The Future of The Grid: Proposals For Reforming National Transmission Policy

THE FUTURE OF THE GRID: PROPOSALS FOR
REFORMING NATIONAL TRANSMISSION POLICY
HEARING
BEFORE THE
SUBCOMMITTEE ON ENERGY AND ENVIRONMENT

OF THE
COMMITTEE ON ENERGY AND

COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
JUNE 12, 2009
Serial No. 11148
(
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
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COMMITTEE ON ENERGY AND COMMERCE

HENRY A. WAXMAN, California, Chairman
JOE BARTON, Texas
JOHN D. DINGELL, Michigan
Ranking Member
Chairman Emeritus
RALPH M. HALL, Texas
EDWARD J. MARKEY, Massachusetts
FRED UPTON, Michigan
RICK BOUCHER, Virginia
CLIFF STEARNS, Florida
FRANK PALLONE, JR., New Jersey
BART GORDON, Tennessee
NATHAN DEAL, Georgia
BOBBY L. RUSH, Illinois
ED WHITFIELD, Kentucky
ANNA G. ESHOO, California
JOHN SHIMKUS, Illinois
BART STUPAK, Michigan
JOHN B. SHADEGG, Arizona
ELIOT L. ENGEL, New York
ROY BLUNT, Missouri
GENE GREEN, Texas
STEVE BUYER, Indiana
DIANA DEGETTE, Colorado
GEORGE RADANOVICH, California
Vice Chairman
JOSEPH R. PITTS, Pennsylvania
LOIS CAPPS, California
MARY BONO MACK, California
MICHAEL F. DOYLE, Pennsylvania
GREG WALDEN, Oregon
JANE HARMAN, California
LEE TERRY, Nebraska
TOM ALLEN, Maine
MIKE ROGERS, Michigan
JANICE D. SCHAKOWSKY, Illinois
SUE WILKINS MYRICK, North Carolina
CHARLES A. GONZALEZ, Texas
JOHN SULLIVAN, Oklahoma
JAY INSLEE, Washington
TIM MURPHY, Pennsylvania
TAMMY BALDWIN, Wisconsin
MICHAEL C. BURGESS, Texas
MIKE ROSS, Arkansas
MARSHA BLACKBURN, Tennessee
ANTHONY D. WEINER, New York
PHIL GINGREY, Georgia
JIM MATHESON, Utah
STEVE SCALISE, Louisiana
G.K. BUTTERFIELD, North Carolina
CHARLIE MELANCON, Louisiana
JOHN BARROW, Georgia
BARON P. HILL, Indiana
DORIS O. MATSUI, California
DONNA CHRISTENSEN, Virgin Islands
KATHY CASTOR, Florida
JOHN P. SARBANES, Maryland
CHRISTOPHER S. MURPHY, Connecticut
ZACHARY T. SPACE, Ohio
JERRY MCNERNEY, California
BETTY SUTTON, Ohio
BRUCE BRALEY, Iowa
PETER WELCH, Vermont
(II)
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SUBCOMMITTEE
ON
ENERGY
AND
ENVIRONMENT
EDWARD J. MARKEY, Massachusetts, Chairman

MICHAEL F. DOYLE, Pennsylvania
DENNIS HASTERT, Illinois
G.K. BUTTERFIELD, North Carolina
Ranking Member
CHARLIE MELANCON, Louisiana
RALPH M. HALL, Texas
BARON HILL, Indiana
FRED UPTON, Michigan
DORIS O. MATSUI, California
ED WHITFIELD, Kentucky
JERRY MCNERNEY, California
JOHN SHIMKUS, Illinois
PETER WELCH, Vermont
HEATHER WILSON, New Mexico
JOHN D. DINGELL, Michigan
JOHN B. SHADEGG, Arizona
RICK BOUCHER, Virginia
CHARLES W. CHIP PICKERING,
FRANK PALLONE, New Jersey
Mississippi
ELIOT ENGEL, New York
STEVE BUYER, Indiana
GENE GREEN, Texas
GREG WALDEN, Oregon
LOIS CAPPS, California
SUE WILKINS MYRICK, North Carolina
JANE HARMAN, California
JOHN SULLIVAN, Oklahoma
CHARLES A. GONZALEZ, Texas
MICHAEL C. BURGESS, Texas
TAMMY BALDWIN, Wisconsin
MIKE ROSS, Arkansas
JIM MATHESON, Utah
JOHN BARROW, Georgia
(III)
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CONTENTS
Page
Hon. Edward J. Markey, a Representative in Congress from the Commonwealth of Massachussetts, opening statement ...................................................
Hon. Fred Upton, a Representative in Congress from the State of Michigan,
opening statement ................................................................................................
Hon. Jay Inslee, a Representative in Congress from the State of Washington,
Hon. Joe Barton, a Representative in Congress from the State of Texas,
Hon. Tammy Baldwin, a Representative in Congress from the State of Wisconsin, opening statement ...................................................................................
Hon. Joseph R. Pitts, a Representative in Congress from the Commonwealth
of Pennsylvania, opening statement ...................................................................
Hon. Steve Scalise, a Representative in Congress from the State of Louisiana,
Hon. G.K. Butterfield, a Representative in Congress from the State of North
Carolina, opening statement ...............................................................................
Hon. Jane Harman, a Representative in Congress from the State of California, opening statement ....................................................................................
Hon. Gene Green, a Representative in Congress from the State of Texas,
Hon. Frank Pallone, Jr., a Representative in Congress from the State of
New Jersey, opening statement ..........................................................................
1
3
6
7
9
10
11
12
13
13
14
WITNESSES
Jon Wellinghoff, Chairman, Federal Energy Regulatory Commission ................
Prepared statement ..........................................................................................
David C. Coen, First Vice President, National Association of Regulatory Utility Commissioners on Behalf of NARUC ............................................................
Lauren L. Azar, Commissioner, Wisconsin Public Service Commission .............
Paul J. Hibbard, Chairman, Massachusetts Department of Public Utilities ......
Richard Halvey, Energy Program Director, Western Governors Association ....
Ralph Izzo, Chairman and CEO, Public Service Enterprise Group ....................
James Nipper, Senior Vice President, American Public Power Association .......
Glenn English, CEO, National Rural Electric Cooperative Association .............
Reid Detchon, Executive Director, Energy Future Coalition ...............................
Joseph Welch, President and CEO, ITC Holdings Corporation ...........................
Chris Miller, President, Piedmont Environmental Council .................................
David Joos, CEO, CMS Energy Corporation .........................................................
15
18
26
28
47
50
63
65
73
75
118
121
123
126
144
147
155
157
173
175
212
214
229
231
SUBMITTED MATERIAL
Letters of June 11, 2009 from FERC to Mr. Markey, submitted by Ms.
Baldwin .................................................................................................................
(V)
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THE FUTURE OF THE GRID: PROPOSALS FOR

REFORMING
NATIONAL
TRANSMISSION
POLICY
FRIDAY, JUNE 12, 2009
HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON ENERGY AND ENVIRONMENT,
COMMITTEE ON ENERGY AND COMMERCE,
Washington, DC.
The subcommittee met, pursuant to call, at 10:24 a.m., in Room
2123, Rayburn House Office Building, Hon. Edward J. Markey
[chairman of the subcommittee] presiding.
Present: Representatives Markey, Inslee, Butterfield, McNerney,
Welch, Pallone, Green, Capps, Harman, Baldwin, Matheson, Barrow, Waxman (ex officio), Upton, Whitfield, Pitts, Scalise and Barton (ex officio).
Staff Present: Matt Weiner, Legislative Clerk; John Jimison,
Senior Counsel, Energy; John Beauvais, Counsel; Jeff Baran, Counsel; Melissa Bez, Professional Staff Member; Mtichell Smiley, Special Assistant; Caren Auchman, Communications Associate; Andrea
Spring, Minority Professional Staff; Mary Neumayr, Minority
Counsel; Peter Kielty, Minority Legislative Analyst; and Amanda
Mertens Campbell, Minority Counsel.
OPENING STATEMENT OF HON. EDWARD J. MARKEY, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH
OF MASSACHUSETTS
Mr. MARKEY. Welcome, ladies and gentlemen, to the subcommittee on energy and environment on this very, very important
hearing on the future of the grid and the proposals for reforming
the National Transmission Policy. There is no more central issue
to resolve here than this question.
Three weeks ago, the Energy and Commerce Committee passed
the American Clean Energy and Security Act of 2009. This landmark legislation on which the House will soon vote will revolutionize our Nations energy policy, creating millions of clean energy
jobs, saving consumers billions of dollars in energy costs, and
unleashing trillions in new investment.
The 21st Century grid will play a central role in this revolution.
Wheeling the countrys vast wind solar and geothermal resources
to market. Enabling the electrification of our transportation system
and multiplying energy productivity through smart-grid technologies.
The Waxman-Markey bill recognizes this role by establishing a
new framework to plan the grid of the future. We task the Federal
Energy Regulatory Commission with establishing national grid
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planning principles which it will use to support and coordinate regional planning processes across the country.
Within 3 years, the commission must report back to Congress on
the results of this effort together with recommendations for further
congressional action if necessary. Some believe we should go further by substantially expanding Federal authority to plan and site
new transmission lines. That includes overriding State decisions to
reject proposed lines and using Federal eminent domain authority
if necessary. I think we need to look closely and skeptically whether such a step is warranted at this juncture.
I urge caution for three reasons. First, if it aint broke, dont fix
it. As several of our witness emphasize, there are a number of innovative and promising bottom-up planning processes now underway from New England to the Midwest to the West. We should
give those processes time to succeed.
Moreover, as Commissioner Azars testimony emphasizes, one of
the greatest obstacles to developing the grid of the future is not a
lack of Federal authority but rather uncertainty as to what energy
policy that grid must serve. By establishing a national renewable
electricity standard, a firm cap on carbon pollution, and efficiency
programs that will dramatically curb growth in electricity demand,
the Waxman-Markey bill will provide this certainty needed to
guide private, State and regional development of the transmission
system of tomorrow.
Second, look before you leap. Transmission is amongst the most
complex and controversial aspect of energy policy. Todays hearing
is literally the first hearing in this committee in this Congress or
the last Congress on transmission. We cannot afford to take a
ready-fire-aim approach in this area.
Further there appears to be little common grounds amongst core
stakeholders. To give just one example, we invited the Edison Electric Institute, which represents investor-owned utilities that own
most of the Nations transmission system, to testify today. EEI cordially declined, in part because it was unable to agree on a witness
that could represent the disparate views of its membership. The
testimony before us confirms that it is very tough to find agreement in this area.
And third, to a man with a hammer, everything looks like a nail.
Precipitous action could result in a policy that is ill-suited to address the problems at hand and could lead to perverse consequences. For example, the Western Governors Association will
testify today that, Western Governors see little benefit in preempting State transmission line permitting processes, because,
the major hurdle for permitting transmission in the West has been
securing permits from Federal agencies.
In other words, it is the Federal Government, not the States that
is the problem from the perspective of the Western Governors.
Several witnesses in the East emphasize that Federal planning
or siting authority could actually undermine regional efforts to developing renewable resources and encourage expansion of high carbon generation in the Midwest.
We need to take time, take a careful look at this and see what
really makes sense. Todays hearing is an excellent beginning to
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this process. We have a great line up of witness, and I look forward
to their testimony.
I would like now to turn to a matter related to the subject of todays hearing which has been brought to my attention. After I
agreed last month to hold an oversight hearing on the subject of
electricity transmission and the question of whether to adopt additional new legislation in this area in addition to the regional transmission planning language that is already in the Waxman-Markey
bill, I directed my staff to obtain additional information about two
important provisions of the 2005 Energy Policy Act that also dealt
with transmission and which are directly relevant to todays hearing.
As part of that effort, the subcommittee sent two letters to the
Federal Energy Regulatory Commission. The first letter, dated
June 3rd, dealt with the impact of the 2005 bills incentive rate
provisions on the construction of new transmission around the
country. That letter was sent out last week.
The second letter, dated June 9th, dealt with the impact of 2005
bills repeal of the Public Utility Holding Company Act on the construction of new transmission. That letter was sent out Tuesday.
Neither of these letters were related in any way to the allocation
hearing that the subcommittee held on Tuesday on MidAmerican
Holding CEO David Sokols testimony before the subcommittee.
They were being drafted prior to our even being aware that Mr.
Sokol would be invited by the minority to be a witness at the Tuesday hearing. Both letters were aimed at helping the subcommittee
better understand the impact of previously adopted transmission
legislation.
The PUHCA letter contained 8 questions, two of which reference
Mr. Sokols earlier testimony before Congress in support of PUHCA
repeal. Mr. Sokol was one of the leading proponents of repealing
PUHCA, which is why his prior testimony was relevant to the
issue.
However, these questions were in no way seeking to target Mr.
Sokol or to intimidate him in any way for his appearance before
the subcommittee earlier this week.
The day following the release of the PUHCA letter, I heard from
Representative Barton that minority members of the subcommittee
had concerns about the questions relating to Mr. Sokol and the
timing of the letters release. In response to those concerns, I made
it clear that there was no attempt or intent to intimidate any witness.
In addition, to make it absolutely clear that this was the case,
I sent a second letter to FERC clarifying that the FERC should respond to the subcommittees questions generically and not just look
at MidAmerican specifically.
I shared a draft of that letter with Mr. Bartons staff and Mr.
Terrys staff on Wednesday night immediately after they brought
this issue to my attention. I responded immediately to their concerns.
And finally, I reached out to Mr. Sokol to inform him of what my
intent was, to clear up the misunderstanding, and to make it absolutely clear that neither he nor his company are the focus of the
subcommittees inquiry.
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So I want to say to Mr. Barton, to Mr. Upton and to the members
on the other side of the aisle publicly what I have already said to
them privately, that I would never seek to intimidate or retaliate
against a person from having to come in and testify before this subcommittee. I value hearing the perspectives that all of our witnesses bring to the issues that we are considering.
I regret any misunderstanding or misimpressions that the contents of the letter or its timing may have raised. That is why I immediately after learning of the minoritys concerns prepared a second letter to the FERC to direct them to respond generically to the
questions rather than focusing on MidAmerican. That is also why
I contacted Mr. Sokol directly, to let him know of my intentions
and to express my apologies, which I have done.
Joe and Fred and the other members, I just want to let you know
that I have the personal greatest regard for you and that in no way
do I want to leave any impression at any time that we would conduct hearings that were not fair and open to all of the members
of this subcommittee or to the witnesses who appear before this
committee. And I just want to make that very clear, very publicly
at this hearing.
I now turn to recognize the ranking member of the subcommittee
the gentleman from Michigan, Mr. Upton.
OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN
Mr. UPTON. Thank you, Mr. Chairman.

