Some of the 
areas would have to be addressed by Congress.
    Senator Barrasso. One last question for you.
    In September of last year, the Mountain West Transmission 
Group announced their intent to join the Southwest Power Pool 
(SPP) of the regional energy market.
    Mr. Moeller. Yup.
    Senator Barrasso. And the members of the group include 
utilities that serve a large portion of my home State of 
Wyoming. Could you please explain the benefits and the cost 
savings to Wyoming customers that are going to result from 
these utilities joining in this regional energy market?
    Mr. Moeller. Absolutely.
    It kind of goes back to the original premise of my 
testimony which is that a larger transmission footprint allows 
for a more efficient dispatch, access to cheaper electricity 
depending on the time of day, more resiliency, more 
reliability. That's the concept behind a larger transmission 
footprint or power pool.
    SPP, obviously, now operates in the Eastern 
Interconnection. This would be a change to then go to the 
Western Interconnection.
    Some of the things that people always focus on when they're 
looking at joining a market are the governing structure, making 
sure that there are cost benefits to all the members. Our 
existing members want to make sure that they're not paying more 
with the expansion, but SPP has assured them that they won't.
    There will be some challenges, especially with the two 
interconnects involved, but overall, the concept of a larger 
transmission footprint typically increases the resiliency and 
the reliability of the system and provides access to lower cost 
generation.
    Senator Barrasso. Thank you.
    Senator Cortez Masto.
    Senator Cortez Masto. Thank you.
    Thank you, first of all, for the important discussion 
today.
    Gentlemen, welcome.
    I was heartened to hear the conversation, your testimonies, 
because it is right up my alley. In Nevada, we are very excited 
about the use of this new technology in so many different forms 
and fashions. One of the areas that I am working in is the 
smart communities and the use of the smart technology and the 
interconnectivity of things.
    Along with one of my Republican colleagues, I introduced 
the Moving FIRST Act. And really, it incentivizes communities 
to start thinking about how they can collaborate and work on 
smart communities, and it reinstates the Department of 
Transportation's Smart City Challenges, if you are familiar 
with that, to create more opportunities for communities of all 
sizes to work together and address individual needs there when 
it comes to transportation and the use of technology.
    That includes what we have talked about a little bit today, 
is the expansion of the electric vehicles, which is a 
fundamental element to the kind of application, I hope, that 
the grand challenge will address to increase energy efficiency 
and reduce the transportation sector's carbon footprint. It 
sounds like this concept is something that I hear that you 
would all be supportive of, is that correct?
    Just a yes is fine, if you want to go down----
    Mr. Moeller. Yes.
    Mr. Mezey. Absolutely, yes.
    Mr. Di Stasio. Yes.
    [Laughter.]
    Senator Cortez Masto. Okay, so let me put it this way, does 
anybody disagree with that comment?
    [Laughter.]
    Alright, so it's a unanimous yes.
    Let me ask this, Mr. Moeller and Mr. Di Stasio. With that 
concept in mind, are you able to be flexible enough to work 
with local jurisdictions to help them improve their 
transportation or energy sectors with support from the Federal 
Government?
    Mr. Moeller. Well, absolutely, thank you, Senator, for 
bringing this up.
    We think that the electric grid is really the backbone, the 
foundation of the smart community movement and can enable a lot 
of things, and John can talk about it a lot from his SMUD 
experience, but the smart meters and the smartgrid have a lot 
of capacity that presently isn't fully utilized and from a 
telecommunications and information-sharing network perspective, 
it's a great platform for a lot of the other issues to come 
about.
    We do have some issues coming on with the 5G network and 
such----
    Senator Cortez Masto. Right.
    Mr. Moeller. ----that deal with the FCC and pole 
attachments that we ought to address later on, but I don't want 
to get us off topic.
    Senator Cortez Masto. Thank you, that is something that 
needs to be considered as well. I appreciate your comments.
    Mr. Di Stasio. I, too, would say that there are great 
opportunities. I mean, we have really moved. Smart meters 
probably created the platform to create transparency and 
interoperability and now we're able to move down the pipe to 
start to look at the concept around the Internet of Things, but 
the great opportunity is efficiency of consolidations. So 
municipal entities can now start to have, instead of having 
several disparate networks or several different processes that, 
kind of, operate independently, all of a sudden the community 
or even a region can start to have a platform on which there 
are a lot of interoperability.
    Clearly, we have to still have good attention to cyber. 
These are physical assets that have a digital network over 
them. But the reality is, there really are a lot of 
opportunities supported by technology and smart communities. 
When you say, is it good for local jurisdictions, many of our 
members, as public power, are local jurisdictions. So it's good 
that they have the decision-making there to be able to do 
things to advance a variety of community or city interests.
    Senator Cortez Masto. Okay, thank you.
    Another area I just want to focus on, I don't have much 
time, is battery technology. In Nevada, we are home to a large 
battery factory, the Tesla Gigafactory. And Nevada recently 
created its Renewable Energy Bill of Rights that protects home 
energy generation and storage. Thanks to declining costs, 
better technology and a growing industry, battery storage 
deployment at a utility scale is accelerating at a rapid pace.
    Let me just open this up and maybe we start, Mr. Moeller, 
with you and again, Mr. Di Stasio, but anybody if you want to 
weigh in.
    What are the barriers? And what can we do, the government, 
to help address those barriers as we look to battery storage 
deployment and the future benefits?
