[Senate Hearing 117-448]
[From the U.S. Government Publishing Office]
S. Hrg. 117-448
A REVIEW OF THE ADMINISTRATION OF
LAWS UNDER THE JURISDICTION OF THE
FEDERAL ENERGY REGULATORY COMMISSION
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HEARING
BEFORE THE
COMMITTEE ON
ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
__________
SEPTEMBER 28, 2021
__________
[GRAPHIC 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
45-807 WASHINGTON : 2023
COMMITTEE ON ENERGY AND NATURAL RESOURCES
JOE MANCHIN III, West Virginia, Chairman
RON WYDEN, Oregon JOHN BARRASSO, Wyoming
MARIA CANTWELL, Washington JAMES E. RISCH, Idaho
BERNARD SANDERS, Vermont MIKE LEE, Utah
MARTIN HEINRICH, New Mexico STEVE DAINES, Montana
MAZIE K. HIRONO, Hawaii LISA MURKOWSKI, Alaska
ANGUS S. KING, JR., Maine JOHN HOEVEN, North Dakota
CATHERINE CORTEZ MASTO, Nevada JAMES LANKFORD, Oklahoma
MARK KELLY, Arizona BILL CASSIDY, Louisiana
JOHN W. HICKENLOOPER, Colorado CINDY HYDE-SMITH, Mississippi
ROGER MARSHALL, Kansas
Renae Black, Staff Director
Sam E. Fowler, Chief Counsel
Brie Van Cleve, Senior Energy Advisor
Richard M. Russell, Republican Staff Director
Matthew H. Leggett, Republican Chief Counsel
Justin Memmott, Republican Deputy Staff Director for Energy
C O N T E N T S
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OPENING STATEMENTS
Page
Manchin III, Hon. Joe, Chairman and a U.S. Senator from West
Virginia....................................................... 1
Barrasso, Hon. John, Ranking Member and a U.S. Senator from
Wyoming........................................................ 2
WITNESSES
Glick, Hon. Richard, Chairman, Federal Energy Regulatory
Commission..................................................... 8
Christie, Hon. Mark C., Commissioner, Federal Energy Regulatory
Commission..................................................... 18
Clements, Hon. Allison, Commissioner, Federal Energy Regulatory
Commission..................................................... 20
Danly, Hon. James, Commissioner, Federal Energy Regulatory
Commission..................................................... 27
ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED
Barrasso, Hon. John:
Opening Statement............................................ 2
Wall Street Journal article entitled ``Energy Prices in
Europe Hit Records After Wind Stops Blowing'' by Joe
Wallace, dated 9/13/2021................................... 4
Wall Street Journal opinion piece entitled ``Climate Policy
Meets Cold Reality in Europe'' by Allysia Finley, dated 9/
27/2021.................................................... 37
Christie, Hon. Mark C.:
Opening Statement............................................ 18
Written Testimony............................................ 19
Responses to Questions for the Record........................ 98
Clements, Hon. Allison:
Opening Statement............................................ 20
Written Testimony............................................ 22
Responses to Questions for the Record........................ 109
Danly, Hon. James:
Opening Statement............................................ 27
Written Testimony............................................ 29
Responses to Questions for the Record........................ 122
Glick, Hon. Richard:
Opening Statement............................................ 8
Written Testimony............................................ 11
Responses to Questions for the Record........................ 75
Hickenlooper, Hon. John W.:
National Renewable Energy Laboratory map showing clean energy
sources nationwide......................................... 52
Manchin III, Hon. Joe:
Opening Statement............................................ 1
Niskanen Center:
Statement for the Record..................................... 148
A REVIEW OF THE ADMINISTRATION OF LAWS UNDER THE JURISDICTION OF THE
FEDERAL ENERGY REGULATORY COMMISSION
----------
TUESDAY, SEPTEMBER 28, 2021
U.S. Senate,
Committee on Energy and Natural Resources,
Washington, DC.
The Committee met, pursuant to notice, at 10:08 a.m. in
Room SD-366, Dirksen Senate Office Building, Hon. Joe Manchin
III, Chairman of the Committee, presiding.
OPENING STATEMENT OF HON. JOE MANCHIN III,
U.S. SENATOR FROM WEST VIRGINIA
The Chairman. The Committee will come to order. I am
pleased to be joined by all four of our sitting Federal Energy
Regulatory Commissioners this morning. I want to thank you all
for being here to discuss the work of the Commission. As you
all have heard me say before, the best FERC is a fully seated
FERC, and I am looking forward to quickly holding a hearing on
Willie Phillips, President Biden's nominee to fill the vacant
seat on the Commission, once we receive all the necessary
paperwork. Now, although we had some of you before the Energy
Committee fairly recently as nominees, it has been over three
years since we have had the full Commission appear together
before our Committee.
This morning, I look forward to hearing how the Commission
is working through our nation's important energy challenges and
ensuring that those issues are all balanced against
affordability and reliability of electric services for all
Americans and their businesses. I was pleased to see that the
FERC and the North American Electric Reliability Corporation,
or NERC, released their preliminary report last week, focused
on the electric grid catastrophe suffered by millions of
customers in Texas and other states last winter. I know there
will be a great deal of interest in what corrections are needed
to avoid these types of massive outages in the future. The
energy mix has continued to undergo a transition due to market
forces and weather patterns that are changing. We all had
better focus on solving the challenges that come with this
ongoing transition. A common theme in recent events from the
extreme heat in California in August 2020 or the extreme cold
around the country last winter is a failure to plan for
adequate energy resources in the context of these changing
weather patterns and generation portfolios. Having reliable
power is not a ``nice-to-have'' for a superpower economy. We
have to get this right. But we have an obligation to balance
the cost of reliability and resilience with affordability
because affordability is also not optional.
There is wide agreement that we need to address climate
change, but less agreement on how, how fast, and at what cost.
In my view, the only way to do it without sacrificing
reliability and affordability is with policies that spur
innovation, not elimination. It makes no sense to take tools
out of the toolbox because we know that none of these energy
resources are 100 percent immune to weather disruptions,
whether that be freezing wind turbines, disruption to our
natural gas production and delivery systems, or frozen coal
stockpiles, all of which we saw happen last winter. We have to
maintain a diverse and reliable energy mix with the
technologies necessary to reduce our emissions, because when
the sun sets in the middle of a regional heatwave, people
expect grid operators and utilities to have firm generation
ready to go, be that energy storage or natural gas. As we all
know, FERC has a very important role in regulating natural gas
markets and the infrastructure that is needed to move natural
gas safely and efficiently.
We have natural gas to thank for the lion's share of the
decarbonization we have seen in the power sector over the last
20 years, and natural gas has helped manage prices and
reliability. We have vast reserves of this commodity right in
our backyard that can continue to support our energy
independence. In 2019, the Appalachian Basin alone produced an
estimated 11.5 trillion--that's with a ``T''-- cubic feet of
natural gas, helping America become a net energy exporter for
the first time in 67 years. However, moving this gas to market
safely and efficiently is a necessity, and in order to do that
we need to smartly expand the country's natural gas
infrastructure system. According to regulators, pipelines have
a 99.99 percent safety record, making them the safest mode of
energy transportation. I believe that natural gas has an
important role in the energy transition, and we need to ensure
an efficient, predictable permitting process for pipelines.
Congress expects FERC to update and revise its policies and
practices in response to new facts and new technologies and
certainly court decisions, of course, but that is while
following current law and current policies in processing
applications expeditiously.
I look forward to discussing how the Commission is
balancing the need for updates with an obligation to the
industry to provide fair and timely review of permit
applications.
With that, I am going to turn to Senator Barrasso for his
opening remarks.
OPENING STATEMENT OF HON. JOHN BARRASSO,
U.S. SENATOR FROM WYOMING
Senator Barrasso. Well, thank you so much, Mr. Chairman.
Thank you for holding today's hearing. It couldn't be coming at
a more critical time. I am especially appreciative of your
opening comments both focusing on affordability and reliability
of our energy because, as we speak, this Administration and
House Democrats are working frantically to impose a witch's
brew of reckless energy policies across the entire nation. The
House Democrats' plans will effectively end any new oil,
natural gas, coal, and hardrock mineral production on federal
lands and waters. If enacted, their bill surrenders America's
energy independence and makes us dependent on OPEC, Russia, and
China. It also would devastate communities across the West and
the Gulf Coast. House Democrats also plan to impose a natural
gas tax on American families and businesses. At a time when
inflation is at its highest level since 2008, these policies
make it more expensive for American families to heat and power
their homes.
Mr. Chairman, the magazine, The Economist, last week
pointed out that higher energy costs anger voters and hurt the
poor. But price increases--they increase inflation, they lower
standards of living, and yet the House Democrats' plan would
establish a so-called ``Clean Electricity Performance
Program,'' which will add to the costs of energy. It is a
scheme. It would use an estimated $150 billion of taxpayer
dollars to pay off the largest utilities in the country to
deploy the Democrats' favorite energy sources. At the same
time, it will allow those utilities to charge their customers
for new transmission lines to service these facilities. And to
add insult to injury, Democrats do not plan to debate and
consider the legislation through regular order. They will not
even allow the public to provide testimony on their bill.
Instead, they plan to ram it through the legislative process on
a completely partisan basis.
Not one Republican is going to support that bill. We will
not support it because we have witnessed the disastrous results
of these polices elsewhere. Let's look at California.
California prematurely shut down nuclear, natural gas, and
coal-fired power plants. They have richly subsidized solar and
wind energy. Now the people of California pay some of the
highest electricity prices in the country. In return, millions
of California residents have been subject to rolling blackouts
over the last two years. They are having a hard time trying to
keep the lights on in California. It is so bad that the
Secretary of Energy and the Federal Energy Regulatory
Commission have had to give California waivers. Waivers to do
what? Well, to allow them to use natural gas plants to run
overtime.
We should also look at what is happening in Europe. Like
California, European countries prematurely shut down their
nuclear power, their natural gas, their coal-fired power
plants. And what did they do? They richly subsidized wind and
solar energy. Now Europe's electric grids are failing to
deliver, and electricity prices in Europe are hitting all-time
record highs. A recent headline in the Wall Street Journal, Mr.
Chairman, here it is, ``European Energy Prices Surge.'' What's
the sub-headline? ``Lack of North Sea wind curbs an electrical
source just as stocks of natural gas are low.'' The article
notes that this month, electricity prices in the United
Kingdom, because of policy decisions made there, are seven
times what they were just one year ago--seven times higher than
what they were one year ago.
[The article referred to follows:]
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Senator Barrasso. Now Europe does not have sufficient
supplies of natural gas. This puts them completely at the mercy
of foreign actors, including Russia. Make no mistake, this is
America's future if President Biden and House Democrats get
their way.
For these reasons, I am glad we have members of the FERC
before us today. Among FERC's authorities, as the principal
regulator of natural gas and electricity, the Commission has
the responsibility to ensure Americans have affordable and
reliable natural gas and electric service--Mr. Chairman, the
two words that you used to start your opening statement today.
FERC is an independent agency, not merely an arm of the White
House. In other words, FERC Commissioners have the opportunity
as well as the obligation to speak the truth about the
potential impacts of these polices on all Americans. They can
explain the consequences of the reckless policies to a
President who seems intent on putting rhetoric ahead of reality
and politics ahead of the people of this country.
Welcome to you all, and I look forward to hearing your
testimony. A number of us have some probing questions.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Barrasso.
I would like to welcome all four of our witnesses to the
Committee and thank you for being here today. It is nice to see
all of you in person, in one place, in one setting.
We have Chairman Rich Glick with us. We have Commissioner
Mark Christie. We have Commissioner Allison Clements. And we
have Commissioner James Danly. Chairman Glick, we are going to
begin with your opening remarks, if you will, sir.
OPENING STATEMENT OF HON. RICHARD GLICK,
CHAIRMAN, FEDERAL ENERGY REGULATORY COMMISSION
Mr. Glick. Thank you very much, Chairman Manchin, Ranking
Member Barrasso, and members of the Committee. Thank you for
inviting my colleagues and me to appear before you today to
discuss the important work we are doing at the Federal Energy
Regulatory Commission. I am honored to appear before you for
the first time since being designated by President Biden as
Chair of the Commission in January. I am also very glad to be
back in this room where I spent so many hours as a staff person
on a couple of different occasions.
The nation's energy landscape is in the midst of a dramatic
transformation driven by rapid changes in economics,
technological innovation, changing consumer preferences, and
the exigency of climate change. Residential, commercial, and
industrial customers are increasingly demanding that their
energy come from zero-
emissions resources. Dozens of the biggest utilities in the
country have established their own decarbonization goals, and a
growing number of state and federal policies are aimed at
dramatically reducing greenhouse gas emissions. The
Commission's job is not to pick winners and losers, but we do
have a role in eliminating barriers to technology's
participation in wholesale markets. For instance, over the last
several years, FERC issued landmark orders facilitating energy
storage and aggregated distributed energy resources'
participation in organized wholesale electricity markets.
Today, I will focus my remarks on five priority areas of
our work: (1) building the transmission grid of the future, (2)
modernizing electricity market design, (3) updating FERC's
natural gas certificate policy statement, (4) safeguarding the
reliability of the electric grid, and (5) facilitating a more
inclusive decisionmaking process.
The rapid shift in the resource mix and the growing threat
to grid resilience due to the changing climate requires
significant investments in new and existing transmission. In
July, the Commission unanimously approved an Advance Notice of
Proposed Rulemaking (ANOPR) inviting the public to comment on
potential reforms to improve current transmission planning and
cost allocation and generator interconnection processes. The
aim of this initiative is to meet the transmission needs of the
future at the lowest cost to consumers. Through the ANOPR, FERC
is taking a critical step toward our first major effort of
transmission reform in a decade, and I hope to move forward as
expeditiously as possible with this priority work.
While organized wholesale electric markets continue to
provide for lower prices, greater efficiencies, and increased
innovation, these markets are now some 20 years old and in
certain regards, may fail to reflect the modern electric
sector. One key focus is to address the growing tension between
state public policies and administrative pricing rules. As
states were adopting clean energy policies that shifted the
resource mix toward renewable and zero-emissions generation,
the Commission expanded its minimum offer price rules (MOPRs)
in the eastern RTO capacity markets in a manner that put state-
supported generation resources at a competitive disadvantage.
In response to strong concerns from the states, clean
energy industry, and consumer groups, the regional grid
operators have initiated stakeholder discussions to reform
their capacity market rules to better accommodate state
policies. In addition, the Commission generally relies on
competition to establish just and reasonable rates in wholesale
markets, but this only works if there is true competition. The
Commission's vigilant use of its authority to prevent
manipulation of electric and natural gas markets is an
essential tool to ensure rates are just and reasonable.