And I, like many members on this side, do value your friendship.
I realize we are adversaries, good adversaries, on a number of
fronts, and we have been together on a number of fronts.
And I know, as we have talked about this privately that it is very
important that there is no intention to intimidate or pressure witnesses to testify in something that they perhaps dont believe in.
And I for one appreciate your statement this morning.
I also appreciate you calling for the hearing today on National
Transmission Policy. The electricity grid is of vital importance to
our Nation. We all know that.
However, it is an area that is often overlooked, as evidenced by
the fact that there were only minor mention of transmission in the
Waxman-Markey climate bill and the fact that today, weeks after
the climate bill has been passed out of committee, we are having
our first really big transmission hearing.
We do have a long and distinguished panel today. I would like
to thank all of our witness for joining us.
I would like to give special recognition to the heads of two Michigan-based companies, Dave Joos and Joe Welch. I know that ITC
and CMS do not exactly see eye to eye on this issue, but I know
that they have Michigans interest at heart. And I would hope that
we could all work together on this issue as we move forward.
This committee passed a sizable renewable electricity mandate
without any consideration to the question of getting the renewable
electricity to population centers. The strongest winds are concentrated in low population areas. The strongest sun exposure is
found in low population areas as well. Existing transmission lines
are centered in areas of high population, and there are inadequate
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high voltage lines to the areas with the most abundant sources of
renewable power.
If we are going to be serious about renewable power, we have to
revamp the grid. And to properly do so, we will have to block the
lawsuits from environmental groups that have increased costs and
blocked much-needed transparency lines.
But lets put it in perspective. According to DOE, it would cost
$60 billion, yes B as in big, in new transmission lines to reach the
20 percent mark for wind power. Al Gores lofty goal of fossil fuel
electricity would cost perhaps as much as $400 billion in transmission lines. And if we are serious, we must block the lawsuits
and make real investments in the needed infrastructure.
A good example of these lawsuits is found in California. The proposed Sunrise Powerlink in southern California will connect the region to existing and proposed renewable energy sources, whether
they be wind, solar or geothermal, located east of San Diego. Energy experts estimate that there is perhaps as much as 2000
megawatts of geothermal power and tens of thousands of
megawatts in solar available in the area. However, without new
power lines, the clean, green energy could not be delivered to its
customers.
Studies show that the line will reduce greenhouse gas emissions
by as much as 1.3 million tons. Yet various environmental groups,
like the Sierra Club, are fighting it, well documented in publications like the Wall Street Journal. The areas that are best for
wind, power and solar are often in these very remote areas, away
from population centers.
Transmission lines are needed to get electricity from wind and
solar farms to consumers. And I feel it is a mistake to legislate a
costly renewable mandate without addressing the transmission
issue.
With all of that said, we must also recognize that many renewable energy sources are unreliable and can bring instability to the
grid. Transmission lines cannot distinguish between the green electrons or the brown ones. So we just cant be planning a transmission system for renewables. We have to take all sources into account, wind solar, nuclear, hydro, coal, clean coal and everything
else. Changes need to be made to the current regulatory system.
FERC can provide a backstop, but we not completely abandon the
State and local process.
We must also be mindful of the cost. Renewable power is not
free. Transmission lines are not free.
Consumers deserve to know what the real costs are of any policy
and understand exactly what they are going to pay for and what
they are getting for their hard-earned money. Consumers will already be saddled with rate increases, and these costs will only go
up under the Waxman-Markey bill. Transmission policy shouldnt
add to those burdens.
I yield back.
Mr. MARKEY. The gentlemans time has expired.
The Chair recognizes the gentleman from Washington State, Mr.
Inslee.
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OPENING STATEMENT OF HON. JAY INSLEE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WASHINGTON
Mr. INSLEE. Thank you, Mr. Chair, and thanks both for holding
this hearing and your great work in assembling the Waxman-Markey bill.
I think that bill is tremendous mosaic of using multiple tools to
solve our energy problems. But it really is missing one critical
piece, and that is the piece that will help us spur the development
truly of a 21st Century national grid. And I think we have to recognize that today, despite tremendous efforts of people in this field,
we have a grid fit for the 19th or 20th Century, but not for the new
challenges of the new American energy policy.
And the way I would categorize that new challenge is that we
used to be able to move our energy components around by truck
and rail. We could move coal to the site we wanted to generate
electricity. We could move natural gas to the site where we wanted
to generate electricity or heat, but we cannot ship photons on rail
cars, nor can we ship wind by packages by truck. They have to be
generatedthe electricity has to be generated in fact where they
are located.
Our existing policy on the grid is satisfactory for the first scenario but not the second. So I have now been at this for some time
hoping to advance our ability to plan, site and finance a new grid
system that is fit for the 21st Century. I have introduced H.R. 4059
and made some progress in the bill and hope to make further
progress in the hopes to achieve this goal in this energy bill.
I want to make note of several things. Number one, our grid system is doing good work today. I am not sure you could say the grid
is broken, but you can have a horse-and-buggy system that is working but not fit for todays new world. And we know that it will not
be fit for the challenges of tomorrow. So while it may not be broken, it is certainly not fit for what we are now asking it to do. And
it is my belief that if we are going to meet our appropriate and necessary 15 percent renewable energy goal, we will need to allow
transmission to move forward.
Second, I would point out that the reason we are here today and
the reason we need to act today is that this is the only vehicle moving out of town, and it will be the last chance and only chance to
really move forward on this effort, and we cant move forward with
a renewable electrical standard without a transmission piece.
So I think Lincolns old quote fits, as our case is new, so should
we think anew. And thinking anew means Federal backstop authority in the event that regional governments are unable to site
these necessary facilities. And the reason national backstop authority is necessary is twofold.
Number one, our grid has always been designed to respond to
local and regional interests, but with the challenges of global
warming and national security needs, we have a national need for
a national grid.
And second, we know that, while all of our constituents love electricity, virtually none of them love electrical lines. There is a time
and a place where Uncle Sam needs to step in to overcome at times
the reluctance of all of us to bear with some of the onerous aspects
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of moving electricity. It is simply necessary, and we know we cannot wait decades to move these electrons.
I am excited about hearing the testimony.
Mr. Chair, thank you, and I hope we get this job done in this bill.
Thank you.
The Chair recognizes the gentleman from Kentucky, Mr. WhitfieldI am sorry, the ranking member of the full committee the
gentleman from Texas, Mr. Barton.
OPENING STATEMENT OF HON. JOE BARTON, A

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS
Mr. BARTON. Thank you, Mr. Chairman.