    Mr. Moeller. Thank you very much, Senator.
    The challenge with batteries and storage is, number one, 
you have to make sure you're clear with whoever you're talking 
about on the definitions because storage can mean about 20 
different things based on the technology and whether it's in 
the wholesale market or the retail market, but FERC can deal 
with it in various ways. A lot of state commissions are dealing 
with it in their ways.
    The rapid improvement and the reduction of costs is very 
promising for storage. I think as it is deployed, particularly 
the distribution level, we want to make sure that there aren't 
cost shifts so that people who don't have access, maybe don't 
have the wealth to afford such a system, are not having their 
costs covered by people who don't.
    So a lot of it goes back to the rather arcane but important 
area of state rate structure and how they treat these 
technologies.
    Senator Cortez Masto. Thank you.
    Anyone else?
    Mr. Allen. Yeah, I'm the past Chair of the State of 
Washington's Clean Tech Alliance which has 280 members from 
every facet of efficiency, to utilities, to innovation, to 
labs. And Washington State is home to two or three of the big 
innovation breakthroughs on battery. From what I hear from them 
is, notwithstanding what you just said about the differences, 
that I would think that the Federal Government would think that 
would be a good bet to help fund the acceleration of battery 
storage as it applies to global competitiveness because a lot 
of people that we work with think that is the big grail to the 
next efficiency revolution, the transition revolution.
    Senator Cortez Masto. Thank you.
    Mr. Di Stasio. The only other thing I would add is, as Phil 
said, storage can take many forms and there is a role for the 
Federal Government to make sure that we can advance battery 
technologies so that we get the best economic and environmental 
performance.
    The reality is the costs have come down a lot. Scale 
matters, even in batteries and where they're deployed. So 
understanding how to advance these technologies to get them to 
the best state they can be in, I think, still is an opportunity 
for whether it's R&D funding or support by DOE, there's still 
opportunities to advance those technologies.
    Senator Cortez Masto. Great. Thank you.
    Dr. Medlock. I have one thing, yes. Fascinating 
conversation.
    First thing I'll say is efficiency is a virtual source of 
supply. So everybody should just recognize that. And I sort of 
address that to you, Senator Cantwell, based on the statement 
you made about ``make our buildings not suck.''
    [Laughter.]
    If we all recognize efficiency is a virtual source of 
supply, it changes the calculus when we're discussing 
investments in infrastructure as we go forward.
    On storage, the role the Federal Government can play, I 
think, primarily right now, is in basic R&D. That's really 
where funding from the Federal Government can play a tremendous 
role in potentially accelerating technologies that occur, pre-
infancy or in infancy at the current moment.
    But beyond that when you start talking about implementation 
of storage you can, sort of, draw some parallels to the natural 
gas industry. I forget the FERC order, but storage in the 
natural gas grid was actually made so that rates were market-
based a little over a decade ago, I guess, maybe a little bit 
longer now. But what that did is it triggered a landslide of 
investment in storage facilities to increase the turn rates of 
the--so how fast I can go in and out because it actually made 
the ability to apply a new technology monetizable.
    That's something that market structure plays a critical 
role to and it's something I mentioned in my written testimony 
and alluded to it in my statement. But that's something that 
you should all, hopefully, keep in mind is the role that 
pricing plays in facilitating innovation.
    Senator Cortez Masto. Thank you. Thank you very much.
    Senator Barrasso. Senator Daines.
    Senator Daines. Thank you, Acting Chairman Barrasso, Chair 
Murkowski, Ranking Member Cantwell, for holding this hearing, a 
timely hearing given the infrastructure seems to be on the top 
of many minds lately, not the least of which is our President's 
infrastructure. And that doesn't just mean roads and bridges. 
It also includes broadband, national parks and, important for 
today and really important for Montana, energy infrastructure.
    I just returned from visiting nine counties on Friday and 
Saturday last week in Montana, in Eastern Montana. Some of 
these places, as they say, it's not the in of the Internet, but 
you can see it from there. This is out, off the beaten path, 
extreme Southeast Montana, the salt of the earth Montanans live 
there.
    The Keystone pipeline, for example, would be one of the 
pieces of infrastructure that will go through some of those 
counties, natural gas liquids pipelines, CO2 pipeline, near 
Baker, Montana and Fallon County.
    In fact, a little side story. I was in Ekalaka which is in 
Carter County, extreme Southeast Montana, with a graduating 
class of seven students. Welcome to Eastern Montana. These are 
kids that, oftentimes, are growing up on ranches in the area. I 
asked the Superintendent, I said, where are we getting the 
money to fund their schools? They just built a new gymnasium. 
They have a lot of their regional Class C basketball 
tournaments there. It is the pride. He said 94 percent of the 
revenues that come to our school to support education, 
teachers, infrastructure, come from pipeline revenues. I tell 
you what, it is the lifeblood for our infrastructure to support 
our schools in places like Eastern Montana.
    We have come a long ways on pipeline safety. I am happy to 
have helped author the Safe Pipes Act which was signed into law 
in 2016 which will make the transportation of oil and natural 
gas even safer. All are critical to moving energy that will 
fuel our nation and, importantly, fuel the entire world.