Under the Natural Gas Act (NGA), FERC essentially must
determine whether a proposed interstate natural gas pipeline is
both needed and in the public interest before issuing the
Certificate of Public Convenience and Necessity. In 2018, then
Chairman McIntyre initiated a Notice of Inquiry (NOI) seeking
input into the potential reforms to modernize the Commission's
1999 certificate policy statement. While the Commissioner
received numerous comments at the time, no action was taken.
Earlier this year, we issued another Notice of Inquiry seeking
additional input, including: (1) options for determining
whether a proposed pipeline project is needed, (2) approaches
for evaluating a proposed project's impact on climate change,
and (3) what considerations are required when a proposed
project would be sited in an environmental justice community.
The need to see this proceeding to a conclusion is even
more urgent in the aftermath of several appellate court
decisions highly critical of aspects of the Commission's
approach to pipeline certification. As we have witnessed in
Texas this past winter, the prolonged loss of electric service
is more than just an inconvenience. It can and did produce
tragic results. FERC and the North American Electric
Reliability Corporation are conducting a joint inquiry into the
operations of the bulk electric system during Winter Storm Uri,
and recently released an interim report suggesting that a lack
of weatherized generation and problems associated with natural
gas production and processing were the main causes of the Texas
blackouts. I am determined that the recommendations arising
from this joint inquiry be implemented to avoid a reoccurrence
of the events. Whether it is prolonged record cold, heatwaves,
drought and wildfires in the West, or increasing ferociousness
of hurricanes in the Gulf, climate change poses a distinct
threat to grid reliability. The Commission recently initiated a
docket to examine the impact of extreme weather on grid
reliability. It will continue to focus on actions that
utilities and others can take to address the growing threat of
extreme weather.
We need to be equally vigilant when it comes to potential
cyberattacks against the grid. At FERC, we use a two-pronged
approach to safeguard grid security, employing mandatory
standards to set requirements for foundational practices like
working collaboratively with industry, states, and other
federal agencies to identify and promote best practices. Given
the high stakes, we devote constant attention to, and continue
to explore improvements in our cybersecurity. And last, FERC's
regulatory actions have a significant impact on the lives of
millions of people. As a result, it is important that our
decisionmaking processes include robust input from diverse
perspectives. That is why I am pleased that the new Office of
Public Participation is up and running. I want to commend my
colleague, Commissioner Clements, for her leadership and her
hard work in helping to establish the office.
Toward the goal of inclusivity, I want to highlight FERC's
efforts to better incorporate environmental justice and equity
concerns into our decisionmaking. It is unlikely that FERC is
hearing from members of historically marginalized communities
with the same force and frequency as other stakeholders and
thus, it is essential that environmental justice and equity get
the attention in our decisionmaking processes that they
deserve.
Thank you again for the opportunity to share some of the
Commission's priorities. I look forward to responding to your
questions.
[The prepared statement of Mr. Glick follows:]
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The Chairman. Thank you, Chairman Glick.
And now, we will have Commissioner Mark Christie.
OPENING STATEMENT OF HON. MARK C. CHRISTIE, COMMISSIONER,
FEDERAL ENERGY REGULATORY COMMISSION
Mr. Christie. Chairman Manchin, Ranking Member Barrasso,
members of the Committee, it is truly an honor to be here for
the first time as a member of the Commission. It was just over
one year ago that I appeared before you as a nominee and I want
to thank you for all the courtesies that this Committee gave me
a year ago.
I said then that my two highest priorities--and I think
FERC's highest priorities--are to maintain the reliability of
the electric grid and also make sure that costs remain
affordable for consumers. I want to mention, Mr. Chairman, you
made those same comments in your opening statement. So I want
to mention something that I think is relevant to that. As you
know, you asked me about this last year, and as you know, I
spent 17 years as a state regulator in Virginia. And as a state
regulator in Virginia, I learned an awful lot about your state,
Mr. Chairman, West Virginia, because we share jurisdiction with
Appalachian Power Company, which is the largest utility in West
Virginia, certainly in the southern half of the state. West
Virginia has a generating fleet that is 90 percent coal. If
West Virginia is forced during the transition that we're going
through to prematurely retire that entire fleet, number one,
you have a reliability problem in West Virginia because 90
percent of your generating fleet is coal. But second, you have
a cost problem, because that fleet has to be replaced with
replacement power and West Virginia consumers have to pay for
that. And third, most of those generating units in West
Virginia I am familiar with are in rate base. And what that
means is, if you shut them down, West Virginians are going to
be paying for them for years to come even though they are not
operating.
So as you mentioned, Mr. Chairman, we're going through a
transition. We're going through a transition to a lower carbon
future, and everybody wants to get there. But as we go through
this transition, it is absolutely essential that reliability
not be compromised and that consumers not be exploited. And
with that, thank you again. I appreciate being here, Mr.
Chairman.
[The prepared statement of Mr. Christie follows:]
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The Chairman. Thank you, Commissioner Christie.
And now we are going to hear from Commissioner Allison
Clements.
OPENING STATEMENT OF HON. ALLISON CLEMENTS, COMMISSIONER,
FEDERAL ENERGY REGULATORY COMMISSION
Ms. Clements. Thank you, Chairman Manchin, Ranking Member
Barrasso, and members of the Committee. It is quite an honor to
have an opportunity to testify before you today.
For several decades, the Commission has met its
responsibilities under the Federal Power Act (FPA) and the
Natural Gas Act (NGA) by adapting to reflect changing
circumstances. These circumstances include technological
advancements, shifting economic and market dynamics, the
emerging cyberthreat, and evolving federal, state, and local
energy policies. While the Commission's adaptation to change is
familiar, the current magnitude of challenges driving the need
for this change is unprecedented. My testimony today describes
three priorities the Commission should pursue to protect
customers while facilitating a reliable and resilient energy
system.
First, we must safeguard the energy system against extreme
weather. Members of this Committee in particular understand the
suffering and the issues posed by excessive heat, drought, and
wildfires in the West, increasing frequency and severity of
hurricanes in the Gulf Coast and up the Eastern Seaboard, and
unusual heat domes and extreme cold around the country. Current
policies are not adequate to meet these new realities. Of
course, the issues cannot be boiled down to just a reliability
standards problem, or just a transmission system planning
problem, or just a market design problem. As FERC and NERC
staff describe in the preliminary findings from the February
Storm Uri event, we must address extreme weather holistically
to ensure reliability and resilience. The Commission has
appropriately opened a docket examining challenges posed by
extreme weather, and I will urge Commission action based on
what we learn in this record.
My second priority is ensuring that FERC's regulations
better facilitate construction of cost-effective, high-voltage
transmission infrastructure. Action here is a priority for two
reasons. First, as was affirmed in the initial analysis of
Storm Uri, as well as in earlier polar vortex events in 2014
and 2019, linking grid regions together via high-voltage
transmission continues to pay reliability and resilience
dividends during extreme weather events. Second, the U.S.
transmission system is not equipped to integrate resources that
otherwise outcompete existing ones and meet consumer demands
for clean energy. Declining costs of wind, solar, and hybrid
generation, which make up the majority of the new supply
seeking to connect to the grid, are not translating into the
customer benefits they hold the potential to provide. The
reason: outdated and often unworkable transmission planning,
cost allocation, and interconnection policy. Current planning
happens, generally, in a piecemeal fashion based on analysis
that is not sufficiently forward-looking to protect customers.
The result has been inadequate system build-out, leading to
overloaded interconnection cues and project development delays
and, of course, the costs that come along with them. Failure to
act on this priority will further endanger both customers and
broader system reliability. The Commission's recently issued
Advance Notice of Proposed Rulemaking is a critical step to
examine how holistic, forward-looking planning based on a more
accurate assessment of future conditions can avoid such
outcomes. It will provide an important record from which to
take action.
My third and final priority is to modernize the
Commission's interstate gas pipeline certification approach to
protect the public interest and increase regulatory certainty.
I am eager to achieve a legally durable framework for
considering certificate applications under the Natural Gas Act,
one that achieves balance by providing consistency and
regulatory certainty to both project sponsors and the public
that we are pledged to serve. The Commission's outstanding
Notice of Inquiry on updating our 1999 policy statement
provides a record to consider the perspectives of stakeholders
across the energy sector toward this goal. While we are
considering this record, however, we cannot ignore our
responsibility to implement our existing policy statement
consistent with binding appellate court instructions going back
to 2017. The D.C. Circuit's recent vacatur of the Commission's
decision granting Spire Pipeline's certificate demonstrates the
harm that may befall project sponsors and consumers when the
Commission's decisional process falls short. As part of this
effort, I have prioritized improved public participation in
Commission proceedings. The Chairman spoke about the Office of
Participation, a Congressionally directed office which is
intended to do just that.
It has been the greatest honor to begin service to the
American people, and thank you again for the opportunity to be
here today.
[The prepared statement of Ms. Clements follows:]
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The Chairman. Thank you, Commissioner.
And now, we will have Commissioner James Danly.
OPENING STATEMENT OF HON. JAMES DANLY, COMMISSIONER, FEDERAL
ENERGY REGULATORY COMMISSION
Mr. Danly. Chairman Manchin, Ranking Member Barrasso,
members of the Committee, thank you for having us here. I am
going to begin by talking about a few items within the
Commission's jurisdiction that I am particularly concerned
about.
The first is our authority to certificate pipeline
infrastructure under Section 7 of the Natural Gas Act. The
purpose of the Natural Gas Act is to encourage the development
of plentiful supplies of natural gas at affordable prices. A
handful of actions that the Commission has taken recently have
created such a climate of uncertainty that it has stultified
the ability of pipelines to rationally deploy capital or secure
financing. In our utility system in America we rely upon
private enterprise to deliver essential services and the
business consequences to these jurisdictional entities are
profound.
We have had a couple of cases that have thrown real doubt
into the certificate process. One of them apparently seemed to
reopen to litigation the terms of a closed certificate. You
have to understand the consequences that can have. It costs
hundreds of millions of dollars to operate and construct a
pipeline and people will not finance projects of that size if
they think that the certificate terms are up for later
relitigation. Another problem has been the hints that have been
dropped in our generic proceedings in another case that we
could condition the certificates that eventually do issue on
some form of mitigation. And it has yet to be seen what form or
shape that would take or what the costs would be and how they
would be imposed. And last, the pipeline industry has witnessed
seemingly inexplicable delays in the processing of the NEPA
documents, the National Environmental Policy Act documents
we're required to make, in which the Commission staff has
determined that EAs--that is the shorter environmental
assessments--were not sufficient, but full EISs (environmental
impact statements) were required. And what I think causes the
pipeline companies confusion is that, at least in two of the
cases, the EISs--the full reviews--have come out and they've
reached the exact same conclusion that the shorter
environmental assessments did.
All told, these different actions of the Commission have
caused such uncertainty that just last week, a very small
pipeline project--it was upgrades to compressor stations in
Pennsylvania and Virginia--the application was withdrawn
because FERC did not take an action on beginning the
environmental review. So I just want to highlight to the
Committee that it is critical that we have stable processes in
place, otherwise financing will not be available and this
infrastructure that's needed--remember, as we learned, sadly in
Texas, if the light--if the gas system goes down so does the
electric system. People rely upon this infrastructure and it
needs to be developed in an orderly manner and there has to be
stability for that.
I'll briefly touch on two other points. I am concerned
about our authority under the Federal Power Act to set rates
for electric transmission. There is, at this point, a great
deal of enthusiasm for a rapid build-out of transmission in
America and doubtless there are places in which further
transmission development is necessary for reliability to reduce
congestion. Those are legitimate and appropriate reasons to be
building transmission and those costs rightly go to the
consumers who get the benefit of that transmission build-out.
But in the enthusiasm the people have to bring intermittent-
resource-generated power from remote locations where it is
produced to the load centers of the urban areas where it is
consumed, I am greatly concerned that the value propositions
set forth of getting inexpensive renewable energy may be a
loser in the end because if the cost of the power is cheap but
the cost of the transmission is high, you will see in the end,
possibly, ``all-in'' bills to the ratepayer and it is the
ratepayer that ultimately bears all of the cost of the
transmission system. The all-in bill to the ratepayer may
actually be higher than it would have been had locally produced
electricity been employed. We are constrained by unambiguous
court precedent to have a cost causation system in which the
benefits derived from the transmission that the ratepayers are
charged for is roughly commensurate with the cost they have to
pay. And as we look at our generic proceeding for transmission,
the Commission has to bear that in mind because it is a
fundamental of transmission ratemaking.
And then, last, very briefly, I see I only have 30 seconds
left. I am concerned about resource adequacy, specifically
resource adequacy in our jurisdictional markets. The RTOs
(Regional Transmission Organizations) and ISOs (Independent
System Operators) have delivered immense benefits to
ratepayers, but for those markets to work, they have to be
designed properly, and I am concerned that incorrect price
signals in our markets are failing to get the resource adequacy
necessary--that is to say--the actual quantity of generation of
the right type to ensure system stability. The Commission has
to ensure that these markets are competitive so that the price
signals are accurate and guard against the exercise of market
power.
I am two seconds over. Thank you very much.
[The prepared statement of Mr. Danly follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The Chairman. Thank you all. I appreciate it. Now we are
going to start with the questions and I will start with the
opening questions.
I am going to ask all four of you the same question. If you
were rating yourself on how you all work together, looking for
commonality between zero to 100 percent, how would you rate
yourself?
Chairman.
Mr. Glick. I would rate us 80, 85. I mean, we have our
differences, but I think, you know, I think we respect each
other.
The Chairman. Commissioner Christie.
Mr. Christie. Well, I taught for a long time and grade
inflation is real, so I am going to say 90.
[Laughter.]
Ms. Clements. I think we're at 80, 85, and just getting
started.
Mr. Danly. There's always one. I am not sure it is quite
that high. Certainly, from my standpoint, I am very concerned
about the clear, unambiguous letter of the law and the court's
interpretation of it and so there are times in which I will
admit that I can have a very clear-eyed view of that. But when
it comes to the discretionary actions of the Commission, I
think we get along very well. And I'll point out that 95
percent of our orders are unanimous. So for the vast majority
of the work we do, we're of one mind.
The Chairman. Very good. Thank you, all.
According to the Bureau of Labor Statistics (BLS), over the
last 12 months, the Consumer Price Index for energy has
increased by 25 percent overall. That includes increases for
natural gas, electricity, gasoline, and fuel oil. Right now,
the benchmark Henry Hub natural gas prices are more than twice
as high as a year ago, over $5 per million BTU, an annualized
rate equal to $109 billion of increases to the consumers, the
end users. As I said in my opening remarks, affordability is
not an option. I am concerned we are on a one-way rise.
So do all of you want to comment very briefly on how does
FERC take inflation into consideration when carrying out your
authorities and determining what is reasonable? Quickly.
Mr. Glick. Thank you, Mr. Chairman.