Since we have an oversight hearing on upstairs, it helps me if
I could give my statement.
I am going to give a double statement, kind of a bifurcated statement. I will talk a little bit about this hearing and then I want to
comment on your personal comments, because I think we need to
elaborate on that a little bit.
But first, on the hearing before us, it is a scary thing when I
agree with Jay Inslee, but I do agree with Congressman Inslee. His
amendment in the committee on the climate change bill was directed, as I recall, towards green energy or clean energy for transmission. But once you have generated that electricity, whether it
is by wind, solar or even coal power, electricity is electricity, and
it is going to go on the same wires. And the wires dont know what
the source of the generation was.
So we do need to update our transmission grid. We started that
in the Energy Policy Act of 2005. And I thought we had bipartisan
support, and it became law. The Fourth Circuit has ruled recently
that parts of EPAct are not as they should be. I disagree with that
court ruling, and I hope that the Supreme Court will overturn it.
But in any event, I agree with Congressman Inslee that we do
need to modernize our grid. We do need to give FERC more authority, in my opinion, to make decisions in interstate commerce when
the States cant do it themselves. We tried to do that in EPAct. If
that is not the right way to do it, perhaps we can try it a little bit
different way.
In the Natural Gas Act, we give the right of eminent domain to
the FERC. Now, I dont know that we need to go that far for electricity transmission. There is, in all probability, a middle ground
where the States and the FERC can work together.
But in any event, Mr. Chairman, this is a good hearing, and
hopefully out of this will come some consensus on both sides of the
aisle about what to do legislatively.
Now let me comment on what you said, Mr. Chairman Markey,
when you were talking about the letter of June the 9th and the
comments towards the CEO of MidAmerican, David Sokol.
First of all, I am very appreciative of what you have said, that
it was not intended to intimidate Mr. Sokol and that you have
called him and taken steps to make sure that to correct what you
say was a misunderstanding. To say that publicly means a lot, and
I appreciate you doing that.
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But let me elaborate on why people like myself have expressed
concerns. You cant make the best public policy if you dont have
witnesses come before this committee and give their full honest assessment of whatever the issue is that is before this committee.
If we adopt a standard that the only witnesses that are going to
be received are witnesses that testify to the side of the question
that the majority is supporting, you dont really have a full and fair
debate on the issue.
And in the instance that you alluded to, David Sokol represented
a point of view that was contrary to the majoritys position on the
climate change legislation and the allocation system that is a part
of that, the allowance system. That is a side that needs to be presented to the American people.
Now it may be serendipity, and it may be inadvertent, but within
2 hours of him giving that testimony, a letter was sent under your
signature to the chairman of the Federal Energy Regulatory Commission, who is sitting before us today, asking six generic questions
and two specific questions about David Sokol and his company.
And the chairman of the FERC was asked to respond in writing
to you by close of business yesterday. How can that not be perceived as an attempt to intimidate? Testified in the morning adverse to the position of the majority, received a letter that was sent
in the afternoon to the chairman of the regulatory commission with
jurisdiction over your industry and your company asking probing
questions about the conduct and business decisions of your company.
Now, I take you at your word when you say that that was not
intended and you are beginning to take steps to correct it, but what
upsets myself and the others on the minority is that we do not accept that we can develop the mechanism where we allow any Member, majority or minority, to threaten, to intimidate, to abuse the
power of the office that we are given by the people of our congressional districts on behalf of the people of the United States of
America.
Now you are already taking steps to correct the perception that
perhaps intimidation was being attempted, and I commend you for
that. You are going to get a letter from myself and Mr. Upton and
other members on the minority later today asking that we consider
those discussions to make sure that we make it absolutely clear
that any citizen of this country that comes before this committee
can testify to whatever they believe is the truth as they know it
without fear of intimidation or retribution.
And I think Members on both sides of the aisle will share that
goal. If we are absolutely certain that that is the way it is going
to be, then nothing else will be said.
But again, you and I have been friends for 25 years, and I hope
we are going to be friends for another 25 if we both live that long.
I have nothing but the upmost personal and professional respect
for you and your conduct. And I am honored to sit on the same
committee as you. I have sat in that chair as chairman of this subcommittee, so I think we can get this worked out. But it is a serious issue, and it deserves serious consideration. And to your credit,
you are giving it that serious consideration.
With that, Mr. Chairman, I yield back.
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Mr. MARKEY. I thank the gentleman very much. And I thank the
gentleman for his words.
The Chair now turns and recognizes the gentleman from California, Mr. McNerney.
Mr. MCNERNEY. Thank you, Mr. Chairman.
I want to thank you for holding this hearing. This is a complex
and difficult issue. I want to thank the panel for appearing this
morning, in particular the chairman of the FERC. I had the opportunity to visit the FERC this week, and it was a good, worthwhile
use of my time.
This issue is complex and difficult, as I just said. It has economic
challenges, technical challenges and political challenges. And I believe the outcome will be best if we do our homework, consider the
challenges and devise a rational and bipartisan plan. So thank you
for appearing, and I look forward to your testimony. I hope I can
stay most of the time this morning.
And with that, I yield back.
The Chair recognize the gentleman from Kentucky, Mr. Whitfield.
Mr. WHITFIELD. Thank you, Mr. Chairman.
We look forward to this hearing today and welcome the witnesses, and we look forward to their testimony.
I just want to make a couple of points. If the advocates for a renewable energy mandate are successful, there is going to be large
portions of the Midwest that do not have solar, do not have wind
power sufficient to meet their needs. It is going to be extremely difficult for them to meet this 20 percent renewable mandate without
some Federal involvement regarding the siting, financing and the
building of additional transmission lines.
And particularly when you consider the Department of Energys
20 percent wind energy by 2030, saying that they are going to have
to build at least 12,000 miles of new transmission lines to meet
that need and then on top of that, when you consider this recent
Fourth Circuit Court of Appeals decision that Ranking Member
Barton mentioned which does make it more difficult for FERC to
operate in this area, I do think we have some significant issues.
And I hope this hearing can help us resolve those.
I yield back the balance of my time.
The Chair recognizes the gentlelady from Wisconsin, Ms. Baldwin for an opening statement.
OPENING STATEMENT OF HON. TAMMY BALDWIN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WISCONSIN
Ms. BALDWIN. Thank you, Mr. Chairman.

Transmission is critical to our Nations electrical system. And I
certainly support grid expansion.
I have significant concerns however about many of the recent
Federal proposals that jeopardize State and regional efforts to develop the transmission grid. Specifically these efforts ignore
progress and may actually slow investments being made in States
like Wisconsin and other in the Midwest.
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Over the last 7 years my home State of Wisconsin, the Wisconsin
ratepayers have supported more than $2 billion in investments in
our transmission system. These actions have and will continue to
improve reliability and increase the flow of renewable energy in
Wisconsin and our neighboring States.
Congress must ensure that we are not undermining the existing
processes if we are going to venture into the transmission arena,
especially when sensitivities already exist to State authority, cost
allocation, safety and eminent domain issues.
As we examine these issues there are some questions and challenges that we must keep in mind. Who is going to pay for this?
Will those not receiving the benefits of transmission have to pay
for cost of lines traversing this country?
I am hearing strong concerns about the designing our transmission system for one specific purpose. It is not the just of transmission planners or transmission companies to choose the types of
generation that may interconnect with the transmission system.
Transmission is needed, plain and simple, regardless of the type of
generation.
Where I come from, transmission is a sensitive subject. It will be
very difficult to convince Wisconsinites and other Americans that
in the name of national interest, the Federal Government is taking
their property to essentially stretch an extension cord across it to
power a larger urban area many, many miles away. So what will
this process be like for public input if it is a Federally directed
process?
While the siting of underground transmission lines may be easier
than that of above-ground lines, the costs are significantly increased, perhaps as much as $3 million per mile. So mandating
technologies on States and regions has significant ramifications.
Again I share the goal of ensuring that critical new investments
are made in our transmission system, but we must proceed with
caution, not undermining existing efforts that are already working
in this process.
Thank you, Mr. Chairman. I yield back.
Mr. MARKEY. The gentleladys time has expired.
The Chair recognizes the gentleman from Pennsylvania, Mr.
Pitts.
OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH
OF PENNSYLVANIA
Mr. PITTS. Thank you, Mr. Chairman.

Thank you for holding this hearing on our National Transmission
Policy.
The official report on the 2003 Northeastern Blackout concluded
that, As evidenced by the absence of major transmission projects
undertaken in North America over the past 10 to 15 years, utilities
have found ways to increase the utilization of their existing facilities to meet increasing demands without adding significant highvoltage equipment.
Clearly there is a significant need for an increase in transmission
capacity. This need is amplified as we consider adding more and
more renewable energy to the grid. And while I am fully supportive
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of adding more transmission capacity, I believe we do need to keep
in mind legitimate desires of localities to preserve green spaces and
historic sites.
My district includes some of the most pristine historic landscapes
in the Mid-Atlantic. My district also has some of the most productive farm land in the United States. Chester County, the home of
Valley Forge and the Brandywine Valley where I come from is one
of William Penns original three counties.
The tradition of preserving land and being good stewards of the
earth have been passed down from generation to generation. We
are not against progress, but we want to protect our heritage and
be wise about how we use and develop the land we have.
Having the needed energy to turn on lights and heat water is
critically important to the quality of life of every American. However, the preservation of our historic resources and natural environment of peoples communities contributes to our quality of life
as well. We need to ensure that all stakeholders are included in deciding where and when transmission lines are sited.
Dialogue and compromise are key in this issue. Indeed, it is critical to strike a delicate balance between the crucial electricity
needs of the country while at the same time maintaining the historic open space areas that make our country beautiful and unique.
As this committee continues to consider this issue, I hope that we
hear from all affected parties and work towards viable solutions.
Mr. Chairman, I am grateful for the opportunity to discuss this
issue. And it is my hope that todays hearing is only one in a series
of hearings on this issue to ensure a robust and well rounded approach to our National Transmission Policy.
And I look forward to hearing from our witnesses, and I yield
back.
Mr. MARKEY. Great, I thank the gentleman.
The Chair recognizes the gentleman from Vermont, Mr. Welch.
Mr. WELCH. Thank you, Mr. Chairman.
I actually want to get my microphone to work here.
I am proud that we have here today as one of our witnesses,
David Coen. David is a member of the Public Service Board in
Vermont, serving on his third term. And he has been appointed by
Republican and Democratic Governors alike. He has done a tremendous job. He is now the vice president of the National Association of Regulatory Utility Commissioners.
David is acutely sensitive to the particular needs of rural utilities. We are a small State, but this issue of transmission is incredibly important to us as it is all around.
So I want to welcome him and thank you, Mr. Chairman for inviting David to be here and add to the testimony. Thank you.
The Chair recognizes the gentleman from Louisiana, Mr. Scalise.
OPENING STATEMENT OF HON. STEVE SCALISE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF LOUISIANA
Mr. SCALISE. Thank you, Mr. Chairman.

Renewable energies will play an important role in the future of
our national energy policy, and I support the development of re-
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newable sources of energy. As a matter of fact, Republicans have
drafted legislation, the American Energy Act, which will invest
heavily in the development of renewable sources of energy.
As we explore the advancement and promotion of energy sources
like wind similar and hydro, and as the Congress and this administration discuss the future of our national grid and its capacity, we
must not neglect that many of these renewable sources of energy
are intermittent and need to be backed up by other sources of energy. And we would be remiss if we do not emphasize diverse the
importance of diversifying our energy portfolio in ensuring that nuclear power is part of any comprehensive policy we discuss.
Wind and solar power still need to overcome fundamental obstacles and we cannot today exclusively rely on these sources of energy alone to power our Nation. When the wind stops blowing and
the sun stops shining, our hospitals that care for our families and
schools that teach our children must continue to have reliable
sources of energy that ensure that the life-saving equipment and
the lights stay on.
Transmission infrastructure, planning, and siting policies are all
important to this conversation as is the regulatory framework that
will surround these policies. I believe it is also important for the
Congress to carefully weigh regional considerations as we further
discuss this issue.
I look forward to todays hearing, and I yield back.
The Chair recognizes the gentleman from North Carolina, Mr.
Butterfield.
OPENING STATEMENT OF HON. G.K. BUTTERFIELD, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NORTH
CAROLINA
Mr. BUTTERFIELD. Thank you very much, Mr. Chairman.