    As the state, Montana, with the largest deposit of 
recoverable coal in the nation--now when you think of Montana, 
most of the time we think about fly fishing and rivers and the 
beauty of our state which is absolutely true, and I love to do 
those things. We also have more coal, recoverable coal, than 
anybody else in the nation. We are looking for approval of coal 
export terminals so we can begin moving our coal through 
domestic ports, creating American jobs, rather than having to 
go north and then west through Canada.
    Security and reliability of our electric grids, also top of 
my mind, especially when they work to protect reliable baseload 
power that comes from the Colstrip Power Plant, especially in 
summer when we have the wildfires. We had a horrible wildfire 
season out West. Montana had one of our toughest seasons in a 
long time.
    These fires are raging across our national forests and they 
become difficult to manage and they sometimes pose risk, of 
course, to utility lines. We had that situation in one of the 
counties. I called one of our sheriffs up in one of our 
counties in Southwest Montana, where we had one of our large 
fires. He said, ``Steve, we are battling a fire and are trying 
to protect a 500 kV transmission line that's running from 
Colstrip out west.'' But because of restrictions and 
regulations on commonsense vegetation management, it has put 
these lines at risk. However, when the fire was burning they 
couldn't move their fire crews in there to try to protect the 
transmission line because the carbon particles were in the air 
from the fire and they were in fear of arcing coming off those 
high voltage lines could kill a firefighter.
    So here we are, we are literally between a rock and a hard 
place. It is why I am going to talk about that here at the end, 
why we need to get some changes made here to how we can more 
effectively manage and protect infrastructure.
    In Montana, we house minerals that are building blocks of a 
lot of infrastructure: sand, gravel, world-class copper, 
palladium, silver. We need to be sure we can access these 
materials domestically and not have to rely on nations 
overseas.
    I hope bills emerge from this Committee and others that 
strengthen all of our energy assets for more expeditious 
approval of pipelines, export terminals, to protect baseload 
terminal or power, as well as helping federal land managers be 
better partners with power companies, back to vegetation 
management and allowing us to recover our own raw materials.
    My question for Mr. Moeller. Can you explain to this 
Committee how critical it is that Congress address the issue 
now that arise from vegetation management in and adjacent to 
electric rights-of-way? I am very disappointed that we did not 
get a wildfire funding and forest management reform package as 
part of this budget caps deal. We got very, very close, once 
again. It's kind of like Lucy and the football right now. Right 
in the last minute it was grabbed from us, but I am not giving 
up.
    Tell us why streamlining regulatory reviews between the 
agency and power companies and also providing some certainty 
and relief in the liability piece is important.
    Mr. Moeller. Well, thank you for the question, Senator.
    I think all you have to do is look at calendar year 2017 
and the extent of wildfires throughout the country. This has 
been an issue for a while. I remember ten years ago working 
with some folks in Colorado because of the pine beetle issue 
that I know Senator Gardner is well aware of, where if there's 
a threat to millions of people's ability to enjoy the delivery 
of resilient, affordable, reliable power when these power lines 
can potentially be put out because of a wildfire. And we've had 
devastation in the West. You mentioned Montana, other states, 
California, as well.
    So I would certainly lend our voices to the sense of 
urgency to deal with vegetation management.
    Senator Daines. Thank you.
    Senator Barrasso. Senator King.
    Senator King. Thank you.
    Before beginning my question, I have to put into the 
record, with all due respect to my esteemed colleague, the 
distinguished Senator from Wyoming, that is what you say around 
here before you put the knife in.
    [Laughter.]
    PURPA plants do not pay inflated prices. The price is 
called ``avoided cost,'' and it is what the utility would have 
otherwise had to spend to generate the next marginal kilowatt-
hour.
    So that is a bit of mythology that has been out there for 
years, and I am tired of hearing it because I was in that 
business. I know what avoided cost is. And the idea that, and 
Mr. Moeller this goes for you too, the idea that these plants 
are paid inflated prices is simply not true.
    So let me move on.
    One funny note, Mr. Mezey, you talked about finding--can't 
find a gas station. I have an app. I have an electric car and I 
can press the app and find that there are 73 charging stations 
within the District of Columbia. So we are getting there.
    Here is my question. And Mr. Allen, I think you hit it. I 
know from my experience, I have been in the generation business 
and the conservation business, it costs about half as much to 
save a kilowatt-hour as it does to generate one, so 
economically, conservation makes an enormous amount of sense.
    The problem I see with the grid, and that is what we are 
talking about here, is that it is wildly inefficient. It is 
like a church that is built for Christmas and Easter and has a 
lot of empty pews the rest of the year, because we have to 
build to the hottest day, the highest demand of the year. The 
rest of the time the grid is grossly underutilized.
    To me the challenge is, how do we incent users of 
electricity to make more efficient use of the grid? And it 
seems to me, things like time-of-day pricing makes sense.
    I remember the day when on telephones you looked at your 
watch and when it became one minute after nine, you made a 
phone call because it cost half as much after nine as it did 
before. Isn't this one of the directions that we have to move 
in?
    Mr. Allen. Yes, in fact, I'm on the Citizens Review Panel 
for Seattle City Light which is a, you know, fairly clean 
utility using hydro. We're in to about two-thirds through 
advanced metering and, as you can imagine in Seattle, there are 
thousands of electric cars and they're dealing with a conundrum 
of----
    Senator King. But if they are charged at night, that helps 
everybody.
    Mr. Allen. Yeah, well that's--we're going to go to demand 
pricing on electricity, for sure.