FERC has authority over the regulation of electricity,
electricity wholesale markets, for instance, and electric
transmission and natural gas transportation, but we do not have
authority over fuel prices, whether it be oil, whether it be
natural gas, and we take our job seriously in terms of
regulating electricity markets to make sure, as much as we can,
that they are sufficiently competitive and the rates that
resulted are just and reasonable.
The Chairman. But nothing moves without electricity.
Mr. Glick. That's correct, absolutely.
Mr. Christie. Mr. Chairman, I think in every case we do, we
have to be very, very sensitive to the cost to consumers
because what FERC does affects retail rates----
The Chairman. Correct.
Mr. Christie [continuing]. And that's what flows through to
monthly bills. So I think cost has to be uppermost in every
proceeding.
Ms. Clements. I think the two things we can do are plan
ahead to save customers money and also encourage competition,
non-
discriminatory competition.
Mr. Danly. In the jurisdictional markets, the costs that
rise because of inflation are inputs to the offers that are
made by market participants and the contracts are negotiated by
utilities--or as between them, they are jurisdictional to us--
but they negotiate their own contracts.
The Chairman. The other question I am going to have is
concerning Texas, the poster child that we are using, but those
decisions regarding gas and electricity are being made all over
our country. FERC's interim report on the 2021 winter storm
indicated Texas and the South-Central U.S. are heavily reliant
on natural gas for fueling electric generation to meet peak
capacity and energy needs. At the same time, the natural gas
infrastructure is heavily reliant on electric power for
producing, processing, and transporting natural gas to end
users. As we all saw, the relationship was managed in February
in a way that failed consumers drastically.
So you all have been thinking about gas-electric
coordination for years. I know that has been going on and we
know that you all have been talking about it. Why haven't we
solved the problem yet? Why is it taking so long to get that
integration done?
Mr. Danly. We have been talking about it for years. In
fact, the last concrete action we took--I forget how long ago
it was, 2016 perhaps--was to implement NAESB standards to get
the day-ahead--the scheduling fixed between the two. This is
extremely esoteric material for a lot of the mechanics of the
interaction between the two of them. But it's a subject that
we're constantly concerned about and we're working on it
actively.
Ms. Clements. We have two important dockets open, Chairman
Manchin, that will provide more information to allow us to take
further steps on this interdependence. One is the docket on
extreme weather and climate change and the other is the open
inquiry on our certificate statement. So it is in the works.
When we think about Texas, whether it be in Texas,
California, New England, across the country, the Gulf Coast, we
have to think about planning, market design, and reliability
standards. We cannot just fix one of them. They all fit
together.
Mr. Christie. Mr. Chairman, gas-electric coordination has
been an issue for years because we have such a large percentage
of our generating capacity in gas. So it is absolutely a high
priority. I would say in Texas, and I have said this before, I
think the problem in Texas, and again, it is their issue to
work out. They are not under FERC jurisdiction as far as their
rate design and their energy market. I think an energy-only
market, where subsidized resources are going to always win and
non-subsidized resources are not going to win, is going to lead
to an imbalance. And I think that's what happened in Texas.
Weatherization, of course, was an issue and the gas plants
needed to be weatherized. But where's the money going to come
from? The gas producers have to have an incentive to weatherize
and they've never had one in an energy-only market. So I think
the bigger problem has been exactly the way the market is
designed. But again, that's for Texas to figure out. They are
not under our jurisdiction.
The Chairman. I understand that.
Mr. Glick. Mr. Chairman, two issues. One, with regard to
gas-electric coordination, it is my opinion that the Commission
has been too deferential. We have only approved changes that
actually both the gas industry and the electric industry could
agree with. I think we actually need to bring the two sides
together and kind of knock heads and suggest we really need to
make some changes here.
Second, and most importantly, while we have reliability
standards for the electric industry, we do not have reliability
standards for the natural gas industry, including pipelines. I
think it is something Congress needs to seriously take a look
at because we saw what happened in Texas and the consequences--
obviously, very severe.
The Chairman. People are concerned about getting product to
market, okay? Getting gas pipelines built has been a tremendous
challenge. They believe that FERC has not been very clear in
the past about how they work through this process. Knowing up
front what to expect, making sure that they do not run into one
thing after another that is added on after they make their
request for their permit--I am hoping that you are getting your
act together on that, and providing clarity to the process so
applicants know what to expect so they can get it done. Or
reject it. Either way, let them know up front.
And the biggest thing I hear all the time: how in the world
could we, as a country, support Russia building the Nord Stream
Pipeline in Europe while we basically denied the pipeline
coming from Canada. Has that caused a problem? The product is
still coming to the market. You can talk about that later, but
I am just telling you what complaints I hear all the time.
With that, we will turn to Senator Barrasso.
Senator Barrasso. Well, thank you, Mr. Chairman. I would
like to follow up on some of those sorts of things.
Commissioner Christie, at the present time you are the only
Commissioner who actually has direct experience overseeing
retail electricity supply and sales. What is likely to happen
to electric reliability if Congress enacts this so-called Clean
Electricity Performance Program to force the closure of natural
gas and coal-fired power plants, the plants that generate
electricity even when the sun does not shine, the wind does not
blow. For example, just consider a region like PJM, which used
to be Pennsylvania, New Jersey, Maryland, but it is now 13
states from the middle of the country to the Atlantic Coast.
How do they keep the lights on without natural gas or coal-
fired power plants?
Mr. Christie. Well, right now, PJM couldn't. They are 20
percent coal, I think about a third gas, and about 38 percent
nuclear, so they couldn't keep the lights on. My concern about
any kind of national mandate with deadlines and timetables is
that the deadlines and the timetables for how you change the
generation mix do not fit the reality of the facts. And as the
Chairman said at the beginning, as we go through this
transition, which everybody wants--this lower carbon
transition--it is absolutely essential to keep reliability
uncompromised. And NERC has warned that if you inject
intermittent resources, of which, of course, wind and solar are
two examples, if you force intermittent resources at a higher
percentage than the system can balance and you do not have
reliable dispatchable resources--gas, coal, nuclear--you have a
reliability problem. And NERC has warned about that repeatedly.
So my concern about a deadline for when you have to have a
certain percentage of a certain generation mix is that it
doesn't fit the actual technology. Today, we do not have the
technology to have a 100 percent emission-free grid. We do not
have that technology. So a deadline of 2030 or 2035,
essentially, is a gamble that the technology is going to
develop. We want the technology to develop. So the question
really is what's the best way to do it? I personally think the
best way to do it is to pour money into R&D, but that's not my
call. But if you mandate deadlines that cannot be met based on
technology, you're going to get reliability problems.
Senator Barrasso. So you addressed one of the two comments
that the Chairman raised at the beginning of the Committee
hearing--reliability. Now I want to ask about affordability.
Commissioner Christie, what is going to happen to the
electric bills of our constituents if Congress forces states to
rely almost exclusively on intermittent wind and solar, and
won't this just drive costs, especially if we find, as Germany
has discovered, that we must have backup--natural gas, coal-
fired power plants?
Mr. Christie. Well, a national standard, of course, is
going to treat different states differently. We have 50
different states. Each one has a different generation mix.
Right now, the generation mix is totally under the control of
those individual states. So it affects individual states
differently. I am very familiar with Virginia because I was a
state regulator for 17 years, and I am very familiar with West
Virginia because we shared jurisdiction with their largest
utility. As I said in response to the Chairman's opening, West
Virginia is 90 percent coal. If a national standard forces West
Virginia to shut down 90 percent of their generation mix, you
obviously have a reliability problem. That is not hard to
figure out. But from a cost standpoint, West Virginians have to
pay for replacement power. Paying to replace 90 percent of
their generation mix is going to be extremely costly.
And also, West Virginia happens to be a vertically
integrated, cost-to-service state. That means that the
generating plants that would be forcibly shut down by a
national standard are in rate base. And so West Virginia
consumers are going to pay for years to come even though those
plants are not running. And the same thing applies to Virginia,
my state. Our largest utility, Dominion, has numerous combined-
cycle gas plants. If you forcibly shut those down, Virginians
have to pay for replacement power and they are also going to
pay for the plants because I can tell you, they are all in a
rate base.
So different states are affected differently, but for
states that are heavy on dispatchable resources, like gas,
coal, nuclear, it could potentially have a very heavy impact,
certainly, on cost.
Senator Barrasso. Thanks so much, Mr. Christie.
Mr. Danly, today's Wall Street Journal editorial, ``Climate
Policy Meets Cold Reality.'' It is an op-ed. In it, the author
points out that Europe's rush to renewables is causing prices
to spike and energy shortages. So you have both. You have
reliability and affordability issues. The author concludes, she
says, ``Europe offers a portent of the havoc to come under the
Biden Administration's policies that aim to shut down fossil
fuel production and power the U.S. grid exclusively with
renewables.''
[The editorial referred to follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Barrasso. So if Congress enacts this so-called
Clean Electricity Performance Program, and it severely
restricts natural gas production as the House Democrats are
proposing, will we be headed for higher prices and energy
shortages, both?
Mr. Danly. Thank you, Senator.
I think that it is almost inevitable. I typically do not
think it is my role to comment on the legislation before
Congress, but in this case, I want to be responsive to your
question. The markets that we have, which are organized
markets, ISOs and RTOs, they cover about two-thirds of the
population of the United States to deliver their power. These
are mechanisms that we have very slowly refined incrementally
over the course of decades. And this--the text of the bill as I
read it seems to create an incentive and penalty structure that
would absolutely change and frustrate every subtle expectation
we have for these slowly developed, incrementally produced
markets of ours, effectively dropping an H-bomb into the middle
of them and it will effectively end the markets as being
anything other than administrative constructs, perhaps for the
purpose of balancing and dispatch.
Just, if you'll indulge one minute here--imagine how hard
it would be when you get a capacity supply obligation, which,
you know, some are three years ahead, they are three years
forward--and you got that supply obligation in return for a
payment when the market cleared and your further bids that you
make in later auctions are going to then have to not only have
you figure out what the cost is, but also what your
competitors--who are bidding in--what their new calculus will
be, based upon performance metrics that have not even been
achieved yet. I cannot imagine how the markets could possibly
take that.
Senator Barrasso. Thank you.
Thank you, Mr. Chairman, thank you.
The Chairman. Thank you, Senator Barrasso.
And now we are going to have Senator Heinrich.
Senator Heinrich. Well-planned transmission projects tend
to create net savings for customers. In fact, the NREL
(National Renewable Energy Laboratory) Seam study found that
for every dollar invested in transmission repairs, we tend to
see more than $2.50 in benefits. One of the challenges,
however, is that the perceived distribution of benefits can be
quite uneven to various customers across the regions served by
transmission projects. I wanted to ask each of you: does FERC
currently have the tools it needs to allocate transmission
costs equitably across multiple regional beneficiaries?
Mr. Glick, why don't we start with you and we will just go
down the line.
Mr. Glick. Thank you, Senator Heinrich, for the question.
So the answer is yes. We do have the authority, as
Commissioner Danly mentioned earlier. We are required by the
courts to ensure that the cost of transmission is allocated in
a manner roughly commensurate with benefits. But I think
sometimes we look at benefits way too narrowly. So for
instance, generally, if someone receives power from a
particular transmission line, they're considered a beneficiary.
But as you pointed out, transmission opens up congestion and it
allows you to get access to cheaper power, certainly enhances
greater resilience and reliability, and there is a significant
number of benefits I think we need to take into account. That's
what we're looking at in our ANOPR process right now.
Senator Heinrich. Ms. Clements, did you want to add to
that?
Ms. Clements. Thank you, Senator, for the question.
I think it's important to put a human face on the
statistics that you just mentioned. In the Midwest, in the 2010
to 2012 period, the region got together and made a significant
investment in transmission called the Multi-Value Portfolio
Lines. To this day, in the cold weather Uri event, those lines
were protecting customers and keeping the lights on a decade
later, benefits that were never considered at the time that
those investments were made. Smartly planned transmission
brings resilience and reliability benefits to all customers
across all states. It also provides the opportunities for low-
cost resources to bring down customer costs, not just in states
with policies promoting those resources, but again, across
states.
Senator Heinrich. So your point of view is we should be
considering things like reliability as a value that
transmission brings?
Ms. Clements. Yes, sir. If we do not, we will find
ourselves in a position 10 years from now where the lack of
interconnection between regions, between states, is going to
cost customers a whole lot of money.
Senator Heinrich. Lengthy timelines for projects that have
been stuck in interconnection queues are one of the primary
barriers to deployment of new, clean sources of energy,
particularly in wholesale markets--PJM, ERCOT, others. A
Berkeley National Lab study from May 2021 found that in four
ISOs, the typical duration from connection request to actual
operation went from 1.9 years back in the 2000-2009 timeframe
to about three and a half years for those built in the last 10
years.
What can FERC do to help make RTO-ISO interconnection
processes more efficient so that we can get more energy
deployed faster to meet these challenges?
Mr. Glick. Thanks for the question, Senator.
I think what you said is exactly right and the queue
devices we have in this country are far too long and they are
obviously causing issues. I think we need to do a couple of
things. First of all, we need to marry up our transmission
planning process with the interconnection queue process. Right
now, they are disjointed, and that's causing the queue process
to take forever. Second, I think we need to look at the way
that network upgrade costs are allocated. Traditionally, what
the Commission has supported is a situation in which the
generator connected to the grid has to pay all of the upgrade
costs when there are a significant number of beneficiaries, as
we just talked about elsewhere. And so that's actually slowing
down the process. Sometimes these upgrade costs are so
expensive, it is causing generators in the interconnection
queue to drop out at the last minute.
Senator Heinrich. Mr. Christie.
Mr. Christie. Senator, one thing we need to do is--I guess
the general term is queue reform--but the number of projects in
the queue is not the total picture, because of all those
projects in the queue, some are ready to go, some are not. And
so I think that the queue needs to start taking into account
which projects already have a state certificate, which projects
already have a PPA, a Purchase Power Agreement with a seller,
so they are already financeable, and start prioritizing which
projects are, to coin a phrase, shovel-ready, and which ones
are not and still do not even have financing.
So I think queue reform includes prioritizing the ready
projects against the not-so-ready projects.
Senator Heinrich. Thanks.
Ms. Clements.
Ms. Clements. Thank you, Senator.
I would add to those two comments that we need to have
states at the table in the conversations, and we have set up a
joint task force with NARUC, the National Association of
Regulatory Utility Commissioners, so that we can start having
conversations about some of the really difficult siting issues,
which are one of the main delays to getting transmission built,
together outside of contested proceedings.
Mr. Danly. I think that one of the easiest things that the
Commission can do is stop issuing unlawful retractive waivers
of the queue deadlines, which are the means by which markets
actually manage their queues. That would be simply us not doing
something unlawful, and that would be an easy partial fix.
The Chairman. Thank you, Senator.
Now we have Senator Lee.