I will move one seat down so I can have the benefit of this microphone.
Thank you for convening this hearing. I particularly want to
thank the five witnesses who have come forward today to make
their testimonies available.
It goes without saying, Mr. Chairman, that I support the expanding of the grid using 21st Century technology. We certainly must
do that.
Waxman-Markey takes dramatic steps to further the growth of
renewable electric generation. The nationwide RES standard demands use of those sources, and the price signals sent from a carbon cap will further the use of clean fuels.
As we move forward, Mr. Chairman, we must focus on developing
policies that ensure electricity generated from these new sources
gets to the load centers that demand them. And this means we
must address the deficiencies in our transmission grid that will
delay us from reaching our full, renewable generation potential or
hamper grid efficiency.
There are a number of challenges to improving transmission, but
siting will be particularly difficult to overcome. Balancing the Federal and State and regional and regional and local stakeholder
needs and interests will be difficult but critical to the completion
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of a modernized grid. Comprehensive planning, cost allocation and
ownership will also present challenges, as we have heard today. I
applaud the collaborative nature of this subcommittee and look forward to discussing the issue further.
I yield back.
Mr. MARKEY. I thank the gentleman.
The Chair recognizes the gentlelady from California, Ms. Harman.
OPENING STATEMENT OF HON. JANE HARMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA
Ms. HARMAN. Thank you, Mr. Chairman, we are debating on the

floor a bill to have the FDA regulate tobacco, and I have to say it
is a long time in coming, and I am absolutely thrilled that we will
finally, I believe, pass it, and it will become law very soon.
So while I am celebrating about that, I am thinking about another hard issue, this one, which require all of us to step up and
think about some risky strategies to make certain that the promise
of renewable energy and the absolute need for transmission of electricity throughout the country can be accomplished. I think anything we do in this committee will make us a few friends and make
us a few enemies. And that applies to us regardless of which party
we are in and which region we are from.
But I think we have to step up, as many people finally have
stepped up in both parties to the need to regulate tobacco.
I just want to point out some of the obstacles. The U.S. electric
transmission system encompasses about 167,000 miles of high voltage transmission lines and another 300,000 miles of lower voltage
lines. The grid is operated by approximately 130 balancing authorities, which are typically utilities that own transition systems and
operate control centers to monitor and control the grid.
Those transmission systems are owned by several hundred private and public entities, so lets just start with that. It is incredibly
complex. And if we dont get a handle on that and dont step up
to the tough decisions, we wont solve the problem.
But I would close by saying that if we really want renewable energy in this country, we really have to fix the grid.
Thank you, Mr. Chairman.
Mr. MARKEY. The gentleladys time has expired.
The Chair recognizes the gentleman from Texas, Mr. Green.
OPENING STATEMENT OF HON. GENE GREEN, A

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS
Mr. GREEN. Thank you, Mr. Chairman, and I have a full statement I would like to place into the record.
And just a little history, in the 2005 Energy Act, we actually provided for the Federal transmission corridors that are so needed.
And like my colleagues, some of my colleagues, have said, we disagree with the court decision.
Hopefully it will be overturned by the Supreme Court, but there
are things that we can do that may help, Mr. Chairman.
I appreciate both Mr. Inslees legislation and to expand and have
a national grid. We know that, and it cant be just limited to renewables because those electricity protons dont decide where they
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come from; they just go down those lines, so that is why I am
happy to be part of the hearing. And, again, I would like my full
statement to be placed in the record, and again, I support our effort
to expand the national grid.
I have a huge transmission corridor right behind my neighborhood, and I guess, in Texas, we dont have any problem with pipelines or transmission grids because our PUC just approved $5 billion for the renewable fuel electricity to come from west Texas to
our urban market.
Thank you, Mr. Chairman. I yield back the balance of my time.
The Chair recognizes the gentleman from New Jersey, Mr. Pallone.
OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY
Mr. PALLONE. Thank you, Mr. Chairman.

I want to first thank you for all that you have done on this issue.
I mean, I know it has been so many years, and we finally passed
a bill out of committee, and I know that we will pass it on the floor
and send it to the President eventually.
I wanted to point out that Ralph Izzo, chairman and CEO of the
Public Service Enterprise Group, a New Jersey based energy company will be testifying on todays second panel. And under Ralphs
leadership, PSE&G has been a leader in renewable energy investments throughout the State of New Jersey.
Today the committee will address policy proposals for transmission planning, cost allocation and siting authority. A strong
transmission grid is essential to ensure energy reliability and to
move clean, renewable energy from remote locations to population
centers.
I think we can all agree that planning and investing in a reliable
grid is a national priority. With that said, we need to be very careful how we craft any National Transmission Policy. Too main areas
of concern for the northeast and specifically for New Jersey are
how to site new transmission lines and how to pay for those new
lines.
It is critical that States like New Jersey have authority over the
siting of new transmission lines that would run through the State.
Giving FERC greater authority to site high-voltage electric transmission lines will generate widespread local opposition. Any new
transmission legislation must give States adequate authority over
siting to ensure that States can protect properly the environment
and cultural and historical sites.
Another issue that will affect my State is cost allocations, specifically how do we craft legislation that encourages investment in
new transmission lines to move renewable energy, such as wind, to
population centers? I believe we should think regionally. New Jersey has tremendous potential to meet our renewable energy goals
through solar and offshore wind. It does not make sense for New
Jersey ratepayers to subsidize the cost of moving wind from the
Midwest to the East Coast, a cost of $10 million per mile. This
could slow development of alternatives closer to home.
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I believe the transmission provisions passed in the American
Clean Energy and Security Act provide a balanced approach that
respects regional differences and local concerns. Before we pass
comprehensive transmission legislation, we must consider how it
will affect the economies of local renewable energy projects and
whether it provides adequate siting authority for the States.
Again thank you, again, Mr. Chairman.
Mr. MARKEY. I thank the gentleman very much.
The Chair recognizes the gentleman from Georgia, Mr. Barrow.
Mr. BARROW. I waive.
Mr. MARKEY. The gentlemans waives his opening statement.
All time for opening statements has been completed.
We will now turn to our very distinguished panel.
STATEMENTS OF JON WELLINGHOFF, CHAIRMAN, FEDERAL
ENERGY REGULATORY COMMISSION; DAVID C. COEN, FIRST
VICE PRESIDENT, NATIONAL ASSOCIATION OF REGULATORY
UTILITY COMMISSIONERS ON BEHALF OF NARUC; LAUREN
L. AZAR, COMMISSIONER, WISCONSIN PUBLIC SERVICE COMMISSION; PAUL J. HIBBARD, CHAIRMAN, MASSACHUSETTS
DEPARTMENT OF PUBLIC UTILITIES; AND RICHARD
HALVEY, ENERGY PROGRAM DIRECTOR, WESTERN GOVERNORS ASSOCIATION
Mr. MARKEY. And our first witness, who is John Wellinghoff. He

is the chairman of the Federal Energy Regulatory Commission,
which oversees wholesale electric transactions and interstate electric transmission and gas transportation in the United States. He
is also cochair of the Demand Response Collaborative launched
jointly by FERC and the National Association of Regulatory Utility
Commissioners.
We thank you so much for being here in your first appearance
before our committee.
We welcome you, sir. Whenever you are ready, please begin.
STATEMENT OF JON WELLINGHOFF
Mr. WELLINGHOFF. Good morning, Mr. Chairman.

Mr. MARKEY. Could you push the mike a little closer and turn
it on?
Mr. WELLINGHOFF. Thank you Mr. Chairman, Ranking Member
Upton, and members of the subcommittee.
First, I have two quick preliminary issues. One is I would like
to recognize and thank my colleague, commissioner Phil Moeller
who is here with me today, and I would also like to request that
my full pre-file testimony be placed in the record.
Mr. MARKEY. Without objection, so ordered.
Mr. WELLINGHOFF. The following is a summary of that testimony.
I appreciate the opportunity to appear before you today to discuss our Nations electric transmission grid.
Mr. Chairman, your invitation for this hearing envisions, A
transmission system that will serve the goals of substantially reducing greenhouse gas emissions, developing renewable energy resources and improving energy efficiency while preserving or enhancing reliability.
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A transmission system that meets the goals you have articulated
will result from a strong and smart electric grid that can assist in
promoting field diversity, reducing greenhouse gas emissions,
strengthening our national security, revitalizing our economy, enhancing competition and ensuring reliability. Such a reliable and
robust transmission grid is essential to allows regions, States and
our Nation to meet these goals.
The commission has taken a number of important steps in recent
years to promote the development of such a transmission system.
For example, in February of 2007, the commission issued Order
890, which among other things required open, transparent, and coordinated regional planning; required evaluation in that planning
of demand resources on a comparable basis to other resources.
The commission also approved an initiative proposal from the
California independent system operator to better allocate costs of
facilities needed to interconnect location constrain resources, such
as wind and solar, to the transmission grid.
Nonetheless, I believe there are gaps in the commissions statutory authority. The absence of an adequate regulatory framework
is the principal obstacle to developing the transmission system to
support the goals have you outlined.
If we are to overcome that obstacle, we need a national policy
commitment to develop such a transmission system. In developing
that policy, Congress should consider three closely related issues:
planning, siting and cost allocation.
First, the scope of existing regional planning initiatives needs to
be expanded. To achieve greater benefits and efficiencies, we must
create a structure that includes coordination on an interregional
basis. Such coordination will facilitate, for example, the development of facilities, transport power from areas rich in renewable energy resources to load centers, as well as the deployment of distributed resources and key smart-grid equipment and systems.
Second, States should continue to have the opportunity to site
transmission facilities, but transmission developers should have recourse to the commission as a Federal siting authority under appropriate circumstances. Federal siting authority would be helpful,
even if limited only to transmission facilities needed to reliably
meet renewable energy goals.
Third, if Congress determines there are broad public-interest
benefits in developing the transmission system necessary to meet
the goals discussed, then Congress should consider clarifying the
commissions authority to allocate costs of such infrastructure to
the load-serving entities within an interconnection or part of an
interconnection where it is appropriate to do so. Of course, the commission would need to ensure, as it does today, that these costs are
allocated fairly to the appropriate entities and that due deference
is accorded regions that work together to develop cost-allocation
mechanisms that garner broad support.
Finally, it is important to recognize the issue is not how to
choose between nearby renewable or more distant renewable resources. Both should be part of the mix of energy resources to
achieve our national goals. And appropriately allocating the costs
of transmission facilities needed to connect remote resources should
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not disrupt the implementation of State policies or disadvantage

local renewable or other distributed resources.
Rather, full planning analysis that reveals respective costs of alternative resource scenarios and a fair cost allocation of necessary
transmission to reliably deliver those resources to loads will eliminate a barrier to the development of new clean resources and thus
will facilitate competition. Such a measured approach should inform consumers of the least-cost sustainable resources options to
meet State and national environmental, economic and security objectives. And enacting a regulatory structure that enables such an
approach to be implemented will ensure our national energy goals
can be achieved.
Thank you, again, for the opportunity to appear before you, and
I would be happy to answer questions that you may have.
[The prepared statement of Mr. Wellinghoff follows:]
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26
Mr. MARKEY. Thank you, Mr. Wellinghoff, very much.
Our next witness is David Coen. He is the first vice president of
the National Association of Regulatory Utility Commissioners. Mr.
Coen has also served as a member of the Vermont Public Service
Board since 1995 and has continued. He has served in a variety of
regional and national leadership positions, including the Chair of
the Consumer Affairs Committee of the New England Conference
of Public Utility Commissioners.
STATEMENT OF DAVID C. COEN
Mr. COEN. Good morning, Chairman Markey, Ranking Member