    Senator King. And that will lead to greater efficiency of 
the grid----
    Mr. Allen. Right.
    Senator King. ----and therefore, not having to build 
additional.
    Mr. Allen. Yeah, yeah, the whole transparency of the grid 
is where we're going. So, a two-way conversation between the 
consumer and utility, you'd be able to see where the prices 
are, when the load is and people will learn that.
    Senator King. Mr. Moeller, I was surprised in your 
testimony, you said 11 percent. I looked for that chart in the 
Energy Review, Table A8, 2017. I couldn't find it. Perhaps you 
can send it to me.
    Mr. Moeller. Yes, I've got it saved.
    [The information referred to follows:]
    
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    Senator King. In New England, transmission and distribution 
is 50 percent of our bill. In fact, it is more than the cost of 
energy today. So what am I missing?
    Mr. Moeller. I was focusing solely on the transmission side 
of the bill, not the distribution side.
    Senator King. Okay, so you didn't include distribution.
    Mr. Moeller. Correct.
    Senator King. So isn't it true that transmission/
distribution is now roughly 50 percent of the bill?
    Mr. Moeller. I don't want to commit to that without 
checking the numbers, but it depends on the region.
    Senator King. Yes.
    Mr. Moeller. I mean even places--my ranch in Washington 
State, I probably pay closer to 11 percent for transmission, 
but here, living here, it's much less than that.
    Senator King. And isn't one of the problems--Mr. Allen, I 
will ask you this question--that our whole rate structure is 
built, is based upon an incentive to build?
    Mr. Allen. That's right.
    Senator King. If you get paid by a rate of return on your 
capital investment, that is--and I am not, this is not a 
criticism, it is just an economic fact of life--doesn't that 
encourage building rather than, for example, conserving?
    Mr. Allen. Yes, it does. And also, we've built a system 
where the goal is to deliver it cheap. So, if you're, like in 
Washington, we've had real, really cheap power for 50 years and 
the result of that is you had a lot of people that just--it 
didn't even come on their family budget income----
    Senator King. Right.
    Mr. Allen. ----in their thinking about their bill.
    So, yeah, I think there's--and these guys----
    Senator King. We need a different model that will 
compensate the utilities sufficiently----
    Mr. Allen. Yeah.
    Senator King. ----and fairly, but not necessarily have an 
inherent incentive to build.
    Final question and I will take this for the record.
    I would like to ask Mr. Moeller and any of you others, 
particularly, I am very concerned about the issue of permitting 
costs and time and delay. I would like from you specific 
suggestions about what we could do that does not compromise 
environmental standards but simply reflects greater efficiency 
in the process and timeliness.
    For example, I think you mentioned, Mr. Medlock, the serial 
nature of permitting. In Maine, we did one-stop permitting and 
we did not lower the standards, but we improved the efficiency 
of the process. I am looking for suggestions along those lines. 
I am very sympathetic to that issue, but I do not want to 
compromise environmental standards.
    Mr. Moeller. Nor do we.
    We'll get that to you, Senator.
    Senator King. Thank you.
    Thank you, Mr. Chairman.
    Senator Barrasso. Senator Hoeven.
    Senator Hoeven. Thank you, Mr. Chairman.
    What I would like to ask each of you is give me your one or 
two best ideas on how we are going to build more energy 
infrastructure, whether you are a fan of traditional energy, 
fossil fuels, coal, oil, gas, you name it, or renewables. We 
need to build transmission, we need to build pipelines and we 
need to build transmission lines for electricity. That is a 
huge challenge now, the permitting, the siting and all the 
approvals. How do we work together, traditional energy 
advocates, renewable energy advocates, to build this 
transmission that our country needs? And I would like to hear 
your one or best two ideas how we are going to accomplish that.
    Mr. Moeller, maybe you could start?
    Mr. Moeller. As you alluded to, I think, accountability in 
the permitting phase is, kind of, lacking right now and that 
can be upped as well as increasing the investment in certain--
the climate of increasing the certainty in the investment 
situation because these, as I mentioned, are multidecade assets 
that often----
    Senator Hoeven. Specifically, how do we address 
accountability and certainty? What policy measures do that?
    Mr. Moeller. Through legislative direction to the resource 
agencies where there's a timeline involved, we can come up with 
other creative ways to make sure that if there's a decision 
that is against something, that there's an adequate way to 
appeal that decision, perhaps to the head of the agency in a 
timely manner.
    Senator Hoeven. So timeline and some kind of appellate 
process?
    Mr. Moeller. Correct.
    Senator Hoeven. Okay, good.
    Mr. Di Stasio. The thing I would say is recognizing there's 
regional differences and even structural differences amongst 
energy providers.
    If the Congress can get clear around what are the national 
priorities in terms of outcome policies, whether that's a focus 
on resilience, whether it's a focus on innovation, on the 
economy and, kind of, unleash the creativity that's resident 
amongst all the different states while respecting these 
regional differences.
    I think one of the things we've suffered from is solutions 
rather than outcomes because we actually do have a lot of brain 
power. We can achieve many things, but if certain things are 
prescribed as silver bullets, they end up becoming difficult to 
manage.
    In my own experience, I think, we are, we stand ready to 
build things that the one thing that we have in public power 
that probably, maybe not within the jurisdiction of this 
Committee, but we're not always, because we're non-taxpaying 
entities, we don't always have access to incentives that are 
provided through the tax code.