Senator Lee. Thank you, Mr. Chairman. Thanks to all of you
for being here.
Mr. Danly, I would like to start with you. Senator Barrasso
referred a few moments ago to the Clean Energy Performance
Program, which would require increasingly massive amounts of
our energy to come from low-emission sources, presumably a lot
of that coming from intermittent sources like solar and wind.
Now, these types of energy projects often require costly new
transmission lines to be built to connect the generating
sites--which are, of course, many--to the consumers. Can you
explain to us the cost impacts that this might have on
consumers? In other words, how might consumers be affected by a
proposal like the Clean Energy Performance Program?
Mr. Danly. Certainly. So consumers will be, I would
predict, affected in two ways. The first is that the cost of
transmission is going to go up drastically because the amount
of wire you're going to have to string across the country to
bridge those distances between the remote locations where
intermittents are and the load pockets is going to be very
expensive and that will go directly into the customer's bills.
But the other thing that is going to happen is, there's
going to be a reliability consequence. As the markets fail to
produce correct price signals as a result of these new
incentives and penalties, they are going to fail to accomplish
the resource adequacy goals that the markets have taken over
from the states. And when that happens--this is not some
obscure, you know, part of market design, this has a real-world
consequence that when we fail to have resource adequacy
properly achieved by the markets, then the lights do not turn
on when you need them to. And we have seen this happen in
California in the not too distant past--price signals failing
to get the right resources.
Senator Lee. So as we are building these big projects, a
small handful of people will make a fair amount of money off of
it. It sounds nice. In many ways, it is. But you are saying
customers will pay higher prices?
Mr. Danly. I believe they will.
Senator Lee. They will also pay for it in terms of
diminished reliability?
Mr. Danly. Yes, that's hard to predict specifically, but
actuarily speaking, there is greater risk.
Senator Lee. Reliability is certainly something that FERC
is charged with looking at and therefore, something we ought to
be concerned about.
Now, Commissioner Danly, in its review of natural gas
pipelines, the Commission may be delaying issuance of
Certificates of Public Convenience and Necessity due to
disagreements of what fits within the statutory definition
within the meaning of reasonably foreseeable. What is the
appropriate standard that you think the Commission ought to use
in making these determinations?
Mr. Danly. So I presume you're talking about how under a
NEPA review we determine what the significant impacts on the
human environment are for EISs and EAs? Is that right?
Senator Lee. Yes.
Mr. Danly. So what we're required to do under the
implementing regulations for NEPA is review all--or take
account of all the significant foreseeable facts in the human
environment, and in doing so there is a--you'll appreciate
this--a Palsgraf-style proximity question, how easily----
Senator Lee. Foreseeability and----
Mr. Danly. That's right, exactly.
So if something is not foreseeable in that tort scheme,
then it just doesn't fall within the compass of the required
review.
Senator Lee. Is that the case where all the explosives, the
fireworks went off?
Mr. Danly. Yes.
Senator Lee. It was a big backup.
Mr. Danly. Yes.
Senator Lee. I read that in conjunction with the Wagon
Mound case.
Mr. Danly. That's right, exactly. Yes.
Senator Lee. Okay. This is something I am concerned about,
because if in determining this, you get that wrong, either in
pursuit of an environmental agenda or otherwise, you could be
sacrificing other things that the Commission is charged with
overseeing, including things affecting the price, or things
affecting the reliability of the grid.
Commissioner Christie, there has been vocal support for the
creation of one or more western regional transmission
organizations or RTOs as they are sometimes described. Under an
obligatory RTO, could consumers who were in previously
independent markets that become part of that obligatory western
regional RTO--could they face increased prices due to the
renewable energy portfolio commitments made by other states,
not made by their own elected representatives in their own
state?
Mr. Christie. Well, Senator, if I understand your question,
let me just first say, I think the decision whether a state
should go into an RTO is purely up to that state. I do not
think FERC should mandate it and I hope Congress wouldn't
mandate it, but it should be a state decision. And all the RTOs
in America are different. I spent 17 years in PJM. That's very
different from California ISO. So the details of how an ISO or
RTO operate are going to be worked out, you know, within that
RTO. One of the issues you have in a multi-state RTO like PJM--
I know from experience--is that you have 13 states and DC in
PJM. Trying to mesh those public policies is always a challenge
and you have always got a threat that consumers in one state
are going to end up paying for the decisions of politicians in
another state.
So if the Western states, like yours, want to join an RTO,
it should be their decision. I would just say look very closely
at the details before you make that decision.
Senator Lee. Thank you. I see my time is expired. Thank
you, Mr. Chairman.
The Chairman. Senator Cortez Masto.
Senator Cortez Masto. Thank you, Mr. Chairman.
Commissioners, welcome. Thank you for being here.
Chairman Glick, let me start with you, and if the panelists
have any further comments on this, I would be interested to
hear it. This summer in Nevada, we actually experienced the
harmful impacts of jet fuel shortages, particularly at Reno-
Tahoe International Airport. And there were multiple factors
involved, including the increased volume of air travel and the
strained supplies at airports throughout the West. This
resulted in airlines limiting the number of passengers so that
they could fly on extra fuel rather than refueling locally.
So my question to you is, as commerce returns, what actions
is FERC taking to help reestablish normal access to fuel among
the different transportation sectors and then, what more can
Congress do to assist FERC in preventing future shortages?
Mr. Glick. Well, thank you very much for the question,
Senator. And so we did experience some issues this past summer
and correctly so in Reno. And the reason is by historically, in
terms of our regulation of liquid fuel pipelines, sometimes
when there's more demand than the supply in terms of capacity
on the pipeline, that pipeline capacity is allocated out based
on historic use, based on the previous year's use. And because
the airlines didn't have significant demand for jet fuel for
the previous year because of the pandemic, the airlines
actually got caught in a situation where they were allocated
less fuel than they had been in the past. As demand for flying
increased, especially in terms of certain airports, they ended
up short and they had to bring in jet fuel by truck and so on
and there weren't enough truckers and so on. So it was a
difficult issue.
I think this issue of historic use needs to be addressed. I
raised it as an issue at a technical conference we had earlier
in the year. I think we need a different approach to allocating
capacity because of the different anomalies, and you have my
commitment that we will take a look at that, and hopefully act
before next summer's demand peak.
Senator Cortez Masto. I appreciate that. Thank you so much.
And then, to the panel, as we are all aware, the drought in
the West is not letting up. If anything, it is getting worse.
It is going to be our norm. And as a result, the Energy
Information Administration (EIA) recently released a report
that found that U.S. electricity generation from hydropower is
expected to drop 14 percent this year compared to the year
2020. So from your perspective, how can FERC better account for
drought in future efforts to ensure grid resiliency and
sustainability? And I will open that up to the panel, if any
panelists have any comments on that.
Ms. Clements. I am happy to start, Senator.
Senator Cortez Masto. Thank you.
Ms. Clements. Thank you for the question.
The answer to that question is to plan--understanding that
the impacts of extreme weather events, the continuing excessive
heat to be expected now in the West, the impact of that heat
and that drought on our hydropower reserves, the answer is to
plan ahead to address that. I think it is really important that
we live in the nuance of the facts of the energy transition
which we find ourselves in the middle of. Variable energy
resources, like wind, solar, and other emerging technologies
are proven to be reliable resources, that is--real experience--
in normal operating conditions, SPP has 80 percent penetration
of wind and solar. It is this extreme weather change, the
impact that stresses the system in ways that we haven't had to
plan for in the past, that is the issue to be addressed. And
that's why, I think, this Advance Notice of Proposed Rulemaking
that the Commission has put forward to think about how we
better predict the resources that will be available will take
us safely through to the other side of the energy transition.
Senator Cortez Masto. Thank you. Any other comments?
Mr. Glick. I would just say, Senator, we have authority
over the reliability of the bulk power system and one of the
things I think we need to take a look at is requiring utilities
to plan for--as Commissioner Clements mentioned--to plan for
climate change. We cannot expect that the generation is always
going to be there, and it is not just hydropower capacity, it
is other power plants freezing during very cold weather or
malfunctioning because of very hot weather. And utilities need
to take that into account as they move forward.
Senator Cortez Masto. Thank you.
Commissioner Christie.
Mr. Christie. The question you asked, Senator, it
illustrates how absolutely important it is when you plan for
resource adequacy that you accurately document what the
capacity is you're likely to get from resources. And that's
been an issue in all the RTOs is--you cannot plan on getting
more actual capacity than is realistic. And that goes to why
planning--which is absolutely essential, you're right--has to
be accurate about the resources that you're going to expect to
get.
Senator Cortez Masto. Yes, thank you. I really appreciate
that. Thank you for being here.
Thank you, Mr. Chairman.
The Chairman. Thank you.
Senator Lankford.
Senator Lankford. Mr. Chairman, thank you. Thank you all,
for your continued service.
I want to be able to follow up on a conversation,
Commissioner Danly, that you brought up earlier about the
environmental impact statements versus the environmental
assessments. This has been a question from multiple different
individuals and groups within my state on trying to be able to
figure out the certainty of where things are going on that. Is
there something you need to be able to finish out in that
statement? You raised that earlier on that.
Mr. Danly. No, I think I made my point from before. I am
merely concerned that in some perhaps misbegotten desire to
ensure that our orders are legally durable, unnecessarily,
because basically, I think that we have been able to deal with
most of the alleged legal infirmities that have been raised by
my colleagues on our EAs, specifically as we have for years and
they've withstood every challenge in court by addressing those
comments in the order, right? The Record of Decision (ROD),
which is the consummation of the NEPA process in the case of
FERC is actually the initial order that we issue. And I do not
think that it is necessary to go through the process of
producing EISs that come to the same conclusion that the EA
did.
Senator Lankford. Right.
Mr. Danly. We can handle those comments.
Senator Lankford. Chairman Glick, this is an ongoing issue
as well, just the predictability of the process so that people,
when they are planning capital, know that they are actually
going to be able to do investment at a time based on what they
already received. How do you balance that out?
Mr. Glick. Absolutely, I think you hit on the key word--
``certainty.'' The D.C. Circuit has admonished the Commission
on three separate occasions just with regard to our examination
of greenhouse gas emissions. We actually didn't review those
emissions. We didn't review the significance of those emissions
and the court said all three times--``We're sending the case
back to FERC.'' It causes extra delay. We have seen that in a
bunch of other cases. You look at the Atlantic Coast Pipeline,
which is probably the poster child for this. This is a
different agency--the Interior Department. It got it wrong in
the previous Administration. The court sent it back, added
several years and extra billions of dollars on to the process--
--
Senator Lankford. So with that, are you assuming that all
orders in the future are going to be EIS statements? There
won't be EAs at all?
Mr. Glick. No, I think we still go forward with some EAs,
but if there was any question as to whether there is
significance of greenhouse gas emissions, the law requires us
to do an environmental impact statement instead of an EA.
Senator Lankford. So you think that is going to be closer
to the default then?
Mr. Glick. No, I think what we're going to do, hopefully
pursuant to this Notice of Inquiry process that's been
initiated, is set up a particular standard, below which a
certain number of emissions--and I do not know what that is--
obviously, all the commissioners have to agree on that. Below
which, I think projects can go forward with environmental
assessments, above which are significant, and then we're going
to need to consider other issues pursuant to an environmental
impact statement.
Senator Lankford. How will you handle social costs of
carbon scoring or will that fit into this?
Mr. Glick. Well, we're waiting for guidance from the CEQ
(Council on Environmental Quality) on that, but the court in
the Vecinos case that we just issued recently suggests that the
Commission needed to at least take a look at the social cost of
carbon in terms of assessing whether the greenhouse gas
emissions----
Senator Lankford. Clearly when you get into social costs of
carbon, you get into lots of different models from lots of
different places. The people that typically write the models
for social cost of carbon have a certain view as well of what
they are taking into account on that. As an independent body,
how are you going to be able to manage what is the right
scoring for social cost of carbon?
Mr. Glick. Well, there is a level of uncertainty, and the
Vecinos Court pointed that out recently, but we do actually
have to take that into account and we're waiting from guidance,
again, from CEQ. But as an independent agency, we're going to
have to make our own judgment pursuant to a majority vote of
the Commission.
Senator Lankford. So this is not an assumption that this is
going to come down from the Administration and hand you--
``Here's the way to be able to handle social costs of carbon?''
Mr. Glick. No, the Commission has historically tried to
follow CEQ guidance on NEPA reviews as much as we can, but no,
we have to make our own determination.
Senator Lankford. So Chairman Glick, let me just stick with
you. FERC trying to be able to issue the revised pipeline
certification policy statement--there has been some
conversation about this. When do you think that comes down?
Mr. Glick. We received a large number of comments for
reviewing it. I was disappointed, you know, we started this
process back under Chairman McIntyre several years ago and the
Commission never moved it forward. So we're trying to move it
forward now as quickly as we can. I am hoping within months,
but I do not have an exact timetable for you just yet.
Senator Lankford. Okay, thank you.
Mr. Christie, I want to be able to drill down on the issue
about large transmission lines. Obviously, you have dealt with
this a lot. I have brought up multiple times the TransWest
transmission line. There are lots of other ancillary issues
there, but they have been 14 years in process just to do the
permit and they have not put up a tower yet. There has been a
lot of push on having us at 100 percent renewable in the
generation field by 2035--14 years away from that. Is that a
realistic time period just based on the permitting process to
be able to transmit power from long distances and intermittent
sources?
Mr. Christie. Well, the problem, Senator, is with these
long-distance transmission lines that go over multiple states,
and I have sat on many transmission line cases and actually
voted for the longest transmission line in PJM today--the TrAIL
Line--Trans Allegheny Interstate Line. The fact is when you
cross five or six states with 300 or 400 miles of a 765-kV
line, they are going to have tremendous opposition. That's just
political reality. And so you're not going to get many of those
permitted and it is not because of any conspiracy, it is just
the political reality that people don't want--you're going to
have a tremendous political backlash. It is very hard to get
these interstate lines sited.
The important thing about transmission is this: if a
transmission line is needed, then it ought to be built. If it
is needed to serve reliability, then it ought to be built. And
I think, frankly, the people in each state are willing to
accept transmission lines. They are going to be controversial,
I can tell you. I have sat in high school gyms and been yelled
at by people that didn't want to look at a transmission line.
But if the people will accept--if they think that their state
regulators have done right by them, had a good record--but I
think, though, that politically, if you try to run a line
across six states, I think that it is going to be much harder
politically to get those sited and people are not going to
really accept the fact that a line like that is needed,
particularly if it is only going to benefit a special interest
group.
Senator Lankford. Great, thanks, and I will follow up with
questions for the record. Thank you.
Senator Cantwell [presiding]. Thank you.
The Chair had to run to another committee and so I am
helping and calling on myself, as I am next in the queue.