Upton and members of the subcommittee. My name is David Coen.
I am a member of the Vermont Public Service Board. I also serve
as the first Vice President of the National Association of Regulatory Utility Commissioners, also known as NARUC.
I am honored to have this opportunity to appear before you this
morning and offer a State perspective on transmission. In addition,
I would like to thank Representative Welch for his kind introduction and his service to our State. He is certainly my favorite Congressman from Vermont.
At the State level, we deal with transmission planning and siting
requests regularly. And I can tell you that the issues and concerns
are not policy or procedural, but multifaceted and do not lend
themselves to a one-size-fits-all solution.
State commissioners are obligated to act deliberately to ensure
that any new projects will benefit the public. This means regulators
must determine whether a demand response, energy efficiency or
perhaps a local renewable energy source is more appropriate than
putting steel transmission towers in the ground.
A major impediment to siting energy infrastructure is the great
difficulty in getting public acceptance. As a country, we want our
electricity to be affordable, reliable and increasingly clean. But we
also want to ensure that transmission infrastructure does not impact our quality of life.
Public hearings on transmission lines are always packed with
concerned ratepayers and landowners with nearly all of them in opposition to the project. I can assure you that no level of Federal involvement will make this go away. Still, the State and local level
provides an important venue for all parties to be heard. State regulators know the geography and citizenry better than any Federal
agency can. Our processes are transparent and give all parties a
voice. What some interests may consider roadblocks or impediments we consider due process.
Let me say a few words about what we are doing in Vermont.
Vermont has a transmission planning process that analyzes potential transmission constraints over a 20-year horizon and considers
various alternatives, including distributor generation and targeted
energy efficiency programs that would address any identified reliability issues. The process ensures that solutions to transmission
constraints serve the long-term needs of consumers at the lowest
cost.
After decades without any major transmission investment, the
public service board has approved three major transmission
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projects from 2005 through 2008, with total projected capital investment over half a billion dollars. At the regional level, these decades without any major transmission investment, nearly $4 billion
of transmission infrastructure has been placed in servicing New
England since 2002.
Despite the activity on the State and regional level, there is momentum in Congress to provide the Federal Government with
broader transmission authority, although we are just 4 years removed from the enactment of the Energy Policy Act of 2005. EPAct
gave the Federal Energy Regulatory Commission backstop siting
authority in specific areas designated by the Department of Energy. Not enough time has passed to determine whether this law
needs to be revisited, but the Congress is addressing this issue nevertheless.
NARUC recently updated our transmission policy in anticipation
of Federal action. We believe that a bottom-up State- and regionaldriven approach is the most appropriate model going forward,
while we are not convinced that the case has been made for expanded Federal authority.
If Congress chooses to act, we recommend the following principles:
Any such additional authority granted to FERC by the legislation
allow for primary siting jurisdiction by the States and provide the
FERCs backstop siting authority be as limited as possible;
In no event should FERC be granted any additional authority
over the siting or construction of new interstate transmission lines;
In no event should FERC be granted any additional authority to
approve a new interstate transmission line that is not consistent
with a regional transmission plan developed in coordination with
affected State commissions or other siting authorities or regional
planning groups;
In no event should FERC be granted any additional authority to
approve a new interstate transmission line unless there is already
in place either a cost allocation agreement among all the States
through which the proposed project will pass governing how the
project will be financed and paid for, or a FERC-approved cost allocation rule that covers the entire route of the proposed project;
In no event should any legislation allow FERC to preempt State
authority over retail rate-making, the mitigation of local environmental impacts under State authority, the interconnections to distribution facilities, the siting of generation or the participation by
affected stakeholders in State and/or regional planning processes;
and
In no event should any legislation preempt existing State authority to regulate bundled retail transmission services.
In conclusion, the electric transmission system must have the capacity to meet the growing energy needs of the Nation regardless
of the generation source. The solutions to the challenges will not
come quickly or easily and will require the cooperation of all stakeholders including State and Federal governments.
Thank you and I look forward to your questioning.
Mr. MARKEY. We thank you very much.
[The prepared statement of Mr. Coen follows:]
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47
Mr. MARKEY. I am now going to turn to Congresswoman Baldwin
to introduce our next witness.
Ms. BALDWIN. Thank you, Mr. Chairman.
I am pleased to welcome a very special constituent to our hearing
today. In 2007, Governor Jim Doyle appointed Lauren Azar to the
Wisconsin Public Service Commission. As a commissioner, she has
played a leading role in confronting the challenges associated with
transmission development. Just yesterday the Wisconsin PSC sited
a very significant transmission line.
Lauren also serves as President of the organization of MISO
States where she is leading a regional planning and cost allocation
effort for developing electrical transmission over the Midwest ISO
region, which includes 13 States and one Canadian Province.
Prior to her appointment to the Wisconsin PSC, Commissioner
Azar worked as an attorney and practiced extensively in the areas
of electric and water utilities representing both ratepayers and utilities. She helped create the Nations first stand-alone transmission
company, American Transmission Company, otherwise known as
ATC, and helped to site a 210-mile extra-high-voltage line in Wisconsin and Minnesota.
In addition to all of these credentials, I can also tell you that I
know what she eats for breakfast and what she grows in her vegetable garden because for those of you who dont know, Lauren is
also my partner. And it is a thrill and a very proud moment to
have her here to testify based on her significant expertise on the
issues before us.
I welcome her to our subcommittee.
Ms. AZAR. Thank you, Congresswoman.
Mr. MARKEY. We welcome you. Whenever you are ready please
begin.
STATEMENT OF LAUREN L. AZAR
Ms. AZAR. Thank you, Mr. Chairman, Ranking Member Upton,

and the members of the subcommittee. Thanks for inviting me to
appear at this hearing on the future of the grid. And my primary
messages for today are, number one, before a transmission grid can
be cost effectively planned, Congress must define the goals for that
grid; number two, States with technical assistance from the regional and utility transmission engineers should plan the grid and
site transmission lines; three, Congress should define the framework through which the States will design and site the gridif the
States fail, then it is appropriate for the Federal Government to
step in; and four, Congress should agree to do no harm by not selecting a specific grid design or technology and by not selecting a
specific cost allocation.
As to point number one, Congress should define the goals. The
renewable energy standards and carbon limits that Congress may
set will define the generation portfolio that our Nation will need to
develop. With clear identification of RES and the carbon mandates,
the States can begin designing the transmission grid that is necessary for that generation portfolio.
Point number two, States should develop the plan and site the
lines. There are a variety of reasons why a State-led process will
lead to better results than a federally led process, and these rea-
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sons include, first, State commissions have the ultimate responsibility for retail electric rates; second, planning must accommodate
State choices for generation in demand side programs, the distribution decisions that they have made; third, planning must incorporate the designs for the existing State transmission and distribution systems; and lastly, State decision-making allows more complete public information, participation, and acceptance.
Point number three, Congress should define the process. Congress could define the parameters for a State-led process. Such parameters could include the following:
Essentially, require the States to participate in regional planning
initiatives to design a grid that will meet the congressional mandates;
Set strict but reasonable deadlines for the planning product and
the siting of lines in that plan;
Ensure that parties who will profit from this grid build-out do
not make the decisions for that build-out; and
Lastly, if States do not complete the plan or the siting of the
lines in that plan, then the Federal Government should intervene.
Point number 4, Congress should do not harm. I ask you to take
a Hippocratic oath today, and such an oath would require you not
to do two things. Number one, do not pick technologies or plans.
While the moniker transmission superhighway sounds good, depending on the goals of Congress it may not be what we need. I
suspect one-size-fits-all solutions such as the 765 grid overlay will
not be cost effective, will likely be oversized and will harm some
areas.
As an aside, the parties who are advocating for a 765 grid overlay are the very parties that will make a lot of money off of that
plan.
And the second point about not doing harm is, do not select a
specific cost allocation for the grid. Because cost allocation should
be tailored to the plan developed, Congress should not preselect
such an option. If Congress mandates a specific cost allocation, it
will be indirectly endorsing a specific type of design. For instance,
endorsing a so-called postage stamp which allocates the costs
evenly over a very large area is more appropriate for an alternating
current solution than a direct current solution.
In conclusion, I ask Congress to promptly set renewable standards and carbon limits so that the problem is defined. I also ask
that Congress essentially lock the States in a room and instruct
them to solve the problem within a specified time period.
The $80 million already appropriated under the ARRA will provide the funding necessary to conduct this endeavor. After being
locked in the proverbial room for a reasonable period of time, if the
States are unable to design a transmission grid meeting the congressional mandates, then the Federal Government should step in.
The same framework should also be applied to transmission siting.
I see I still have 43 seconds, so I will quickly provide a quick
summary of some of the efforts that are currently happening within the States as far as regional planning and siting. The chairman
and Congresswoman Baldwin already referenced one of them,
which is namely the organization of MISO States, and that is the
Midwest Independent System Operator. The States within that 13
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State region and one Canadian Province are currently developing

a regional plan and cost allocation process, and we expect to have
that done by the end of the year.
More, I think, importantly to this committees work, in the
ARRA, Congress identified they wanted to have interconnectionwide plans. And on May 15, leaders from the eight different regions
within the eastern interconnection met to begin the process of planning on a interconnection-wide basis. At the end of this month, we
expect to have all 40 States present at a meeting in which we will
begin to discuss just how we expect to go forward in that process
and what the States role should be in that process.
Thank you very much, Mr. Chairman.
Mr. MARKEY. We thank you very much for being here today and
for your testimony.
[The prepared statement of Ms. Azar follows:]
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63
Mr. MARKEY. Our next witness is Paul Hibbard. He is the Chairman of the Massachusetts Department of Public Utilities. Chairman Hibbard previously worked for the Massachusetts Department
of Environmental Protection.
STATEMENT OF PAUL J. HIBBARD
Mr. HIBBARD. Thank you, Mr. Chairman. I also want to thank