    And so, then we end up having to find a taxpaying 
counterparty to do a wind project or something. And it really 
siphons off some of the benefit that would otherwise go to 
building more infrastructure and providing benefits to the 
communities.
    Senator Hoeven. Okay.
    Mr. Allen. Yeah, in our, in the Pacific Northwest, we have 
an interesting observation. This is definitely not in my 
network, but an interesting observation is we've almost doubled 
the square footage of facilities in King County and 
particularly in the city of Seattle and it's a no-growth 
utility.
    So, as, and you talk about working it together, as the 
utilities worked with consumers and businesses to be more 
efficient and they grew. They had less consumption per square 
foot that now we have twice the infrastructure and the same 
size utility. I'm not saying that can happen everywhere. New 
York is working on that. New York City is working on that.
    But, yeah, you mentioned working together. I think, in 
general, that's where you're getting at too and it's going to 
take a whole community effort to, kind of, balance all these 
disparaging views to get some common sense on the effectiveness 
and efficiency.
    Dr. Medlock. Thank you for the question.
    I think it's very important to recognize the 
interdependence of infrastructures. The comment was made by 
Senator King, unfortunately he had to leave, about build to 
peak. So the idea that we over-scale capacity--
    Well, that occurs in a situation where you have limited 
demand response at the end of the line and you have no ability 
to store. We've talked about both of those issues today in a 
lot of detail. I think addressing those things actually begins 
to address things that are farther upstream, so the 
transmission and distribution discussions that we're having as 
well. So all these things are interrelated and they need to be 
addressed in such a way that we recognize that.
    The other thing and this----
    Senator Hoeven. Do you mandate that or do you incentivize 
that?
    Dr. Medlock. I think you incentivize it.
    Senator Hoeven. Okay.
    Dr. Medlock. Absolutely.
    The other thing to be recognized, and this is an example of 
a failure by policy to recognize the interrelated nature of 
infrastructures, there were policies put in place in the State 
of Texas which I referred to that incentivize the expansion of 
wind capacity. Well, all of that occurred and then all of a 
sudden regulators and power retailers and distributors all of a 
sudden realized we can't get that power to market.
    Senator Hoeven. Right. You have a real challenge between 
baseload and peak.
    Dr. Medlock. Exactly.
    And so, all of a sudden, it required the state to step in 
and create renewable energy zones. This was a State of Texas 
issue, obviously, and the construction, or another expensive $7 
billion to expand transmission.
    One could argue that if all of that had been done up front 
in a coordinated way, it would have been a much more 
efficient----
    Senator Hoeven. But a huge issue, because it goes, again, 
to baseload, intermittent. Who built the power? Who has 
priority to the transmission line?
    Dr. Medlock. Well, there's a host of issues.
    Senator Hoeven. Huge issues, not just in Texas.
    Dr. Medlock. No, absolutely. There's a host of issues 
related to what's been going on in the power grid.
    Senator Hoeven. Very important issue.
    Dr. Medlock. Absolutely.
    Senator Hoeven. No, I think you really have some good 
things you have touched on there, very important.
    Yes, sir?
    Mr. Santa. Yeah, Dr. Medlock talked about the importance of 
price signals and the ability to respond to them. I think we 
largely have that in the case of natural gas pipelines.
    Mr. Moeller talked about the permitting process and 
accountability. I think the accountability there, the 
predictability of it, and as he noted the recourse in the event 
that an unfavorable outcome is reached is very, very important.
    And also, it's been mentioned earlier, kind of, eliminating 
the serial nature of this permitting and getting it happening 
concurrently. I mean, think about for a pipeline the number of 
approvals that have to be gotten from different bureaus and 
offices within the Department of the Interior. Do they 
coordinate with each other?
    Senator Hoeven. I think these are some good ideas there. I 
appreciate it.
    Senator Barrasso. Senator Hirono.
    Senator Hirono. Thank you very much. I thank the panelists.
    I have a question for Dr. Allen. Yes, you did come a long 
way, but if you came from Hawaii that would be even longer.
    [Laughter.]
    Mr. Allen. I just spent a month doing--studying the energy 
efficiency, distributed energy of the island, the Big Island of 
Hawaii.
    Senator Hirono. Great.
    Okay, so you are very familiar that Hawaii has six separate 
electric grids because we are an island state.
    I do appreciate your interest in funding for smartgrid 
demonstration projects in rural areas and other communities 
where the central grid has limited reach. We actually don't 
have a central grid as such.
    Last Congress I introduced the Next Generation Electric 
Systems Act to provide grid demonstration grants and was 
pleased that the Chair and Ranking Member of this Committee 
included many of its provisions in the Energy Policy 
Modernization Act and their Energy and Natural Resources Act 
this Congress. I wanted to ask you what are the most promising 
opportunities you see--and I think you cited to some of them, 
such as in our schools--for grid demonstration projects that 
could help rural and hard to reach communities with lowering 
their their energy costs?
    Mr. Allen. Well, obviously, I think the ECO districts could 
be a small community. Hawaii has several in process or 
communities that are sharing agriculture and power and 
distributed energy from solar.
    I think some of the bigger opportunities would be, would 
probably be in lighting and for street lighting which brings 
LED, of course, it also brings safety.
    And there's all kinds of technologies that are vetted.
    We've got work, recovering methane from small cities and 
turning it into energy.
    We've been doing----
    Senator Hirono. Talking about methane from waste?