I do want to thank the Chairman of FERC for mentioning the
market manipulation authority and the advantages that that's
given and thank FERC for its uses over time. I do think it has
really helped in policing the market. As we discuss this larger
issue of transformation and where we need to go, I want to
point out that GAO did a 2021 report that said the impacts on
the grid will cost utilities and consumers billions without
more significant resiliency investment.
So doing nothing is going to cost us, and we see that all
the time. I mean, this research now that says electricity lines
sag in hotter temperatures and cause fires and the fact that we
could make them more intelligent than they are. The lack of
capacity caused lengthy interconnection queues to top 750
gigawatts in 2020. So there we are with basically congestion
that could be resolved. We know in Spokane, when we had this
heatwave, which was record heat for the Pacific Northwest, we
had the electricity, we just couldn't get it to the right spots
at the right places.
And so this is going to occur more and more. And what is
happening because of this is we are now having the increase in
electricity costs for consumers because we have not met these
demands or missed the rural economic development opportunities
or the job opportunities. I just, you know, come from a very,
very rich state reliant on electrification and it has paid the
bills over and over and over and over again. And so I am just a
big believer in electricity and the investments that we can
make that make our economy more robust. So we know we now have
a rapidly electrifying transportation sector. Ford made this
big announcement today, how they are going to go with even more
electric vehicles, which would mean roughly 25 percent more
electricity than we are producing today. So we know that this
is where we are going so we have to have a grid that is going
to get the job done for the economy of the future.
So I would like to discuss a couple of issues. One, this
notion of installing fiber on top of transmission towers. Not
only is it an affordable way to transmit mass-amounts of data,
which I think you need for that automobile sector or smart-grid
sector or application sector. I have often said this is like
the operating system of the future. And if we invent it and we
work on it, and I guarantee you--and it is basically driving
down cost and giving you more options--everybody will want it.
So to me, it is as unique as what Ben Franklin contributed. And
I hope that we will continue to lead in electrification
technology. But encased fiber, 40 feet in the air, surrounded
by high-voltage transmission lines--pretty secure against
physical attacks. So a great concept. But it also provides a
closed-loop network for cyber communications, which we also
know, given the Colonial Pipeline and everything else--this is
just unfair to say that we are going to have a simplistic
answer to cybersecurity when now utilities are being attacked
from state actors. These are sophisticated nation-actors taking
aggressive action toward us. Why? Because this is where the
money is. This is where the intimidation is. This is where the
economy of the future is. So you can do a lot of damage, really
simply.
And so I would like to--you know, there is a lot that
lighting up dark fiber and building out OPGW (Optical Ground
Wire) along our nation's transmission grid could do to improve
data needed to modernize the system and make our grid more
secure. So I would like to start. Do you, Mr. Chairman, agree
that expanding communication capacity and using the grid's
existing rights-of-way could help provide benefits for
cybersecurity, grid modernization, and high-speed internet? And
that is a grant/loan/cost-share EEI has basically talked about.
There are examples in the Chairman's state, his own state.
There are great examples of utilities and telcos working
together. I know in my state, some of the public utilities and
people are working together. They see the future of the grid
and they are trying to capture that. So what does FERC have?
What do we need to do to build out that capacity for the
future?
Mr. Glick. So Senator Cantwell, I agree with you
completely. I think this is the--fiber provides a significant
number of benefits in terms of use, like cybersecurity,
certainly bringing up broadband. But I want to point out one
other issue. You know, we talk about building transmission--we
need to build a lot of extra transmission--but we also need to
make our existing transmission grid more efficient. And one of
the ways we make it more efficient is operating the grid a
little more dynamically. And in order to do that we need a
significant amount of additional data--data points--as to where
the transmission lines are and are they sagging, are they, you
know, depending on weather changes and other changes to the
grid. And we're not going to be able to do that, to operate it
more efficiently and more dynamically without that particular
data. So it provides significant benefit to have that fiber-
optic capability as well.
Senator Cantwell. Thank you. I have even heard that people
say you will be able to hear fire on the lines if you had this
kind of system in place. And to me, if you could detect,
instead of what we have gone through in California where you
either have to preliminarily shut down for days and days in
advance of a big temperature burst or the after effect. To me,
having a smarter grid just to deal with fire, it would be a big
benefit.
Okay, Senator Marshall.
Senator Marshall. All right, thank you, Madam Chair, and
welcome to all of our guests today.
I just want to make sure you all are feeling the same pain
that Kansans are feeling from the economic cost of the February
winter events. I hope that you can feel the same pain that we
are going to feel for a decade. An average family home, like I
grew up in, three bedrooms, two baths, natural gas, probably
about $80, $90, $100 a month. That cost was $2,500 for
February. And what they are going to do is take that over the
next 10 years and let people pay off that debt--probably it
will double the average Kansas family's natural gas bill for
the next 10 years. And it feels like we are just piling on when
it comes to energy costs. We are already paying 40 percent more
at the gas pump and as the Chairman indicated earlier today,
the cost of natural gas has more than doubled since this
Administration has taken over. So certainly the cost of energy
is just through the roof.
Some small businesses in Kansas--Sugar Creek Beef Packing
typically pays about $24,000 a month and they got stuck with
$600,000 that month. So it went from $24,000 on average, you're
making a business plan, you get a $600,000 hickey. A homeless
shelter is Kansas usually paying about $2,000 a month. Their
bill for February was $48,000. This little city of Mulberry,
not to be confused with Mayberry, but the little city of
Mulberry typically pays about $2.50 a unit. They were charged
$330 a unit, a 13,000 percent increase--13,000 percent
increase. The city of Winfield, a municipality there, typically
has a monthly bill of $130,000 a month--$8 million--an $8
million surprise for them.
You know, the people of Kansas want to know what is their
Senator doing and FERC would be one of my resources. So I will
start with the Chairman and--kind of multiple questions here to
try to answer together. I think what the people of Kansas want
to know is who made the money? Who made all that money on that
increase? What has FERC done about it? Is there an
investigation underway and what would be a reasonable timeline
for the people of Kansas to know the truth about this? Was
there price gouging, and who made the money?
Mr. Glick. Well, thank you very much, Senator. At first, I
will say that the impacts were horrific and that's--we need to
think about these types of situations where there are shortages
and what happens in terms of prices and I want to start with
jurisdiction. We do not have jurisdiction over the price of the
sale of natural gas. Congress deregulated that a number of
years ago. I believe it would be helpful if Congress were to--
whether it give FERC or some other agency some sort of circuit-
breaker authority when there are extreme prices to impose some
sort of limitations at certain times. I think that would be
helpful.
Second, as you mentioned, we do have authority to guard
against the manipulation of both our electric markets and our
natural gas markets. We have entered into a number of inquiries
with regard to alleged manipulation that occurred during Winter
Storm Uri. Several of them--we found a number of anomalies.
Several of those particular anomalies, when we investigated
them, we moved them on to what we call our Investigations
Office. So we're moving forward and that takes a while,
unfortunately, because we have to go through a lot of data. We
haven't made any final determinations yet, but I can assure
you, to the extent that we do find that there's manipulation,
we will make sure that----
Senator Marshall. Who made the money and what is a
reasonable timeline?
Mr. Glick. I can get you a list of individual companies
that reportedly made a significant amount of money. In terms of
the timeline of the manipulation investigations, I do not have
a specific timetable for you, but we're moving as quickly as we
can.
Senator Marshall. Months? Years?
Mr. Glick. I am hoping months.
Senator Marshall. Yes. Mr. Christie, you have been on the
state end and the federal level. Now, who made some money in
these events? Is it the pipeline? Is it the people that are
selling the natural gas at the pump? You know, not specific
companies, but who benefits from this, a 13,000 percent
increase? Somebody got rich.
Mr. Christie. Well, as the Chairman said, the situation
from February is under investigation by our enforcement
division and so I do not want to comment on that investigation.
Your question about who makes the money--it could be traders,
it could be suppliers. It depends on the facts of the situation
and what happened in Kansas and Oklahoma and this past
February, of course, as the Chairman says, is under
investigation. I think a bigger issue, too, that needs to be
considered is background, as we go through this transition to a
different resource mix--lower carbon--gas has to be part of the
mix and that means gas supply has to be plentiful and gas
supply has to be transported. You have to transport a product
before you can use it.
And so that gets to the market availability of gas. But as
far as the manipulation of this intense shortage that we had in
February, that's definitely under investigation--needs to be
investigated to see whether there was manipulation that drove
those--that took advantage of that, a very tragic situation.
Senator Marshall. Thank you, Madam Chair. I yield back.
Senator Cantwell. Thank you.
Senator Hickenlooper.
Senator Hickenlooper. Thank you, Madam Chair, and thank all
of you for being here today but also for your service. Just as
Senator Marshall pointed out, you guys are right in the
crosshairs of a lot of the most difficult decisions that are
going to happen over these next few years.
I brought an audio-visual--really just a visual. It is out
of our National Renewable Energy Laboratory in Golden, Colorado
and shows basically the extent of our clean energy resources.
[The map referred to follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Hickenlooper. The blue is the wind. The yellow is
solar. And then the green--green being the green light--is
where you have both. As you can see, these are states that are
Democratic, Republican, really cover a large portion of the
country. I think this represents a unique opportunity to be
able to reap the economic and employment benefits of making
this work. But we only are able to make this work if we link
our resource supply to our energy demand. And obviously, a lot
of the questions you are all getting today are on this.
Chairman Glick, if Congress had the desire to enable more
transmission buildout, could the creation of a new federal
siting authority for transmission be an effective policy that
would help enable that goal?
Mr. Glick. So there are three general barriers to
transmission development in the U.S. One of them is siting. One
of them is cost allocation. The third one is planning. We have
jurisdiction over the last two. We do not have jurisdiction--
much jurisdiction--over siting. If Congress were to create some
sort of siting body, that would certainly have some benefits in
terms of pushing transmission forward. But I would say we also
have to address planning and cost allocation as well in order
to get it right.
Senator Hickenlooper. Right. I think we agree.
And while we are talking, Mr. Glick, the U.S. was able to
successfully take advantage of the innovations in hydraulic
fracturing, and this so-called gas revolution and part of this
was because of the federal siting authority in terms of gas
pipelines. Natural gas pipelines clearly propose different
environmental, human health, and aesthetic challenges than
transmission lines. Is it therefore appropriate for a
hypothetical transmission siting authority to potentially have
correspondingly different guardrails and protections for both
states and landowners that are existing gas authorities while
still maintaining its integrity enabling the buildout of new
transmission?
Mr. Glick. Well, thank you, Senator, for the question. I
think there is. I think there certainly are differences. There
are a lot of similarities in terms of siting the two
technologies as well. I would say, though, we need to learn
from the mistakes that the Commission has made in the past
about ignoring certain parties, not facilitating greater
participation in our proceedings, ignoring what's required
under NEPA. We need to do that, whether Congress does that or
the Commission does that itself in a new transmission siting
authority. I think we need to learn from that and do better the
next time.
Senator Hickenlooper. All right.
And Commissioner Christie, as a former state regulator,
what is your sense of this?
Mr. Christie. Thank you, Senator.
My sense is the states are not the reason that the lines
are not getting built. I know we hear a lot of rhetoric about
how the states are the barriers, they are the ones in the way.
I will tell you one of the first transmission line cases I am
aware of when I went on the Virginia Commission was a line that
ran from West Virginia down into Virginia. It was a 765-kV
large line. And it was delayed for almost two years and it
wasn't because of the state commissions. We approved it. West
Virginia approved it. It was delayed because of federal
agencies. There were three different federal agencies, Army
Corps, Forest Service, and there was one more--Fish and
Wildlife--and they were delayed for various reasons. It wasn't
the state commissions. And so I think the idea that, well, if
you just get the state commissions out of the way and create a
federal authority, you can just get all these lines built, I
don't think you change the political dynamic that--the reality
is, again, as I mentioned before, I have sat in high school
gyms and been yelled at by hundreds of people that didn't want
to look at a 500-kV line.
And so you're going to have that same dynamic even if you
go to federal siting. In fact, I think you're going to have
less political support for building those lines because they
can all blame the Washington people, right? It is harder to
blame your own state officials. And you're from Colorado--you
know, if the Colorado public utility commission approves the
line it is going to have a lot more credibility that if
somebody in Washington says build that line from Pueblo down to
Albuquerque.
Senator Hickenlooper. Right. Or from Wyoming out to
California. That's----
Mr. Christie. No, exactly.
Senator Hickenlooper [continuing]. A case in point.
So I would like to ask you, either Ms. Clements or Mr.
Danly, if you have any additional perspective or suggestions in
terms of how we can make these siting necessities more
efficient.
Ms. Clements. Thank you, Senator. There are political
realities to any kind of significant infrastructure investment,
whether that be on the gas side or the electric side on the
issues within our jurisdiction. And those political realities
will be different in all cases. The only way we succeed in
building out the transmission system, to integrate all the
resources that are trying to connect and provide customer
benefits to protect against the impacts of extreme weather and
the events that need that strengthening of our system, is to
get buy-in from the parties around the table, whatever that
line might be.
So it would be great to have other tools in our toolbox as
a Commission, but we can have all the tools in the world--if we
do not have buy-in that this is an important thing that the
country has to get done to maintain our leadership across the
world, frankly, going forward.
Senator Hickenlooper. Mr. Danly, you want to?
Mr. Danly. No, I have nothing to add to my colleagues on
this, thank you.
Senator Hickenlooper. Right, that would be the mythical
alignment of self-interest.
Ms. Clements. Yes.
Senator Cantwell. Thank you.
Senator Hickenlooper. Thank you, Madam Chair.
Senator Cantwell. Senator Daines.
Senator Daines. Thank you, Madam Chair.
Thanks for being here today. It is good to have you in the
room.
FERC is inherently an economic as well as safety regulator.
Your mission, as given by Congress and explicitly summed up on
your website is to, and I quote, ``To ensure economically
efficient, safe, reliable, and secure energy for consumers.''
This means that when you are looking at approvals for
pipelines, for hydro facilities, LNG terminals, your chief view
is to make sure the projects are safe and they economically
benefit the consumer. That is a really important mission. When
Montanans go to turn on their lights or heat their home in the
wintertime, they expect they are delivered affordable and
reliable energy. Unfortunately, Democrats in the U.S. House are
trying to pass their tax-and-spend bill that would include
provisions that would kill jobs and increase consumers' energy
costs. Their bill includes new methane taxes and fees as well
as increasing the royalties on oil and gas development. In
fact, the new methane tax alone is estimated to increase energy
prices for consumers by $100 a year. That would be a tough hit
for many of our low-income and fixed-income families across
Montana.
I have a question for all commissioners and that is this--
looking at it from FERC's economic viewpoint and knowing that
consumers use natural gas in their homes--in fact, 40 percent
of the U.S. electricity generation comes from natural gas--
would you agree that increases in taxes and fees on natural gas
production, transportation, and storage will increase consumer
energy prices and would have a negative impact on low-income
communities?