the members of the subcommittee for inviting me here today to talk
to you about this critical topic.
On behalf of Governor Deval Patrick and the Commonwealth of
Massachusetts, I want to thank you all for your leadership in addressing our energy challenges and global climate change, and for
your wisdom in addressing both at the same time in the ACES legislation. We support your efforts and encourage Congress to move
forward with the ACES legislation expeditiously.
On transmission, we think that ACES has got the transmission
planning and siting question exactly right. In its current form, it
presents a measured and sensible approach that supports the continued and vital primary role of State and regional resource planning in siting efforts and expands the role of FERC to coordinate
regional planning across a broader geographical footprint and with
an added focus on national energy policy. But most importantly, it
does so without jeopardizing the critically important role of competition in wholesale energy markets.
In contrast, I have serious concerns with the more aggressive
proposals that have been put forward to expand Federal authority
in transmission planning and siting. At their core, these proposals
appear to put FERC in three roles:
First, in the role of requiring the development in a short period
of time of interconnection-wide plans like the JCSP, ostensibly to
access renewable resources;
Second, it puts FERC in the role of deeming transmission included in such plans as needed for the public convenience and welfare triggering the siting override and eminent domain authorities;
and
Third, it puts FERC in the role of approving or imposing the allocation of associated costs on a broad basis across all load.
Under these proposals, FERCs traditional authority is expanded
to where it becomes a de facto central planning authority to select
and direct the build-out of renewable generating resources across
the Nation, potentially diminishing the development of the abundant level of demand reduction and renewable resources that are
available at the local level in all of our regions.
Developing renewable resources locally is a top priority for the
Commonwealth, as I am sure it is for States across the country. We
believe that renewable resources in our State and along the eastern
seaboard, both onshore and offshore, represent one of our Nations
most promising yet underdeveloped renewable resources, sources of
energy.
While offshore wind installation costs currently exceed those of
onshore installations, these resources are much closer to our load
centers. And research and development efforts that are focused on
reducing costs and improving reliability promise to make offshore
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wind competitive with distant but onshore wind farms on a delivered cost of power basis.
As regional onshore projects move forward and offshore wind
moves into commercialization in the United States, they all must
have the opportunity to compete on an even playing field with the
onshore and more remote sources of renewable power and not be
disadvantaged by upfront transmission subsidies.
The threat that unsubsidized local renewables would be unable
to compete in fact has been taken very seriously in our region and
beyond. A bipartisan group of 11 Governors representing every
coastal State from Maine to Virginia, as well as Vermont, recently
joined together to raise these concerns in a letter to the committee
chairman.
A top-down central planning process is in stark contrast to how
free markets are supposed to operate. In our region and at the direction of FERC, to ensure fair competition, all generating resources, renewable or otherwise, are responsible for all development costs, including the costs of environmental compliance and
the costs of delivering their power reliably to load. In this competitive market context, it is the lowest-cost provider, based upon the
price at retail, that prevails ensuring that societys electric reliability and environmental goals are met at the lowest possible cost.
Notably, this is the design principle under ACES, where the
prices offered by fossil fuel resources will be higher and less competitive due to the additional marginal costs associated with purchasing carbon allowances, and the price offered by renewable resources will be lower and more competitive due to the additional
marginal revenues associated with the generation of renewable energy credits andother incentives. In this framework there is no
need for a central planning decision to force development or to pick
the winning resources because, by definition, the cost of carbon allowances and the value of renewable energy credits will rise to levels that are needed to support the resources that must come on line
in order for our Nation to meet our carbon cap and our renewable
resource floor.
This is the way it is supposed to work and indeed has worked
in emission markets over the past couple of decades. By suggesting
that FERC needs to engage in resource planning to build transmission to preselected renewable resources is to concede at the outset that the free market structure for emission control and renewable control contained in ACES will fail.
In my view, the more aggressive proposals for transmission legislation, thus, are about much more than siting. They force the Federal Government into an administrative role of central renewable
resource planning, a role that I believe in the long run will damage
the operation of competitive markets, suppress the technological innovation and creativity that come from the operation of competition, and ultimately will result in our meeting our climate objectives at prices to retail consumers of electricity that are higher
than they otherwise would need to be.
So I want to, again, thank the members of the committee for this
opportunity and look forward to questions
Mr. MARKEY. Thank you Mr. Hibbard.
[The prepared statement of Mr. Hibbard follows:]
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73
Mr. MARKEY. Now we have one final, very important witness representing the Western State Governors, who I think we should all
hear from before we cast our vote on the floor on the last vote of
the day. Then we will reassemble after that roll call. But I think
since we are all here right now that we will hear from Rich Halvey,
who is the Energy Program Director for the Western Governors
Association and representing those Western Governors before this
subcommittee today.
STATEMENT OF RICHARD HALVEY
Mr. HALVEY. Thank you, Mr. Chairman, members of the committee; thank you for the invitation to testify here today.
Over the last 8 years, the Western Governors Association has assumed a strong leadership role in defining policies for transmission
planning, cost allocation and regional cooperation. In 2002, a protocol governing cooperation among State and Federal agencies in
the siting and permitting of interstate transmission lines in the
Western United States was developed and signed by the WGA, the
Departments of Energy, Interior and Agriculture, and the Council
on Environmental Quality.
In June 2006, the Western Governors Association published a report that explained that while vast resources, renewable resources,
exist throughout the West, many reside in remote areas without
ready or cost-effective access to transmission. Lack of transmission
access was and remains the greatest impediment to the rapid development of utility-scale, renewable, rich resource areas.
In April 2008, the Western Governors partnered with the United
States Departments of Energy, Interior and Agriculture and the
Federal Energy Regulatory Commission to create the Western Renewable Energy Zones project. This project will ultimately identify
those areas with the highest potential for large-scale, cost-effective,
renewable energy development across the Western region and the
high-voltage transmission that would ensure this electricity can be
delivered to demand centers.
This coming Monday, the Western Governors Association will be
releasing the project phase one report quantifying the potential of
the richest renewable resource areas.
WGA will continue to work on the project over the next 2 years.
We are partnering with utilities and the Western Electricity Coordinating Council to evaluate transmission needs to move power
from preferred renewable energy zones. We will be working to improve the integration of wildlife and environmental values in decisions on the development of generation and transmission associated with these renewable energy zones.
Ultimately, we will propose conceptual transmission plans to
move electricity from the most desirable zones to markets. We will
work with load-serving entities to coordinate purchasing for the desirable renewable energy zones and to foment interstate cooperation for renewable energy generation and transmission.
The Western Governors support the development of interconnection-wide transmission plans. However, if the Federal Energy Regulatory Commission is given the authority to approve such plans,
Congress needs to set explicit criteria by which FERC evaluates
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these plans. At a minimum, statutory criteria should require that
the States approve electricity future scenarios to be studied and approve interconnection-wide plans corresponding to the future scenarios.
Even with the success of our past efforts, the Western Governors
recognize that we need help from the Congress. I will mention four
positions the Governors have consistently emphasized as necessary
elements of transmission planning, cost allocation and regional cooperation where legislation will be critical:
First, the Federal Government should be responsible for ensuring
that near-term projects proposed to serve large geographically constrained low-carbon resource areas are adequately sized to meet
long-term needs. When we know future demand will materialize,
action by the Federal Government to correctly size lines will help
projects capture economies of scale in building transmission and
avoid environmental impacts from the construction of multiple
lines to the same area. We propose that the Federal Government
pay for the incremental cost of building higher capacity lines to
these areas.
Second, Congress should redirect the implementation of sections
1221 and 368 of the Energy Policy Act of 2005 to preserve important transmission corridors and ensure the timely siting and permitting of large transmission lines to move geographically constrained low-carbon generation. Specifically, once higher priority
zones and associated conceptual transmission have been identified,
Congress should direct Federal land management agencies to use
those results when evaluating and designating corridors.
Third, the Western Governors see little benefit in FERC preempting State transmission line permitting processes. The major
hurdle for permitting transmission in the West has been securing
permits from Federal agencies. The implementation of Federal law
has resulted in lengthy and inflexible Federal permitting processes.
Enabling FERC to preempt State siting processes will not fix the
underlying problem.
I would like to mention the limited instances in which the Governors could agree with FERC backstop siting authority.
It must be demonstrated that the transmission line is needed to
meet national carbon and renewable generation requirements; comports with an interconnection-wide transmission plan; is right sized
to meet the long-term needs for geographically constrained low-carbon generation; is the lowest cost option to meet long-term needs
and where the State has failed to make a decision within a reasonably set statutory period.
Finally, the Western Governors believe the current system for
cost allocation in the West has worked well, and we believe it will
continue to be adequate for the future. The exception, of course,
would be the cost allocation as it applies to the kind of right sizing
we described.
We are attaching two letters to our testimony and we ask that
they be included, two letters that the Western Governors have sent
to the Congress in 2009 regarding transmission issues.
Thank you for the opportunity to talk with you today.Mr. MARKEY. Thank you, Mr. Halvey, very much.
[The prepared statement of Mr. Halvey follows:]
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95
Mr. MARKEY. I think this is about as important a hearing as we
are going to have this year. We appreciate the opening statements
from the witnesses.
There are 5 minutes left on the House floor for us to cast our
vote. And so what I will recommend is that we reconvene this hearing in 15 minutes and then we will begin with questioning of the
witnesses by the subcommittee members.
The subcommittee stands in recess.
[Recess.]
Mr. MARKEY. Welcome back, ladies and gentlemen, and we would
ask all of the witnesses to please be reseated. And I would ask that
the rear door be closed so that we can have the attention of all of
our audience on the witnesses. Thank you.
So the Chair will recognize himself. And I will ask you, Mr.
Halvey, to please elaborate on your testimony that permitting on
Federal lands is the major obstacle to siting transmission in the
West.
That issue is not generally within this committees jurisdiction,
but rather within the jurisdiction of the Committee on Natural Resources. But I dont think this is a widely understood kind of political reverse takedown that it is not the problem that the Federal
Government has with the States, but the problem the States have
with the Federal Government as represented by the management
of the Federal lands, especially across the West.
Could you elaborate on that and perhaps give us some specific
examples?
Mr. HALVEY. Sure. Thank you, Mr. Chairman.
Let me mention a couple of things. At a meeting of the Western
Governors in February, Governor Otter from Idaho made the statement very clearly that in those instances where we have the opportunity to site transmission lines and not go through Federal lands,
we are often going to want to exercise that.
There are a couple of issues, I think, that come to mind in terms
of permitting with Federal lands. One, if you live in the West, it
is difficult to avoid Federal lands. Many of the States are covered
with lands under Federal jurisdiction, both the Department of Interior and the Department of Agriculture. So that is certainly an
issue.
Second, there is no priority system for dealing with lease applications. It is on a first-come, first-served basis.
One of the things they are doing with the Western Renewable
Energy Zones is really pointing out what we think is a critical
issue, which is that there are places that are really better for not
only locating renewable energy, but there are also transmission