    Mr. Allen. Yeah, from waste procedures, yeah.
    But yeah, there's just the schools have unending needs 
because of--we did a project in Minnesota for a school. We did 
an energy reduction program for a district. After we were done, 
it delivered 24 percent and we put in dashboards in all the 
schools so the kids could see the watts per square foot, the 
water per pupil, all the metrics and they competed with each 
other to see who could beat those numbers. It lowered the 
energy another ten percent.
    Senator Hirono. I'm particularly intrigued by what you are 
doing in the schools because of energy costs in our Department 
of Education. Hawaii has the only statewide school system in 
the entire country and energy costs account for a lot----
    Mr. Allen. A lot, yeah.
    Senator Hirono. ----a lot of that, so perhaps we can get 
with you to have some specifics, and I would like to find out 
whether Hawaii schools are embarking on those kinds of 
projects.
    For the entire panel, the Department of Energy has been a 
key supporter of Hawaii's efforts to transition from importing 
oil. We were the most oil-dependent state in the entire country 
to renewable energy, including a goal of 100 percent renewable 
electricity by 2045.
    Last week the Washington Post reported the White House is 
considering cutting the budget for the Department of Energy's 
Renewable Energy and Energy Efficiency Office by 72 percent--
that is, like, eliminating the Office--from current levels.
    Can you comment on the importance of public investment in 
renewable energy and energy efficiency technology provided by 
the U.S. DOE and what impacts would be of the major funding 
cuts to DOE on the pace of clean energy technology innovation? 
I believe Mr. Di Stasio and Dr. Medlock mentioned the 
importance of the federal role in R&D. Would you like to 
comment on what a 72 percent cut would mean to this Office?
    Mr. Di Stasio. Again, I think it's important that a lot of 
these, a lot of the help that industry needs, at least 
utilities need, is not direct funding support. It's really more 
in the R&D space, helping commercialize things that would be 
too risky to invest in directly.
    So to the extent there's support from the Federal 
Government through DOE, I know we benefited significantly from 
the smartgrid investment grants that were issued some years 
ago, as did many of our members. And those provide very, very 
good learnings to make risk-free investments going forward.
    Senator Hirono. So I take it that this kind of a cut would 
not be a good idea.
    Mr. Di Stasio. Well, again, I would stop short of--Congress 
and the Administration will make a determination with the 
budgets. All I can say is these have been valuable and 
important functions in the past.
    Senator Hirono. Would the rest of the panelists agree?
    Mr. Mezey. One other point I would make about the role of 
DOE is, as an advocate for efficiency and renewables, the 
establishment of a common set of standards and the convening 
power of the group in order to bring industry together has, 
beyond a funding source, has a snowballing effect on helping to 
drive innovation through standards and clarity and 
communication. And I would say that DOE has played a very 
positive role in our portion of the industry.
    Senator Hirono. And should continue to play such a role. 
Would all of you agree?
    Dr. Medlock. I would argue that the central role for the 
DOE with regard to energy efficiency and the Office, in 
particular you're arguing about, is one, to provide funding for 
R&D.
    Senator Hirono. Yes.
    Dr. Medlock. Not necessarily implementation or deployment 
because R&D will ultimately lead to discoveries and innovations 
that the market itself will incentivize the deployment of.
    So when we think about or put that lens on it, I think, the 
discussion really should center on the ability for DOE to fund 
R&D successfully.
    Senator Hirono. Would you agree that R&D funding is a major 
role for the Federal Government, U.S. DOE----
    Mr. Di Stasio. Well, I would say for sure, I would think--
--
    Senator Hirono. You can just nod. I am running out of time.
    Mr. Di Stasio. I think, probably, a third of everything 
we've done in these, especially smaller communities, in the 
builds environment, have come from trying things that needed 
vetting, that needed trying. Even in your great state, I 
noticed ocean thermal energy is being researched. I saw a thing 
on waves. Those things don't happen without R&D and they can't 
come to life unless you vet it and try it. And we have done a 
bunch of things that failed, shockingly, but we tried.
    Senator Hirono. Yes, and another thing that happens that 
encourages the private sector to come forward is to set certain 
standards. When you set a standard of 100 percent of renewable 
for electricity, then people come forward and tell us that here 
is how they can help the state do that. That is why I have been 
supporting a national energy efficiency standard, for example.
    Thank you very much.
    The Chairman [presiding]. Thank you, Senator Hirono.
    I think we do recognize that, again, in many of these far-
flung places where there are very high costs, it can be a great 
opportunity to be the demonstration, to be the pilot, because 
if you can make these technologies pencil out in a high-cost 
environment, they are going to be okay elsewhere.
    So we encourage that and understand, I certainly 
understand, the role that DOE plays within the R&D and how we 
can really use these as the incubators of good ideas, but you 
have to have a place to test them. And you do fail. I know it 
is tough for some people to realize that, but sometimes that 
failure actually allows us to succeed on the next time around 
instead of just shutting it down and saying no, we couldn't. So 
enough of that.
    I want to direct this question to you, Dr. Medlock. We had 
a really interesting hearing about a month ago here in the 
Committee. We had Dr. Birol, who is the Executive Director of 
the International Energy Agency, and he presented the 2017--oh, 
it must have been the 2018 World Energy Outlook. One of the 
things that he started with, he had four upheavals. The first 
upheaval was the fact that the U.S. is becoming the undisputed 
global oil and gas leader. That is exciting, certainly exciting 
for a state like mine that is an oil and gas producer and 
contributor. But it, kind of, begs the question. It is one 
thing to have the resource and it is another thing to be able 
to move the resource, whether it is the wind in Texas or 
whether it is the oil on the North Slope, you have to have the 
infrastructure.