Do you agree with that? Let me ask this. Would anybody
disagree with that?
[No response.]
Senator Daines. So is the silence that you would agree they
will increase prices?
Mr. Danly. I think price increases would be inevitable,
yes.
Senator Daines. Right.
Mr. Glick. Senator, if I may?
Senator Daines. Yes.
Mr. Glick. We regulate the transportation of natural gas
but we obviously don't regulate natural gas, you know, produced
natural gas--the prices that are for sale. But I would say
certainly that if anybody's costs go up then the tax cost for
it will go up and the rates will likely go up, but it is not
necessarily a one-to-one measurement. It depends how
competitive the market is, what other opportunities there are
for other sources of energy, for instance, that might be less
expensive and so on. So it is a little bit difficult to say
that without knowing what the market is going to look like.
Ms. Clements. And sir, I would add that one thing that
comes to mind from the extreme weather event in February is the
fact that the pipelines performed pretty well. The issues that
happened were related to the weather--the lack of
weatherization or failures due to freezing at the well heads
and the production level and down on the generating side. And
so when you think about how to make investments that are
prudent, relative to customers, thinking about reliability
standards in other areas, some of which fall outside the
Commission's jurisdiction, are important.
Senator Daines. Okay. Well, I think as a consensus, you
raise taxes and fees of natural gas, ultimately the consumer is
going to end up, most likely, paying more.
Chairman Glick, many members of this Committee wrote you a
letter in April requesting the status of over a dozen natural
gas infrastructure project approvals and asking the Commission
to quickly process these important projects. As of today, how
many new natural gas pipelines are currently awaiting approval?
Mr. Glick. How many new proposals for natural gas--If I can
get you that for the record--I do not have an exact number, but
a significant number.
Senator Daines. Yes, what is your best estimate? I respect
the fact you want to get the exact number. What is your best
estimate?
Mr. Glick. I am going to guess in the neighborhood of 150
projects, including LNG projects and gas pipeline certificate
projects.
Senator Daines. One hundred and fifty. And we have heard
that approvals are taking longer and we are seeing what is
going on right now around the world. In fact, just in the last
48 hours--spikes in natural gas prices. This is related to the
fact that the wind stopped blowing in the UK. Do you think this
could, by delaying these projects, could this have an effect on
price?
Mr. Glick. So a couple points, Senator, thank you for the
question.
First of all, the situation in Europe and in Asia, yes,
there are certainly increased price pressures and a lot of that
has to do with their reliance on LNG. And the fact is that they
had a very hot summer and a very cold winter so they haven't
been storing natural gas. They have low supplies of natural gas
and high demand. It is obviously going to increase prices and
it did increase pretty dramatically. In the U.S., we have a
much different situation. We have our own. We're not heavily
reliant on LNG, except for in terms of exports, but not in
terms of imports to supply ourselves and so I do not think
you're going to see similar price pressures.
Senator Daines. Yes, it is just remarkable to me as I am
watching the dynamics here in Washington that we have
increasingly more Democrats that are on the bandwagon of
stopping more natural gas consumption, which I did not think we
would come to that point in this country, but I think it is a
real threat to reliable and affordable energy in America.
I want to switch gears here and talk about hydropower.
Commissioner Danly, in Montana, approximately half of our
electricity is generated from affordable, reliable, renewable
hydropower. I believe that we need to continue to expand
hydropower throughout Montana and the United States by
streamlining and expediting hydropower permitting. With my
support, Congress actually streamlined permitting for small
hydro projects but I believe there's a lot more we can do. The
question is, in what ways do you think FERC and Congress could
help expedite the approval and the development of new
hydropower facilities?
Mr. Danly. So thank you for the question, Senator.
Every chairman that I have worked either under or alongside
has wanted to make the hydro process more speedy and clear. One
of the problems, and I think it is necessary to set
expectations here, is that our authorities under Part I of the
FPA are pretty broad-ranging and the number of inputs that go
into a hydro project are huge. We have resource agencies. We
have various communities and stakeholders that need to have
input on it. We have the state and local authorities. And so
there is no doubt that there are efficiencies that can be
gained in the process, but they are complicated projects that
have tremendous potential for destruction of property and loss
of life. So deliberate hydro processes are probably called for.
The best way to improve it would probably be the inputs
from the federal agencies because often--I know, I am saying
that FERC does things faster implicitly here--but often federal
agency inputs are the problem. And streamlining that process to
get the single choke-point to get the information to the
resource agencies could help a great deal.
Senator Daines. Thank you very much.
Senator Cantwell. Senator King.
Senator King. Well, I cannot resist, because you suggested
one of my favorite mottoes of business, which is you always
want to have one throat to choke.
[Laughter.]
Senator King. And what that means is somebody needs to be
responsible. So I appreciate your comment. It is a life
principle that I have lived by for some time.
Mr. Chairman, first, I apologize for being late. We were
having another hearing on Afghanistan in the Armed Services
Committee. We have artificial intelligence, but also an
inability to schedule Senate hearings so that there aren't
conflicts.
I am gravely concerned about the cybersecurity of our
pipeline system. And as you all know, the pipeline system is
not really under your purview explicitly and yet, it is really,
in my view, part of the grid. In New England, over 60 percent
of our electricity comes from natural gas--all of which comes
through the pipeline. So if there is a compromise, a cyber-
compromise of the natural gas pipeline system, our electric
grid is down. And so I would like to ask the Chair and other
members, if they are interested, how do we deal with this
issue? I have met with the pipeline industry. They are taking
steps on this, which I appreciate, but I always follow
President Reagan's admonition--``Trust, but verify.'' And I am
not sure we have sufficient verification of the cybersecurity
of the pipeline system.
Any of you that want to comment, but I will start with the
Chair.
Mr. Glick. Thank you, Senator and I want to start by saying
I very much agree with your statement. The natural gas sector
and the electric sector are so heavily reliant on each other
for reliability purposes. And on the electric sector, as we
know, we have mandatory reliability standards, and that's not
necessarily, you know----
Senator King. But that is my point.
Mr. Glick. Yes.
Senator King. You have great standards on the grid side.
Mr. Glick. Right.
Senator King. But not on the pipeline side and yet, they
are----
Mr. Glick. Exactly, exactly. And as Senator Cantwell and
you, Senator King, and others have been leading this effort for
a number of years pointing out that the TSA has authority over
pipeline cybersecurity authority and not FERC, not the
Department of Energy. Former Commissioner Chatterjee and I
actually wrote an Op-ed about this, because it is a serious
issue, and I think TSA, to their credit, at least now is
actually considering----
Senator King. So what should we do? Do we need to change
the law?
Mr. Glick. I think we need to do two things. I think, first
of all, TSA needs to move forward with their mandatory
standards, but even more so--I think I said this earlier--we
need to consider mandatory reliability standards for the
natural gas pipeline industry, and that includes cybersecurity,
but other standards as well, because we saw what happened in
Texas. When there are not similar standards on the electric and
gas side, we see some of the issues that occur. And I think
Congress at least needs to consider whether TSA is the
appropriate agency, whether there's another agency that could
do a better job in terms of imposing mandatory cybersecurity
and reliability standards in the pipeline industry.
Senator King. Could you supply this Committee with your
recommendation to help guide our deliberations on that subject?
Mr. Glick. Be glad to do so, Senator.
Senator King. I think this is an absolutely urgent
question. Any other members of the Commission wish to comment?
Mr. Danly. Senator, I think that when it comes to something
like cybersecurity, FERC is probably not the ideal agency to
take the lead on something that requires nimbleness and
immediate reaction. The threats that are developed in
cybersecurity----
Senator King. You are suggesting that the U.S. Government
should--is nimble and----
Mr. Danly. Well, I mean, just because they are nimbler than
five rate-makers, I mean, it is a comparative that I am using
here.
Senator King. Yes.
Mr. Danly. So that strikes me as being something that would
be better for an executive agency like the Department of
Energy, specifically when it comes to this subject. We have an
Office of Energy Infrastructure Security that constantly deals
with various jurisdictional entities, does best practices. Of
course on the gas side, none of that is mandatory. But I just
question whether FERC itself would be the best agency to
oversee cybersecurity directly.
Senator King. Do you agree though that there should be
greater oversight and standards for the pipeline system?
Mr. Danly. Yes, I do.
Senator King. Thank you.
Thank you, Ms. Chairman. I yield.
Senator Cantwell. Thank you.
Senator Cassidy.
Senator Cassidy. Thank you.
Mr. Christie, earlier you mentioned, in response I think to
a question from Mr. Lankford, that it is difficult to get folks
to agree to permitting when they perceive that the line being
permitted is for special interest. Can you elaborate? Who would
be the special interest that somebody in Arkansas may perceive
as the excuse for a transmission line?
Mr. Christie. Well, I think obviously, developers--
generation developers, transmission developers--and I am not
impugning anybody's motives, but the fact is if you build a
transmission line--essentially a high-voltage line, like a 765-
kV, which is a very--you have high towers, it goes--especially
if they are greenfield--those are going to be extremely
controversial and hundreds, even thousands of people are going
to be opposed to those. Getting those built--and it is
essential to build them--if they are needed for reliability, we
absolutely need to build them. But the people who are naturally
opposed to those very intrusive facilities, I think, are going
to be much more willing to accept that construction if they
know, number one----
Senator Cassidy. Well, let me ask you, because you said
that earlier.
Mr. Christie. Yes.
Senator Cassidy. But I am guessing--my perception, correct
me if I am wrong--if you have wind in the panhandle of Texas
and Oklahoma and you need to transmit it to Atlanta, the people
in Arkansas are going to be wondering--or the people in North
Louisiana are going to be wondering, why is it coming across my
state, tearing up forests, wetlands, et cetera? Is that a
correct analysis of who are the players involved?
Mr. Christie. Well, without speaking to an individual line,
I think you're right about the people in the middle between,
you know, the Alpha and the Omega of the line if it is going to
run from Oklahoma or West or North Texas to Atlanta. People in
Louisiana, Mississippi, and Alabama are going to wonder why a
765-kV is being driven through their state. That's just the
reality of----
Senator Cassidy. Believe me, I get that.
Mr. Glick, you had spoken in your testimony of trying to
address the growing threat of extreme weather. My state has
been impacted by that with multiple major transmission lines
collapsed. What is FERC doing that people in my state will look
at and say, ``My gosh, that's what FERC's doing to prevent us
from having the consequences of extreme weather?''
Mr. Glick. So I just want to point out, first of all--thank
you for the question, Senator--I want to point out first of all
that we have jurisdiction over the bulk power system and not
necessarily the distribution system.
Senator Cassidy. I get that.
Mr. Glick. And you understand that was where most of the
issues were, but we do have authority again over the bulk power
system and one of the things that we're doing is we're looking
at the reliability standards that utilities currently operate
under. What we learned from Winter Storm Uri in Texas and
elsewhere is that there are significant gaps in terms of what
utilities do and what they should be doing to ensure
reliability, and given the fact that we're going to have
increased occurrences of extreme weather, we need to ensure
through our reliability standards that utilities plan for
extreme weather in terms of enhancing their grid, making the
transmission towers more resilient against 140 mile an hour
storms that aren't necessarily----
Senator Cassidy. So is that, I am sorry, is that FERC or is
that my local public service commission that is going to
require those enhanced transmission lines?
Mr. Glick. It depends on the transmission line. It is a
little bit complicated, but some transmission facilities are
considered part of the bulk power system--our responsibility--
some more of the local distribution----
Senator Cassidy. So those ones that are made like an
erector set, which I am told have a stronger wind profile, and
after Hurricane Laura and the more recent one, Ida, were
collapsed, as opposed to the ones that look like a thin stick.
Mr. Glick. Yes.
Senator Cassidy. Those stood up. These collapsed.
Mr. Glick. Yes.
Senator Cassidy. Is that you or my public service
commission that would mandate an evaluation of whether or not
those should be replaced?
Mr. Glick. Primarily, your public service commission.
Obviously, it is a case-by-case basis, but primarily your
public service commission.
Senator Cassidy. Okay.
Then next, when you do the environmental impact of gas, I
will ask this to you, Mr. Chairman. There is evidence and there
is a report out of a national lab here in the United States
that both on a 20-year and 100-year horizon, gas exported from
the United States to Europe contributes significantly less to
global greenhouse gas emissions than does Russian gas. Is this
taken into account as this analysis is made of the
environmental impact of our gas production upstream?
Mr. Glick. So the way the law is structured with regard to
our approvals of LNG facilities, the Department of Energy is
actually required to make the determination as to whether the
export is in the public interest. And in doing so, they do an
environmental analysis to determine whether the export of
natural gas produces environmental benefits or adverse impacts.
We are only required under the law to examine the construction
and operation of the project. The emissions associated with the
project----
Senator Cassidy. And one more thing, really quickly. I was
told last night by somebody that does a pipeline that he can
convert his compressors from gas to electric and he could
decrease his fugitive gas emissions, but it would take him so
long to get the permit through FERC because he is constructing
this now originally out of gas power compressors. It would take
him so long to get that changed through FERC that it is not
worth it, that he will tolerate the increased emissions
precisely because of the regulatory delay. Now, is that an
accurate kind of depiction of what he would confront should he
ask that request to be made?
Mr. Glick. Yes, well, first of all, I think it is helpful
to make those requests. We consider those types of requests all
the time. I think, actually, if you look at our record, and
I'll be glad to get you information for the record, I do not
think that the time we take to approve particular certificate
applications is much longer than they have been previously. We
try to do it as quickly as possible. We have a lot of requests
we have to go through under the law. We're supposed to go
through various environmental analyses, but we actually try to
move through it as quickly as possible. And even if I do not
agree with the case in order, I still bring it up for a vote
because I think that's a requirement and I will continue to do
so.
Senator Cassidy. But how long would it take him to get that
request through, on average, now?
Mr. Glick. I have to get you that information for the
record. But again, I think if you look at it based on previous
chairs and our current approach, I don't think it's any
different.
Senator Cassidy. Thank you, all.
Senator Cantwell. Thank you.
I am aware that a vote has started. I think maybe more than
15 minutes ago. So we need to move fast. Senator King, did you
have something you wanted to say quickly? Because Senator
Murkowski has been waiting very, very patiently.
Senator King. Oh. I'm sorry.
Senator Cantwell. So we have two members who have yet to
ask questions. Yes, Senator, I thought maybe you had a
question.
Senator King. Building transmission lines is going be a
huge issue. We have a referendum in Maine right now on a
project bringing hydropower from Canada to Massachusetts and
people in Maine are saying ``Why should we have the corridor?''
So you are absolutely right about that as a looming, I think,
major issue.
Senator Cantwell. Senator Murkowski.
