[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
__________
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the
Committee on Energy and Natural Resources
Available via the World Wide Web: http://www.govinfo.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
28-700 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
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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:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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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