    The question to you is, given your understanding of the 
energy markets, the critical role of transportation and trade 
in these markets, are we ready for this? Are we prepared for 
the growth in oil and gas production and LNG exports given the 
infrastructure that we have and knowing of the need to move it 
to those areas where it can provide the country with the 
greatest value?
    Dr. Medlock. There is a lot of infrastructure investment 
that is still needed to connect those supplies to viable 
markets.
    We published a study back in 2015 when the discussion about 
the export ban was raging, and one of the things we pointed out 
is that lifting the ban would unlock a tremendous amount of 
pent-up capital aimed at not only developing resource but 
allowing it access to markets that it never had access to 
before.
    And you're actually seeing that occur in the State of 
Texas, for example, connecting the Permian Basin to the Gulf 
Coast is occurring increasingly every day, expansion of port 
facilities, development of pipeline facilities, development of 
petrochemical plants that have access to those export outlets. 
All sorts of things are going on.
    So that needs to continue to occur if the wealth of the 
United States is to continue to grow in the energy space. I 
mean, you go back 15 years, and who would have dreamed that 
we'd be talking about the United States as one of the largest 
oil producers in the world, well, exporters in the world and an 
energy superpower. These are all terms that have been used by 
the previous Administration and now this one. So, you know, 
this hopefully is not a disputed fact, politically. It also 
conveys tremendous geo-political advantage for the United 
States. Conversations by councils around the world really do 
focus largely on the U.S.'s ability to project energy dominance 
around the planet.
    It conveys tremendous advantages in those regards but, and 
this is actually very important, none of that is going to 
happen absent the very unique, legal institutions that we have 
in this country and regulatory facilities that we have in this 
country. And anything that upsets any of those things, and 
they're laid out in my written testimony, will actually throw a 
wrench in the wheel, so to speak. And that can actually keep 
things from occurring.
    I mean, the United States, for example, is the only country 
in the world where landowners own mineral rights. There's not 
another one in the world. So that actually gives developers the 
ability to negotiate directly with landowners and you get this 
incentive compatibility that triggers development.
    Now, that's not enough, right? So geology is a necessary 
condition. You need that very unique treatment of property 
rights, but you also need the ability to move and market. And 
that's something that is unique about the United States.
    You look at the natural gas market, for example. It is, 
arguably, one of the most efficient energy markets on the 
planet and that owes everything to the ability to expand 
infrastructure based on pricing signals that are realized 
because there's real communication between consumers and 
producers. So anything that gets in the way of that 
communication can stand to disrupt everything, all the way back 
through the value chain. And this is actually why earlier, I 
mentioned, it's important to recognize interrelated nature of 
all infrastructure because if one thing slips, the whole engine 
shuts down. And so, it's really important to recognize the 
efficiencies that the current environment have wrought from the 
United States.
    The Chairman. Well, I appreciate that.
    Let me talk a little more broadly about this cooperative 
federalism that was raised by several of you. If other 
colleagues have raised it in their questions, I apologize, as I 
was out.
    But it does speak to some of what we are seeing today. You 
have a clear need in a region, but you have states, you have 
municipalities, localities that have, clearly, their view of a 
particular product or project.
    I guess, and I throw this out to any of you who wish to 
speak to it, obviously Mr. Santa, I would hope that you would. 
What should Congress be doing in this vein--to ensure that the 
federal and the state governments respect one another's rules, 
do not abuse the authority that they each have or the 
delegation that they have been given under federal laws, 
recognizing that you have a product, whether it is natural gas, 
or just use that as an example here, but you need to move it to 
an area, but you have to move by others? Just the issue that we 
face in respecting both the state and the federal authority. 
Given that, what should our role here in Congress be?
    Mr. Santa. Let me begin by saying I think often this issue 
gets framed in terms of state versus federal roles, and I think 
it's important to think about it in terms of state versus 
state.
    For example, the fact that the State of New York blocks a 
pipeline. That deprives Pennsylvania and its citizens of a 
market for their natural gas and similarly deprives the 
citizens of the states downstream of that pipeline from the 
ability to have access to more affordable natural gas. So I 
think in that sense, it's uncooperative federalism that we are 
seeing.
    I think there are two things that Congress could do. First 
of all, clarify what is the appropriate role of the states 
acting under that authority that has been assigned to them. And 
then second of all, providing some recourse in an event that a 
state oversteps its bounds or acts in a way that is contrary to 
the national interest.
    For example, under the Coastal Zone Management Act, there 
is the ability to take an administrative appeal back to the 
Secretary of Commerce rather than going to a Federal Court 
where its administrative law standards that are very, very 
deferential to the agency that took the action. Could something 
like that be done under the Clean Water Act?
    The Chairman. Anybody else? Mr. Moeller?
    Mr. Moeller. Well, I think Don summed it up quite well. 
When it's about interstate commerce there's more than just 
states involved, or individual states, and I think his example 
with Pennsylvania, New York and the New England states is a 
very poignant one.
    The Chairman. Very good.
    Let me turn to Senator Smith.