Senator Murkowski. Major issue. Love the fact that we have
four of the FERC Commissioners with us and we don't have
protests. We don't have people screaming out in the halls. This
is the calm, new FERC. So congratulations to you.
But as Senator King has pointed out--many, many issues that
generate their own level of controversy. I have been waiting
patiently, Madam Chairman. And the beautiful thing is that I
can hear the responses to the many good questions that
colleagues have asked. Senator Daines raised the issue of hydro
and the issues that we face with the FERC in advancing our
hydro projects. About 20 percent of Alaska's electricity on
average comes from hydropower, but so much of ours is really
small. I was out in the Eagle River Valley just last Saturday.
There is a small project that one guy with a vision is
developing. Juniper Creek, 300-kW, came online. It is not much,
but you can imagine the frustration of so many that are trying
to get these really small projects online, recognizing that you
have these multiple agencies that you have to work through.
And so I would love to figure out a way that we can get
beyond, and whether it is the efficiency issues, the multiple
layers. Mr. Danly, those were your suggestions. I don't know if
anybody else has anything that they can provide for the good of
the order here on smaller scale, really smaller scale hydro,
and what more we might be able to do to help advance some of
these projects.
Mr. Glick.
Mr. Glick. Thank you very much, Senator.
So first of all, I want to say I agree wholeheartedly with
what Commissioner Danly said earlier that a lot of the issues
associated with the speed, the length of time it takes to move
hydro license projects is due a lot to other agencies'
involvements. But I would say that, you know, pursuant to
legislation that you all enacted a couple of years ago, we do
have a pilot project with regard to pumped storage.
Senator Murkowski. Right.
Mr. Glick. We're dealing with a pilot project with regard
to developing projects at 900-power dams to try to expedite the
process. And the problem is, we haven't received too many
applications yet. And we want to work with the hydro industry
to do that. But I would also think that with regard to smaller
projects, we need to consider, maybe, additional pilot projects
to try to expedite the process as much as we can at FERC and
try to work with our other agencies like the Interior
Department and NIST and so on and try to figure out how we can
break the logjam.
Senator Murkowski. Well, I like that idea and I am sure
that we can provide you with some potential pilots.
The issue of cybersecurity that has been raised by a
couple--again, this is something that we are very keyed in on
but again, when you have really small utilities, we all know
that we want greater oversight, we know that there need to be
standards, but sometimes with particularly your smaller
entities, they do not have the up-front capital that is
available. They cannot make these investments. And so, how do
we address this? We have a measure, Senator King and I, along
with the Chairman and Senator Risch, of this PROTECT Act that
provides incentives for utilities to make the upgrades. Your
comments on what more we can be doing when it comes to the
smaller utilities and really--the very same threat that the big
guys are facing--we face it down here and it has a level of
impact that is also just really debilitating. So comments to
that?
Chairman.
Mr. Glick. So Senator, again, and I appreciate the
question. I spent quite a bit of time speaking with your, I
think, member of your state public service commission about
this very issue. I know it is a very important issue. I think
we need to revise the way we and NERC together look at
cybersecurity threats. For instance, we had these high-value
facilities and low-impact facilities and so on and we have
learned through the solar/wind situation and so on that that's
not necessarily the right metric because low-impact
facilities--a foreign entity can get into a low-impact facility
and then infiltrate a higher impact facility associated with
that.
I think we need to take a look at where the threats are,
where the threats are most likely to occur, and try to work our
standards in a way that really focuses more on that and less on
these categories that I do not think work anymore. And I know
it is a big issue with smaller utilities. And I agree with you
100 percent that we also need to figure out a way to help these
smaller utilities fund investments because investments aren't
going to go down. They are going to increase singly, but they
are going to increase as time goes on.
Senator Murkowski. And to penalize them when they do not
have the capital up front--it is not that they do not want to,
it is just that it is really challenging.
One last quick question. The Alaska Gasline pipeline--FERC
is very, very familiar with this project, having had it in
front of it for years. Of course, we were pleased to see the
project approved by the FERC last year. But throughout that, a
lot of questions were highlighted. So I guess the last question
for you, Chairman Glick, is, you said in 2019 that, ``FERC is
obligated to consider greenhouse gas emissions and impacts to
environmental justice communities.'' And so, as you think about
that in relation to the Alaska project, I guess the basic
question is, what are environment justice communities and do
you think that it is just from an environmental or an economic
perspective for these rural--very rural, very remote
communities to continue to rely on their fuel source right now,
which is very expensive diesel-powered generation? How does
that work?
Mr. Glick. So thank you very much, Senator.
First of all, we rely on EPA's regulations to determine
what an environmental justice community is and isn't. With
regard to your second question, we are required--whether it be
an LNG facility or a natural gas pipeline--we're required to
determine whether the project is essentially in the public
interest. We look at the benefits of the project against the
potential adverse impacts to species or the environment or
whatever else you're taking a look at. And those particular
issues--about increased access to cleaner fuel, economic
development in the local community--those are the very type of
issues that we consider on the benefit side of the ledger when
we do a public interest analysis.
Senator Murkowski. Thank you. Thank you, Madam Chairman.
Senator Cantwell. Thank you.
Senator Hoeven.
Senator Hoeven. Thank you, Acting Chairman Cantwell.
For Commissioners Christie and Danly, what immediate
actions should the Commission take to make sure that the
regional grid operators are retaining sufficient baseload
generating capacity, particularly during events that create
stress on the grid?
Mr. Danly. I'm sorry, Senator. Whom did you specify to take
that action, just the states or the Commission?
Senator Hoeven. The Commission.
Mr. Danly. Okay, I mean, the Commission's powers on the
subject of generation are limited. The Federal Power Act
restricts to the states and leaves that residual power to
choose generation to them. Our powers relate to ratemaking, and
we have to ensure, as I said in my opening comments, that the
price signals in our markets properly compensate generators to
retain the ones that already exist and attract new investment
for new generation. But we do not directly select the
generators.
Senator Hoeven. So it is of no interest to you, grid
resiliency is totally up to the states, it is of no interest to
you. There is nothing you should do about it.
Mr. Danly. So Senator Hoeven, you and I have had this
extended colloquy and you and I both agree that there is a
problem here. I think that if we march ahead with the change in
the composition of the generation fleet, as we have been, as it
looks like we're doing, I think that resilience and reliability
will be very badly impaired. And I think there will be
catastrophic consequences.
Senator Hoeven. I like that answer a lot better.
Mr. Danly. But that doesn't mean that I believe that FERC
has the power, sir.
Senator Hoeven. Well, I got that on the first question, or
the first part of your answer.
Mr. Danly. Yes.
Senator Hoeven. I got that. The second part, I think is
right on the money. Thank you for that, Commissioner.
Mr. Danly. Yes, Senator.
Senator Hoeven. Commissioner Christie.
Mr. Christie. Well, Senator, if a state is not in an RTO,
of course, it is up to the state. The resource adequacy is up
to the state and even in the RTO, it is up to the state. Now,
Mr. Danly is right. In those RTOs that set rules for where
their capacity markets are going to run, those markets need to
be non-discriminatory, non-preferential, and they also have to
make sure that the planning is done to make sure that they have
sufficient dispatchable resources to meet the need. You cannot
do it all with intermittent, but it is going to be a mix. And
as we go through the transition, it is going to be a mix of
both. But the RTOs have a much bigger role in that than,
obviously, states that are not in RTOs.
Senator Hoeven. Certainly, the RTO has a role, no question
about it, but you would also share the concern that we have
grid resiliency for efforts, for times it puts stress on the
grid, for the well-being of state, region, and country.
Wouldn't you agree with that?
Mr. Christie. Well, absolutely, I mean reliability means--
here's what it really means: it means the lights are on 24
hours a day, 7 days a week, 365 days a year. Anything less than
that is insufficient. That's not what Americans expect. And so,
we have to have a generation mix that can produce that 24/7/365
standard.
Senator Hoeven. Right on.
Also for you two, should developers expect to complete a
full environmental impact statement for new projects moving
forward?
Mr. Christie. You mean a transmission developer?
Senator Hoeven. Yes.
Mr. Christie. You know, I do not think we have had a case
where that came up where the NEPA required a transmission
developer. So I really don't want to comment on that since we
haven't had a--and here's the thing, Senator--a transmission
line is going to be permitted at the state level.
Senator Hoeven. Well, it is my understanding that the
Chairman now is requiring environmental impacts for a project
to move forward.
Mr. Christie. Well, that's for gas. I think that, you know,
gas is under our jurisdiction. I think----
Senator Hoeven. Okay, well, I'm sorry, I should have said,
excuse me--for gas.
Mr. Christie. Yes, transmission is under state permitting,
you know.
Senator Hoeven. Yes, I'm sorry. For gas.
Mr. Christie. Well, that gets back to what the Natural Gas
Act requires and also what NEPA requires and that's an
ongoing----
Senator Hoeven. Should the FERC require an EIS for a gas
pipeline?
Mr. Christie. I think FERC ought to require what the law
requires. Now, whether an EIS is required in every case, I
cannot give you a definitive answer on that because it is
still, frankly, under----
Senator Hoeven. So you are saying it is not up to FERC--
they shouldn't require an EIS for a gas pipeline.
Mr. Christie. I cannot say in every case that it is
required because that's something that's under litigation right
now.
Senator Hoeven. Thank you.
Commissioner Danly.
Mr. Danly. What is required under the implementing regs for
NEPA is that if there is a significant impact, then an EIS is
required, but an EA can do the initial review to determine the
severity of the impact. And so, in conducting all NEPA under
the CEQ regs, there is a rule of reason that compels the action
of the agency and you do as little work as you possibly can to
get the fastest answer from government you can get.
Senator Hoeven. Thank you, Commissioner. I appreciate that
answer.
Chairman Glick.
Mr. Glick. I think Commissioner Danly is correct in terms
of how we characterize the law. I think the problem is that the
courts keep on telling us that we keep on getting it wrong and
we're not expediting things, what we're doing is delaying
things. Because every time we're supposed to perform an EIS and
we prepare an EA, we just ignore climate change altogether, the
courts say you got it wrong. You have to do it all over again.
That costs billions of dollars and extra time for these
pipeline projects. And I think certainty is much more important
than trying to decide whether we can do something quickly and
do it on the cheap. Every time we do it on the cheap, the
courts tell us we got it wrong.
Senator Hoeven. In that context then, I mean, it takes much
longer now to permit these gas pipeline projects than it does
to build them. Can you help expedite that? Because we have
situations where it is in everybody's interest, including
better environmental stewardship, to build a pipeline. We have
to be able to do it.
Mr. Glick. And we are attempting to expedite the process,
Senator, and thank you for the question. You know, I think one
of the things--we had a discussion about this several months
ago--we were trying to prepare supplemental environmental
impact statements where we see--as opposed to drafting a whole
new big environmental impact statement on everything, we move
forward as quickly as we can. Some of these projects are moving
forward and we'll be considering them very shortly. But again,
if we cut corners, all the courts are going to tell us to do is
go back to the drawing board.
Senator Hoeven. But it is your intent to try to get these
things done as--I mean, properly--but as expeditiously as we
can?
Mr. Glick. Everything before us as expeditiously as
possible. That's my motto.
Senator Hoeven. Thank you, I appreciate it.
Mr. Danly. Senator, can I say one thing on this subject,
which is that there is a difference between a failure by an
agency to properly conduct a NEPA review, which would be in the
EA or the EIS, and a problem from the agency from an
Administrative Procedure Act (APA) standpoint to properly
explain the decisions that it made, partially informed by that
NEPA document. In almost all of the cases where FERC has been,
in one way or another, remanded, those cases are not because of
failures in the NEPA document, they are failures of reasoning
under the Administrative Procedure Act. It is basically the
court saying that you did not sufficiently explain the reason
why you made this choice, connecting the choice made to the
facts found. And so saying that we can fix that problem of APA
violations by having different or more robust NEPA review is
simply not the reality of the remands we have gotten from the
courts. And I feel it is necessary to tell the Committee that.
Thank you.
Senator Hoeven. Thank you, Commissioner Danly. Also, I have
some questions for Commissioner Clements, but I'll submit the
rest for the record in the interest of time, Mr. Chairman, and
I do thank all of you for your responses. I appreciate it.
Senator Barrasso [presiding]. Thank you, Senator Hoeven.
Just another number of quick questions.
Commissioner Danly, in my understanding, both private and
public investors build and operate electricity and natural gas
projects in accordance with a whole series of contracts, and
you mentioned that earlier. These contracts determine how,
whether, and when a project can be built, when it can be turned
on, and continue to operate. So if Congress enacts this so-
called Clean Electricity Performance Program, as House
Democrats have proposed, what is the likely impact on existing
contracts?
Mr. Danly. Thank you, Senator.
So you're asking about the current contractual
relationships, right?
Senator Barrasso. Yes.
Mr. Danly. I alluded earlier to what I thought the
consequences of this legislation would be for the markets, but
for the entire rest of the country that isn't in markets,
that's governed by a series of very complicated, interacting,
bilateral and multilateral contracts, usually that are entered
into for very long periods of time--decades. If the revenues
that people can expect if they meet the performance standards
or the penalties that they can expect if they fail to meet them
then get applied to those contract holders, you are going to
find that a huge number of parties and counterparties will
either be unable to perform under the contract terms and then
suffer the penalties specified, or they may actually find that
rational breach of those contracts is in their business
interests and then they will intentionally not fulfill those
contracts because they have separate revenue streams that will
be more lucrative to them. That is the ineluctable affect of
the market forces that will be created.
Senator Barrasso. So then, it is fair to say that this
legislation, which the Democrats are proposing in the House,
would result in a tidal wave of disputes, lawsuits, and
ultimately hurt American consumers and the economy?
Mr. Danly. As I said before, nobody has a crystal ball, but
it seems like that can be expected. The point is, if the
legislation goes into effect as written, the consequences are
going to be profound, they are going to be disruptive, and at
the moment, they are basically incalculable. And I think it is
worth pointing out--and I do not want to make this sound like a
plea for mercy--but even though we have virtually no role in
implementing any of what's in that bill, FERC, as a practical
matter, is going to be the forum in which all of those disputes
are going to be adjudicated when it comes to our jurisdictional
contracts. I mean, there will be residual state contract
issues, of course, but FERC is going to have to do a lot of the
cleanup for what I think are the inevitable consequences of
this.
Senator Barrasso. Thank you, Mr. Danly.
Chairman Glick, I agree with you that safeguarding the
reliability of the electric grid should be one of FERC's top
priorities. Enabling power plants to have access to plentiful
supplies of natural gas is essential to electric reliability.
So if FERC fails to permit new natural gas pipelines or
upgrades of existing pipelines in a timely and a predictable
manner, won't that put electric reliability at risk?