corridors that are going to be more important in moving that renewable energy. We believe that there ought to be some kind of a
way to recognize that priority and to do the transmission work, the
permitting work that is necessary to get those facilities located.
We think, in many cases, it is not unusual to see 5, 7 or even
10 years to locate transmission lines when they go through Federal
land.
Mr. MARKEY. Would you repeat that fact?
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Mr. HALVEY. Yes. That it is not unusual to see 5-, 7-, 10-year
time periods in terms of getting lines approved through Federal
lands.
Mr. MARKEY. So when the States go to Federal agencies, it takes
5 to 7 to 10 years?
Mr. HALVEY. There are certainly instances where it has taken
that long.
Many of the applications that we see now, that are going through
that processin fact, Governor Rounds from South Dakota was
talking about a line to run from South Dakota to Minnesota. At one
of our meetings he mentioned that they have been working on it
for 2 years, and they have had very little success in moving it
through the Federal permitting process; and he sort of got the response of a chuckle from people in the audience, essentially suggesting, 2 years, you have barely started.
And so I think there is a great frustration on the part
Mr. MARKEY. So what you are saying is that the States were
working together cooperatively to try to find a solution to that regional, North Dakota-Minnesota issue, but because of the Federal
Government, there was a multiyear delay in getting to a point
where the issue could be resolved.
Mr. HALVEY. That I think is the sense of the Western States that
the Federal permitting process is difficult, it is onerous, it is time
consuming, and in many cases there are requirements that dont
add any value to the permitting process.
We would hope to see something that one would recognize those
areas that have a priority because of the richness of their renewable resources, but more than that, recognize that if we are going
to meet any requirements for renewable portfolio standards or carbon reduction, we have got to do a much better job of matching up
how long it takes to do renewable development with how long it
takes to get the transmission to those developments.
Mr. MARKEY. So again, not to make too fine of a point of this,
but you are saying that out West it is very difficult, if you are dealing with the remote areas where the wind and the sun might be
strongestgeothermal, as wellto create any kind of a transmission system without at some point confronting this Federal
issue.
Mr. HALVEY. That is absolutely true.
Mr. MARKEY. And no matter how cooperative the States areand
your testimony is that in most instances when States are trying to
resolve these issues, the Federal Government serves as an impediment sometimes of such a nature as to just paralyze the process?
Mr. HALVEY. That is correct.
Mr. MARKEY. That is very helpful to us. Thank you.
Let me now turn and recognize the gentleman from Kentucky,
Mr. Whitfield.
Mr. WHITFIELD. Thank you, Mr. Chairman.
And thank you all for your testimony.
Mr. Wellinghoff, back in April of 2009, the New York Times
quoted you in an article saying that new coal and nuclear plants
may be unnecessary. And I know that Chairman Barton and Mr.
Walden and some others have sent you a letter about that. And I
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have not had an opportunity to read your response, but you are
certainly not opposed to coal and nuclear power, I am sure of that.
Mr. WELLINGHOFF. That is correct. I am not opposed to coal and
nuclear power.
Mr. WHITFIELD. Since I didnt even read the New York Times article, would you basically explain what you were referring to when
you made that statement?
Mr. WELLINGHOFF. I would be happy to. Thank you for the question.
I was referring basically to a scenario where, if we look at the
diversity of the number of renewable resources, which would include, potentially, Midwest wind, that may have a diversity of delivery from offshore wind and include solar and geothermal, biomass; and also include the demand side, looking at demand response, energy efficiency, distributive generation, combining these
things together with a smart grid.
And the whole answer wasin the response was, in the context
of the smart grid, if you combine these things together it may, in
fact, be possible with a smart enough grid to effectively provide
these renewables as if they are base load, displacing base load; and
that was the context of my statement.
Mr. WHITFIELD. When you talk about a smart grid, do you have
any idea or thoughts, or have you seen any studies about what the
cost would be to complete transformation to a smart grid?
Mr. WELLINGHOFF. I have seen cost estimates anywhere from
$50 to $60 billion up to $200 billion.
Mr. WHITFIELD. And to reach the scenario that you referred to
in the New York Times article that you just explained, in what sort
of time frame would you view this transformation taking place?
Mr. WELLINGHOFF. At least a 10-to-15-year time frame.
Mr. WHITFIELD. Now on the Fourth Circuit Court of Appeals decision, have you all appealed that decision? Has FERC appealed
the decision?
Mr. WELLINGHOFF. Let me check with my counsel.
It is due in July. We havent yet made a decision. We are looking
at it now.
I will tell you, though, I personally disagree with the Fourth Circuit decision.
Mr. WHITFIELD. Well, I know there are many of us that hope you
will appeal, but that is a decision that you all make, of course.
Mr. Coen, Ms. Azar, Mr. Hibbard, can you tell me the lastwhen
the last new transmission line was built in each of your States?
Mr. COEN. We are actually, in Vermont, in the process of upgrading most of our transmission systems. So we actually have ongoing
projects as we speak.
The most major transmission line that has ever been sited in
Vermont, the docket ended 2 years ago, and the line is currently
almost complete today.
Mr. WHITFIELD. And how many miles is that line?
Mr. COEN. Well, this is Vermont. The line was 60 miles.
Mr. WHITFIELD. And what about you, Ms. Azar?
Ms. AZAR. Just yesterday, we approved a 32-mile, 345kV line
that costs about $220 million through the city of Madison. So, in
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other words, the three commissioners essentially sited a transmission line through their backyards.
Over the last 8 years, we have spent $2.5 billion upgrading or
creating about 1,700 new miles of transmission in the State of Wisconsin. We have construction going on all over the State. A line
was just energized, I believe last week, which was over 100 miles
long.
And as Congresswoman Baldwin indicated, before I became Commissioner I was on the other side. I was getting permits for a 210mile line between Minnesota and Wisconsin, and that line has been
energized.
Mr. HIBBARD. In Massachusetts, our most populous area, of
course, is the Boston region and it is where our heaviest electrical
load is. And over the past 10 years we have sited and had constructed a number of transmission enhancements to support the
flow of power into Boston, including two major 345kV lines to
eliminate the constraints between Boston load pockets and the remainder of Massachusetts.
Mr. WHITFIELD. One other question to you three: With the anticipated increase in demand of electricity needs over the next 15 or
20 years, do you think the existing system is adequate in your
State?
Ms. AZAR. With regards to the increase in demand, we continually update our systems. So we are going to continue to do updates. We have been doing updates all along. I dont think that
process ever stops.
Mr. COEN. In Vermont, we have actually been able to mitigate
any increase in our load over the last 5 years with energy efficiency. So I would say, offhand, that with the completion of what
is called the Southern Loop in a couple of years, I think our transmission grid will be adequate for the next 10 to 15 years.
Mr. WHITFIELD. Mr. Hibbard?
Mr. HIBBARD. I would give a similar answer. The answer to your
question is yes. When we look at potential scenarios for load
growth over time within Massachusetts, and indeed within the
New England region, we see that the transmission system, including what is existing today and what is in the process of going
through the regional planning process in siting, will be more than
adequate to support the movement of power throughout our region
for a decade or two.
Mr. WHITFIELD. Mr. Chairman, I see I have gone 1 minute 25
seconds over.
By the way, we will be having a second round and perhaps a
third round of questions of the witnesses if the gentleman is interested.
Let me turn and recognize the gentleman from Washington
State, Mr. Inslee.
Mr. INSLEE. Thank you. I would like to put in the record, with
no objection, a letter from the University of California, Berkeley,
from Dr. Dan Kamen, a letter describing the reason and appropriateness of expanding new transition linesif I can put that in
the record.
Mr. MARKEY. Without objection, it will be included in the record.
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[The information was unavailable at the time of printing.]
Mr. INSLEE. Chairman Wellinghoff, I wanted to ask you to expand on your thoughts on how FERC could implementif it does
receive backstop siting approval, how it could implement a greenhouse gas performance interconnection standard for new transmission and/or some criteria associated with compliance or fulfillment of the Nations renewable energy goals.
Several of the other witnesses made reference to something of
that nature. Could you tell us how you think that could work?
Even though we have heard the physical explanation and that an
electron is an electron is an electron, how could this function?
Mr. WELLINGHOFF. Thank you, Congressman Inslee.
First of all, we have initiated a rule-making, and certainly as
part of that, all stakeholders would have an opportunity to provide
any proposals as to how to implement such a greenhouse gas performance standard. But in doing so, there are a couple ways it
could be done.
Certainly, in looking at the current emission permits from the
generation stationsfrom those, it is based on known items such
as model and configuration of the generator and its mission control
equipment and composition of fuel and the approximate run time
of the generator.
You could take from that also the annual emissions are typically
capped by a permit that can be used as the baseline to determine
compliance.
So we could take compliance, I think, from their current permit
applications, or new permit applications from generating stations,
and take that data, put it into a database and ultimately from that
use it to determine a greenhouse gas performance standard for particular plants that were into the interconnect.
Mr. INSLEE. So you can obviously do that for particular plants,
but could you effectively reference that to particular lines? In other
words, are the plants specific enough to the line that this type of
standard could be applicable to lines?
Mr. WELLINGHOFF. I think you would have to do that by regions,
because it is all a matter of sort of displacement. You are not really
delivering electron A to point B necessarily over an AC line. It is
really pushing one electron down the road.
So I think you would have to do it basically on a regional basis,
but I feel that we can do it, yes.
Mr. INSLEE. Thank you.
Commissioner Azar, I appreciated your comments, first off, about
the appropriateness of Federal backstop authority and its general
view, that I share, that it is appropriate. And I appreciate your
views on that because of your incredible background in this area.
But I also appreciate you making reference to the necessity of
considering demand-side issues when you do siting and planning.
And I want to make sure you are aware that in the ACES bill, we
do have a very specific policy that is a policy of the United States
and regional electrogrid planning to meet these objectives should
take into account all significant demand-side and supply-side options.
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Do you want to comment on that? Is it a good idea? Is there anything we should do to expand on that to make sure we consider
that is part of our planning process?
Ms. AZAR. It is a very good idea. And my point in raising it is
that those kinds of solutions are oftentimes best made at the State
level because the States are going to understand how they are
going to be setting up their distributed generation, how they are
going to be setting up their energy efficiency and conservation
measures, better than the Federal Government.
So that was the point I was trying to make with regards to why
I thought a State-led process would be better with regards to those
specific items.
Chairman Hibbard, I wanted to ask you about cost allocations.
I am told that recently there has been a 345kV end star reliability
project in transmission in the Boston area, and I am told that the
total cost of that was $334 million and 325 of that was spread
across New England in a cost allocation system; only 3 percent was
assigned directly to the Boston area ratepayers. So regional cost allocation seems to work at least in your area.
If cost allocation in general of that nature seems to be acceptable, should we not be able to fashion some other cost allocation
more widely?
Mr. HIBBARD. Certainly.
Thank you, Congressman. I think it is instructive when thinking
about the cost allocation issue to draw a very clear line between
transmission projects that are needed to maintain grid reliability
and transmission projects that are essentially for the benefit of
generation developers.
In the New England system, we have exactly that split. If,
through the regional planning process, lines are identified that are
needed to maintain reliability on a regional basisand the end
star line in Boston was exactly one such linethen we support the
socialization of costs across the entire region, because it benefits
everyone within the region to maintain the reliability of the grid.
So the cost of the end star line is shared by everyone in New
England. In Massachusetts, we are about half of the load; we pay
about half of the bill. Similarly, the project that Commissioner
Coen referred to in Vermont, other projects that are on the books
in New Hampshire and Maine and Connecticut, all focused on reliability of the grid, projects for which even though they are not
within Massachusetts, Massachusetts consumers will pay half of.
It is a vitally important component of cost allocation that when
looking at reliability there be a willingness within an integrated
power grid to share that cost across load.
The distinction I want to make here is that the issue of cost allocation for building lines to interconnect generation resources departs from that. We wantin order for our consumers to be protected, we want the cost of developing generation, including the