    Senator Smith. Thank you very much, Madam Chair.
    I am so happy to have a chance to see you all.
    I would like to turn to Mr. Mezey and ask you about Itron--
sorry, I've been running around this morning--Itron's work on 
embedding smart technology in the electric grid and how that is 
helping to improve energy efficiency and also the resiliency of 
the grid. I sit here as a proud Minnesotan who is very happy to 
have your company's presence in my state, in Waseca which is 
one of your, as I understand, one of your best performing 
manufacturing facilities. So it is wonderful to have a chance 
to visit with you about this.
    I am wondering if you could just talk a little bit about 
your company's, you know, kind of, what your company is doing 
in Waseca and how this is working to, sort of, showing the 
combined importance of both American manufacturing and water 
and water efficiency.
    Mr. Mezey. Great, thank you, Senator.
    A great deal of the discussion about smart technology 
gravitates toward electricity for a very good reason that 
electricity can't be stored. It's much more a dynamic market.
    Our Waseca facility actually manufactures our gas and water 
products. And there's a tremendous amount of opportunity for us 
to improve understanding about gas usage and the performance of 
gas distribution systems, improve their safety and reliability.
    And so, the Waseca facility produces these units that we 
are deploying so the equivalent of the smart meter on the 
electric side and the smartgrids--we are building gas 
smartgrids that are going beyond just the measurement of gas, 
but actually looking at, as I mentioned, things like corrosion, 
pressure and even methane detection, in order to improve 
overall safety and efficiency of the pipelines.
    On the water side, not the direct jurisdiction of the 
Committee, but over 30 percent of water put into the U.S. water 
distribution system is lost. Water in some states, and 
California is an example, is the most energy intensive. It 
represents, it consumes 10 to 20 percent of electricity in the 
State of California for the pumping purification movement of 
water and yet, we waste so much of it. So the water smart 
devices that we're putting out there are allowing utilities to 
isolate where these water losses are occurring, give consumers 
better visibility that not only helps our stressed water 
systems, but also improves the energy efficiency of very large 
water utilities which is a tremendously, and wastewater, which 
is tremendously important as well.
    So we're very proud that the Waseca facility really is a 
beacon and the work that we're doing in gas and water 
efficiency world and really bringing measurement and management 
to these very important commodities.
    Senator Smith. Thank you very much.
    I was struck by the description in your testimony of the 
Envision Charlotte initiative, and this seemed like this is a 
public-private collaboration that focuses on improving energy 
efficiency with smart technology and the really impressive 
results, it sounds like, in terms of reduced energy 
consumption, reduced CO2 emissions and also saving money. So it 
sounds like all around a great thing. Could you just talk a 
little bit more about that strategy and your role in that 
strategy?
    Mr. Mezey. Certainly.
    I mean, we're so--first of all, it is a public-private 
partnership, so a very innovative structure that was put 
together which is being replicated in other cities across the 
country and was a collaboration of Duke Energy being such a 
strong local presence and driver.
    The technology that we're deploying is an open standards 
based platform that encourages other types of technologies and 
devices to share this infrastructure which makes it possible 
for the downtown area to not only reduce its electricity usage 
but gas, and now we're bringing water on and integrating with 
buildings through open standards to integrate into building 
control systems to balance supply and demand.
    So for, really, a very inexpensive additional expenditure 
to the smart metering infrastructure that we had put in place, 
we had this dramatic benefit in Charlotte, which as I said, is 
really a measure of economic vitality for that city and we have 
tremendous possibilities in cities and this point about rural, 
about increasing energy efficiency in rural communities as 
well.
    Senator Smith. Great, thank you very much.
    I want to thank all of you for your testimony today. I 
appreciate it very much.
    The Chairman. Thank you, Senator Smith.
    Mr. Moeller, I was asked, I was not here when you were 
responding to Senator King, but apparently there was an 
exchange that related to PURPA and I have been asked to ask 
just for some clarification in responding to Senator King's 
comment that PURPA does not raise costs.
    [Laughter.]
    Mr. Moeller. Well, I probably gave short shrift to the 
mandatory, I mean, to the avoided cost calculations that are up 
to states--so they decide the compensation levels of PURPA 
resources. But the details really matter because if you sign a 
long-term contract while prices are falling, of a particular 
resource, then arguably if you would have a shorter contract 
customers would not have to pay as much. And so, those details 
matter.
    On a larger side though, the mandatory purchase obligation 
is more significant because we have customers being forced to 
buy power they don't need. In that sense, the cost of the 
resource really doesn't matter if they're forced to buy power 
they don't need. Idaho Power is going to spend $3.1 billion 
over the next 20 years for PURPA contracts they don't need.
    That is the fundamental argument I was making, but again, 
states have avoided cost calculation responsibilities.
    The Chairman. Good. Well, I appreciate that clarification.
    Gentlemen, thank you. You have given considerable time here 
this morning to the Committee in responding to member's 
questions. You have given of your time by coming here to the 
East Coast, several of you, and we appreciate that. And we 
truly appreciate what you do in your respective sectors.
    I think the information here has been helpful, and I know 
the Committee will be considering it as we move forward with a 
focus on building out that energy infrastructure that makes 
this country strong and sound and truly resilient from an 
energy security perspective. So thank you for all you do.
    With that, we stand adjourned.
    [Whereupon, at 12:11 p.m. the hearing was adjourned.]

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