Mr. Glick. Thank you for the question, Senator Barrasso. So
first of all, I think that you can't answer the question
generally because you have to take these issues on a case-by-
case basis, but there are several cases in which the courts,
most recently on the Spiro case, in which the court told us a
project is not needed. That's one of our responsibilities. FERC
is supposed to ensure that there's sufficient natural gas and
sufficient natural gas transportation capacity around the
country, but one of the things the statute tells us, natural
gas tells us is--is the project needed?
And so first of all, that's what we have to determine--
whether there's a need for the project, and not based on some
sort of contract between affiliates, whether there's true need
for the project--and in that case, I will, on a case-by-case
basis, determine that if there is, in fact, evidence in the
record to suggest that additional natural gas capacity is
needed for reliability reasons, personally, I will conclude
that the project is needed.
Senator Barrasso. So Mr. Danly, recent events in California
and Texas have shown that reliable, affordable natural gas is
essential for families to heat and power their homes, their
state, local governments to provide public services, and
Americans to operate their businesses. Are you concerned that
the Commission's failure to act on pending applications for
natural gas pipeline certificates will put reliable, affordable
prices for electricity and natural gas services at risk?
Mr. Danly. Yes, Senator. And it is not only the fact that
there is a delay in a handful of the cases pending, it is also
the uncertainty created by the recent issuances by the
Commission.
Senator Barrasso. And then, Chairman Glick, again, I have a
series of just general statements for you that do not pertain
to any particular matter before you, but please just let me
know if you agree or disagree.
Private sector investors, who put up their own money and
expect a reasonable return, finance most long-term energy
infrastructure in the U.S. Agree or disagree?
Mr. Glick. Agree.
Senator Barrasso. Okay.
And the Commission's obligation is to balance the needs and
interests of investors and the public. Agree or disagree?
Mr. Glick. Agree.
Senator Barrasso. Okay.
Investors need regulatory certainty. Agree or disagree?
Mr. Glick. Wholeheartedly agree.
Senator Barrasso. And the Commission introduces uncertainty
for investors if it calls into question its final orders,
especially final orders which have been upheld on appeal.
Mr. Glick. If orders have been upheld on appeal that's one
thing. I think when the Commission--the Commission hasn't ever
done that. But if the courts question what the Commission has
done and say it is not sufficient, the Commission didn't do
something sufficiently, whether it be a NEPA review or a need
finding--we're actually discouraging investors from investing
in the market because they have no certainty. That's why we
need to do it right the first time.
Senator Barrasso. And final question, Mr. Chairman.
Commissioner Danly, as you noted in your prepared remarks,
the U.S. Supreme Court has said that the principal purpose of
the Natural Gas Act is to encourage, ``The orderly development
of plentiful supplies of electricity and natural gas at
reasonable prices.'' The court has described the same purpose
for the Federal Power Act. In your view, is the Commission
doing all that it can to fulfill the purpose of these two
statutes, and if not, what more should the Commission be doing?
Mr. Danly. I think, Senator, that the Commission is failing
to properly oversee our markets to produce the correct signals
that will incentivize the arrival of much-needed generation in
various regions, and then also, I think that we are creating a
climate of uncertainty that makes it impossible to rationally
deploy capital to build out the natural gas infrastructure that
the electric system and people need.
Senator Barrasso. Thank you, Mr. Chairman. No further
questions.
The Chairman [presiding]. Thank you, Senator.
My final two questions will be to whoever would want to
respond on these, okay? I believe that all of you agree that
more regional and inter-regional transmission lines will be
needed to facilitate clean energy and to improve the grid's
resilience and reliability. The recently noticed rulemaking on
transmission planning confirms that, but yet FERC recently
reversed course and has proposed sunsetting after three years
the return on investment--the adder transmission owners can
access as an incentive to join their regional transmission
organizations, the RTOs.
So the incentive adder was directed by Congress as part of
the Energy Policy Act of 2005 as a compromise short of
mandating RTO membership. That was the sweetener. Joining an
RTO remains voluntary, but I know that PJM and other grid
operators are concerned that eliminating this sweetener will
mean transmission owners may elect not to join or not to stay
in the RTO, which could significantly reduce the reliability
benefits that RTOs can provide and do provide. Does anyone have
that same concern that I have?
Yes sir. Chairman.
Mr. Glick. Mr. Chairman, if I can. So I think you're
exactly correct. The statute, which was enacted in 2005, tells
FERC to give incentives to transmission owners that join RTOs
and I think there are significant benefits with RTOs and
consumer savings, reliability, resilience, all the rest. But
the incentive is only to join, and if we provide incentive, 20
years later, if we just continue to provide the same 50-basis-
point, 100-basis-point adder, 20 years later, that no longer
becomes an incentive. We're also supposed to--you mentioned
earlier, affordability. We have to guard and ensure that the
consumers are adequately protected. I think if Congress wanted
to amend the law and say they should provide an incentive for
staying in an RTO and being in an RTO, that's one thing. But I
think the way the statute is written currently, we have no
choice but to cut off the incentive at some point.
Mr. Danly. So Senator Manchin, the language of the statute
is to give incentives to utilities ``that join.'' That is a
demonstrative. It is not a ``to join.'' And further, the
statute specifies that we're supposed to do as much as we can,
I mean, it is very broadly written----
The Chairman. So hold on. You're saying ``that join'' or
``to join?''
Mr. Danly. ``That join.'' It says ``that join''----
The Chairman. So that's all new. That's not existing.
That's new.
Mr. Danly. No, no, no. It means those that join should be
given the incentive. And so, having this idea that it is
appropriate to limit it, I do not understand. I dissented
vigorously on this. If you want to have RTO membership--and
what you, Congress, want to do is encourage it--it is worth
keeping in mind two things: It is not only an inducement for
people to join, but it is also an inducement for people to
remain. And as long as the utilities have the privilege of
exiting RTOs, the limit on the RTO adder is going to encourage
an earlier exit, all things being equal. So I think it is very
bad for the project of trying to encourage utilities to----
The Chairman. Do you think the language of the code needs
to be changed?
Ms. Clements. Chairman Manchin, as a practical aspect of
this, we have two responsibilities under the Federal Power Act.
One is to retain reliability and one is to protect customers.
The Chairman. Right.
Ms. Clements. We should be incenting things that are hard
to do. So that when we are building out our system, we're
protecting customers in the process. As you described this RTO
adder, a sweetener, it is not hard to join an RTO. In fact,
RTOs have been saving customers billions of dollars year after
year after year for several decades now. We should be thinking
about what are the things that are really hard to get done--
what are the things that we need to help utilities do that
require incentives? Once you have been in an RTO past some
number of years, it is not hard to keep saving customers money.
So what I think the important piece to talk about is how we get
the hard things done.
The Chairman. Is there more incentive for them to move on?
Is it more profitable for a transmission owner to move on to
independence, basically, for profit reasons?
Ms. Clements. I wouldn't vouch to speak for any particular
utility, but my guess would be no, and I think, certainly, the
utility commissions and governors of states where those RTOs or
utilities live might have something to say about that.
The Chairman. Commissioner Christie.
Mr. Christie. I would say this, Mr. Chairman, on the issue
on whether the law actually requires an RTO adder as opposed to
an incentive, I would agree with the Chairman on this. I do not
think it mandates an RTO adder, specifically. I think it is
incentives, generally. And I would say this, there's not a
utility in America in an RTO that is not there because either
(A) the state mandated it or (B) the utility went to their
state regulators and asked to join, as our utilities in
Virginia asked to join PJM.
So they made a decision to join the RTO and the problem I
have got with it, with an adder, and I am not going to prejudge
the case because it is actually still open, but an ROE is the
cost of capital. It is the market cost of equity. And so an
adder, by definition, is above the market cost of equity, and
who pays that? Consumers pay that. And you know, in your
opening remarks, you talked about the need to be sensitive to
consumers and I take that very seriously. And I think that that
is implicated here when you talk about an adder to an ROE
because consumers are going to pay it.
The Chairman. Do you all have any consensus right now? You
do not, but do you have a way to have a consensus around a
language change, code change, things of that sort that would
keep people in the RTO? I understand three of you do not
believe transmission owners are going to leave the RTO?
Mr. Christie. Do not believe what, Senator?
The Chairman. That transmission owners are going to exit.
They are not going to exit? Okay. Do you all three believe that
that won't happen because there's too much incentive and
benefits to the consumers?
Mr. Danly. I do not agree with my colleagues. I think that
there is a greater, ever-growing chance that RTOs will unravel
and that the transmission owners will leave. I am not saying
that's going to happen imminently----
The Chairman. Yes.
Mr. Danly [continuing]. But I think it is getting closer.
The Chairman. Let's use Texas as the model of what we
should be looking not to do, right? We all agree on that? That
Texas being not----
Mr. Christie. I wouldn't structure my energy market the way
Texas does, no, sir.
The Chairman. No, I know that, but I am saying basically
what happened with Texas with no reliability, no backup, not
hooked in, no oversight--maybe we could have caught that, maybe
we could've stopped that and prevented it.
Ms. Clements. This increasing new normal of extreme weather
that hits all of our states.
The Chairman. Sure.
Ms. Clements. The idea of not being interconnected to your
neighboring systems----
The Chairman. Right.
Ms. Clements [continuing]. Through coordinated integration
that both allows for the sharing of resources that saves
customers money and protects customers in these dangerous
situations, is a really compelling reason to stay connected.
The Chairman. Commissioner Danly, then I would ask you,
what would the incentive need to be then if all these risks are
out there and if the sweetener goes away?
Mr. Danly. Well, what would be the incentive for them to
leave?
The Chairman. Right.
Mr. Danly. It is that the burdens of being a transmission
owner within an RTO are simply too high to justify remaining.
They would have to pay a whole lot of money to leave. This we
have seen before when utilities have left RTOs. But if RTOs are
so great, and everybody wants to be part of them, why are there
entire regions of the country that have simply refused to even
consider the idea? I think we can see in front of us
empirically that the promises of RTOs make sense for some
regions and not for others. And to the extent to which Congress
wishes to incentivize utilities to join them, it has to
actually take action to, otherwise it would have happened.
Mr. Glick. Mr. Chairman, if I may.
We only give the incentive to actual utilities that
voluntarily join an RTO. If a state tells them to join an RTO,
they are not eligible for the incentive, pursuant to court
decision. And all the utilities that are required to----
The Chairman. When I was still Governor, I would tell my
utilities that I am not mandating you, just go ahead and do it
and get the money.
[Laughter.]
Mr. Glick. But in some states, like Ohio, for instance,
where the state requires you to participate in RTO----
The Chairman. Sure.
Mr. Glick [continuing]. You do not see anyone leaving, I
mean, basically----
The Chairman. Well, they can't if you mandate them.
Mr. Glick. Well, they can't, but they also talk about all
the benefits they get from participating in the RTO.
The Chairman. Sure.
Mr. Glick. And I do not think we'd see anyone leaving.
The Chairman. It is a good discussion. And I can understand
that your discussions could be lively. That is good. Maybe we
need a fifth one here, huh, real quick?
Mr. Glick. Absolutely.
The Chairman. Let me just thank you all. You all have been
most professional and I appreciate it and I think most
amicable. And I think there is a good collegial mix here. It
really is, and that is good.
Mr. Danly, I know that you are kind of on the fringes--on
the other side--and that is good, too. We need--and I mean
that--trust me, I know how you feel.
[Laughter.]
The Chairman. So I am saying that with reverence.
Mr. Danly. I appreciate that. Thank you.
The Chairman. But the bottom line is we have to find
consensus and move forward. And I am concerned about the clean
energy standard. I am not asking you to comment on it, I am
telling you the concerns I have about paying utilities to do
what I think they are going to do anyway. I looked at the
transitions going on now and what has happened since 2000 to
2020--we have transitioned to a completely different delivery
system and we did not pay the utilities to do it.
If they are going to do anything with utilities and
transmission, I know a little bit about transmission, there is
an awful lot of money to be made in transmission, probably more
money in transmission than there is in generation. And with
that being said, if you want to build a line, you better share
a little bit of the revenue. Do not tell me that ``everyone is
stopping you,'' because I put in a procedure called Kilowatt
Mile so we would share with the counties or the municipalities
the line went through. That takes care of all the problems.
Everybody benefits in that.
But for new lines, I said, I will give you a loan. The
Federal Government should give a loan to go out in the desert
for wind, solar, whatever it may be, until the time when that's
going to end up being profitable. I am taking all the risk away
on the front end, but when it is interconnected and starts
making money then the Treasury should get its money back. That
is the only thing I have said. They want to give it just
strictly as a grant up front, and that, to me, makes no sense
whatsoever. And I just cannot, for the life of me, keep writing
checks from our Treasury to publicly traded companies that have
shareholders that are basically benefiting from the investments
we are making with no return to the taxpayers. That is the
biggest problem I have.
So I will be calling on you all to help me through this. If
it is there and the customers are demanding it, then
transmission lines will get built. I think, Mr. Christie, you
made this statement, and I agree wholeheartedly, that if we pay
utilities incentives to basically change their portfolio by
2030, reliability will be the loser. Reliability could be the
big loser because we are moving faster than we should and I
guarantee you, the utilities will take every dime you want to
give them, but they will not commit and be held accountable for
reliability. And then they are going to have to buy it
somewhere and the consumer is going to pay. That is my problem.
That is my big problem. And in my state, Mr. Christie, you hit
it. What are we going to do? Ninety-three percent reliant on
coal? I have said this--if a coal plant does not have
scrubbers, low NOX boilers, bag houses for mercury,
they shouldn't be operating. That technology is available.
Until we can do carbon capture and until we find out a way to
have carbon utilization through some type of technology that we
come up with that makes it feasible, it makes it very
difficult. But there are not that many states left that are so
reliant on coal, like mine, I do not believe, are there? You
all would know that better. PJM?
Mr. Christie. West Virginia has the highest percentage of
coal----
The Chairman. That's what I am saying. So our transition is
going to be different, but I can tell you, the transition is
going to happen and people in West Virginia realize that. Just
do not leave us behind. There has to be something. We can do
something.
So I am trying to get the legislature in West Virginia to
change their code so we can build nuclear. I have the perfect
platform for nuclear, basically where the old coal-fired plant
was. Transmission and connectivity are there and we cannot even
use the site for nuclear yet. So we have all got to get
together, but you all can be tremendously helpful. You all have
an extreme amount of knowledge on this and I think you have the
desire, all of you seem to have that passion and desire. I see
it coming out when everybody wants to jump up and that is all
good. That is really good. And we hope we can get you another
FERC nominee as quickly as possible. There will be five of you;
that will be a full, working FERC.
So with that being said, I want to thank you all again, I
appreciate it very much, and our members will have until close
of business tomorrow to submit additional questions for the
record.
The Committee stands adjourned.
[Whereupon, at 12:19 p.m., the Committee was adjourned.]
APPENDIX MATERIAL SUBMITTED
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