cost of meeting compliance measures, the cost of delivering power
reliably to load and making sure you dont adversely impact the reliability of the system to be borne by the generation developer and
included in the price that they are charging customers.
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Mr. INSLEE. I just want to comment, I think this is a new approach that some of us are suggesting, because there is a new national need just as important for reliability and that is to prevent
the Earth from turning into toast. So that is the reason for our
thinking.
Thank you very much.
Mr. MARKEY. The gentleman times has expired.
Again, there will be a second round of questions for all members
who are interested.
The Chair recognizes the gentlelady from the State of Wisconsin.
Ms. BALDWIN. Thank you, Mr. Chairman. And I want to direct
this question to Commissioner Azar.
One of the proposals that we hear a lot about on Capitol Hill is
the possibility of a 760kV line, often known as the transmission
super highway. And I would like to hear your insights on how a
765kV overlay might affect a State profile like a State of Wisconsin, and if you could, describe any concerns that you might have
that it would be detrimental to Wisconsin or others.
Ms. AZAR. Thank you, Congresswoman.
When you add a high voltage overlay into a State, you have got
to make sure that the underlying system is built up to accept that.
In Wisconsin, as both you and I have noted, we have spent billions
of dollars at this point in time designing a specific kind of system.
The American Transmission Company has designed a 345kV system. If there is a 765 overlay built into Wisconsin, it is essentially
going to mess up our very deliberate 345kV design. So we are going
to have to build up our underlying grid.
That being said, ultimately, if Congress gives us the mandates
and the group of States decide that the best thing to do would be
a 765 grid overlay, then we are going to need to accommodate that.
But I think there are better ways to do it.
The one-size-fits-all will likely be, in my estimation, probably
oversized and not cost effective. The one way in which I think
about a 765 grid overlay is, you have got somebody with a hose on
one side of the swimming pool and he has to get the water to the
other side of the swimming pool, there is a drain at the other side
of the swimming pool. There are two options he has got. One, he
can extend a hose, or the second option is, he fills up the swimming
pool. And the 765 grid overlay is more akin to filling up the swimming pool than extending the hose.
I think there are better ways to do it than one-size-fits-all. The
bottom line isthe primary message is, we need to do the calculus.
We can figure this out. A tailor-made answer is better than a sort
of a generic answer.
Ms. BALDWIN. Another proposal that we hear a lot about that has
been floated is making RTOs the final decision-makers with regard
to transmission decisions. And I wonder how you would analyze
this as an option. Do you think that RTOs have all the correct interests in mind when they would approach these sort of decisions?
Ms. AZAR. You know the decision-maker, in selecting the plan for
the grid, needs to be beholden to only one interest and that is the
public interest. The RTOs have got a lot of different stakeholders.
And they are very adept, and I compliment them on trying to balance the competing needs of the stakeholders.
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But I can speak for the Midwest Independent System Operator.
They actually have a contractual obligation to their transmission
owners to maximize the revenues of the transmission owners. And
when you have got those kind of interests, they will not be thinking
about the public interest when they are making their decisions;
they will be thinking about their contractual obligation to the
transmission owner.
So, no, I do not believe the RTOs should be the ultimate decisionmaker in this. That being said, their expertise with regard to planning and their planning engineers absolutely needs to be involved
in this process.
Ms. BALDWIN. I dont know if Mr. Coen or Mr. Hibbard have any
comments on that same question.
Mr. COEN. I would concur with Commissioner Azars comments
as well.
Mr. HIBBARD. As would I.
Ms. BALDWIN. Mr. Chairman, I dont have any other questions at
this time.
Mr. MARKEY. Great. I thank the gentlelady.
The Chair will recognize himself for another round of questions.
Let me move to you, Mr. Hibbard, so that we can put this out on
the table.
A lot of people, when they think of the solar revolution, they
think, well, we are going to bring it in from the deserts of the
United States and bring it into the cities of our country. And that
is true. And they also think that when we consider wind, we are
going to go out to the prairies of the United States and we are
going to bring it into the cities in order to provide the electricity.
But people dont really think about the oceans as much a source,
in the future, of renewable electricity. And you made a reference
to all of the Eastern States Governors from Maine down to Virginia, who are very concerned that their plans for bringing in wind
off of the coastline or other renewable sources might be undermined by this kind of a proposal.
Could you talk about that and talk about what your vision is
that is, all of these Governorsin terms of what the long-term renewable prospects are for the East Coast?
Mr. HIBBARD. Certainly. And thank you, Mr. Chairman.
In Massachusetts and I think throughout the New England region, we are strongly supportive of the climate goals that are inherent in the ACES legislation and the renewable goalscertainly, in
Massachusetts we areand we want to find the best way to meet
them.
We see offshore wind as being an enormous renewable potential
for the coastlines of our country, a potential that is very close to
load centers and can interconnect in multiple locations on the
lower-voltage-type networks that Commissioner Azar mentioned in
a way that will strengthen the reliability of the grid; and that it
representsthere is also a huge amount of onshore renewable potential up and down the East Coast.
The concern that we have is that byif you take, for example,
what is included in the Joint Coordinated System Plan, it would essentially dump
Mr. MARKEY. Could you expand on what that is?
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Mr. HIBBARD. Sure it is a multiregional plan that was doneI
think, coordinated by MISO.
Mr. MARKEY. Can you explain what MISO is?
As you all continue your testimony, we have CSPAN watching
this, and I think it would be a very interesting subject if it was actually communicated in English to the watching audience. So we
are going to be on acronym alert for the rest of this hearing, and
I am going to stop every time you use an acronym and every time
you make an assumption that everyone in the room knows what
you are talking about.
This is a very important issue that has very profound impact on
families, so please explain what you are talking about.
Mr. HIBBARD. Thank you, Mr. Chairman. I will try not to use a
lot of acronyms. I hope my Boston accent is OK.
Mr. MARKEY. You sound very eloquent. All of the other people in
the room have such funny accents, dont they?
Mr. HIBBARD. I agree.
Mr. MARKEY. How about those Red Sox and Yankees last night?
Mr. HIBBARD. I was going to, on a personal note, commend you
for your astute observation about the link between our national
economy and baseball because we are seeing signs that our economy is improving, and it occurred to me that at the same time, as
you watch the Red Sox once again sweep the Yankees over the past
few days, Ortiz is hitting home runs again.
Mr. MARKEY. I will give you 1 extra minute, so everyoneagain,
people wont know what you are talking about.
I gave a speech in Boston on Monday, and I said thatI said in
Boston that the economy was in a David-Ortiz-like slump, but that
I had faith that our economy and David Ortiz would be hitting
home runs again. Now, unfortunately, the Boston Globe ran a little
editorial the next day questioning my judgment in linking David
Ortizs recovery to the American recovery. That night David Ortiz
hit a home run. Last night David Ortiz hit a home run.
Today and yesterday we received all this new, positive commentary about the American economy. I am not saying it is directly
related to my speech on Monday. However, I do believe that, and
I thank you for pointing this out, that my comments were accurate.
So please continue, and we will add back the time onto your
statement.
Mr. HIBBARD. I will see if I can remember the original question.
There was what I think has gone hand in hand with the efforts
to push for expanded Federal oversight over transmission, there
have been a couple of major studies done recently by DOE and also
done by a group of regional planning entities across the country to
look at this idea about how do we actually expand the development
of renewable generation in the parts of the country where it exists
and move that across the multiple regions and deliver it into subregions.
So the Joint Coordinated System Plan was a very large technical
analysis of how to go about doing that, what the transmission network would look like, a super-high-voltage transmission network
would look like, to accomplish that result.
As part of that plan, when you look at it, one of the things it does
is, it would dump on extra-high-voltage lines on the order of
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severalthousand megawatts of power into New England at a very
high voltage.
Now, in addition to thatissues that Commissioner Azar has
mentionedthat would require a lot of building out of the transmission network within New England.
The concern I have is that we have a competitive market framework in New England that is absolutely essential to keep commodity prices low for our consumers. We have a need in the region
over the next couple of decades only on the order of several hundred to 1,500 megawatts for new power. If we were to administratively put in a large high-voltage transmission line that put that
quantity of power into our region, it would eliminate the market
signals that our local renewable resources require in order to move
forward with financing and development. That is the threat.
Our position is, we absolutely have to meet the carbon goals that
the country is now warming up to and that we need to meet in the
coming years. But the way to do that is to do it through ensuring
that the resources that are brought on line are those that make the
most sense to the customers from the standpoint of the delivered
price of electricity; and we think we can do that without this level
of Federal oversight.
Mr. MARKEY. Soif I may, so one of your concerns and New Englands concerns generally, those six States, would be that as you
put together regional plans to generate renewable electricity within
the region, offshore or onshorethere is a huge project up in
Aroostook County in Maine that could be, ultimately, in the thousands of megawatts if it is built out completely; but there will be
an issue there of getting that electricity down into the population
areas. But nonetheless it is contained within New England that
has had historic relationships and worked through all of the reliability, cost allocation and siting issues over the years.
But you would be concerned that if there was some superimposed
decision made to build transmission lines in from other parts of the
country, that that would then change the economics of developing
the renewables that are indigenous to Massachusetts and New
England whether it be in Aroostook County, Maine, or off the
coastline of New England.
I thinkand I will add this as wellone of the things that is not
well understood about the East Coast of the United States is that
when you go out 10 miles, 20 miles, 30 miles, 40 miles, you are still
only in 200 feet of water. When you go out that far on the West
Coast, you are outyou are miles deep in the ocean. And so in
terms of the siting issues along the East Coast, for wind especially,
you can go out miles and miles and still be just hundreds of feet
from having to site these wind facilities; and then with superconducting technologies, just bring them in to the shore and hook
them into the preexisting grid that already is there in New Englandwith the States having to work out, of course, what the cost
allocation is, but knowing that all of New England, for example
and New York, for that matter, and New Jersey and Maryland are
all committed to resolving and cooperating in the production of
new, renewable energy resources.
So just opening up this whole question of the remote areas of
Maine, for example, most people dont know that 95 percent of
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Maine is forest. It is woods. It is rural. So there is a lot of opportunity there as well, and it is a huge State as well. So I just raise
that issue because we have to strike a balance here, because we do
want each regions indigenous resources to be developed as well.
Let me just stop there and recognize the gentleman from California, Mr. McNerney, for his questions.
Mr. MCNERNEY. Thank you. I was expecting you to recognize Mr.
Inslee first.
Mr. MARKEY. He has already been recognized for his first run.
So I think it is appropriate for you to be recognized.
Mr. MCNERNEY. Thank you.
First of all, I want to thank Chairman Wellinghoff for his hospitality this week. And I think your testimony was rational. I noticed
one thing though. You were seeming to advocate that the Fed has
a significant, large role and the State regulators were all saying,
Well, the States should have a larger role and the Fed should have
a littler role. So I guess that is not too surprising.
I wanted to ask you, though, do you think that the U.S. faces significant technical hurdles, or do you think it is mostly political hurdles to improving our national grid?
Mr. WELLINGHOFF. Thank you, Congressman McNerney.
First, on the issue of the Federal role, I really believe that we
should primarily defer to the States. I think what we need is to
have Federal pressure to ensure that the States can move forward
with interconnection-wide regional planning, siting, cost allocation.
But I largely agree with Commissioner Azar and her testimony.
I think really it needs to be primarily informed by the States.
We certainly, though, have to have some entity who would overlook that State activity to ensure that the national goals are also
incorporated into what the States
Mr. MCNERNEY. And I like Ms. Azars suggestion that we lock all
the State people in one room until some decisions are made. But
I dont think that that is really going to happen.
Mr. WELLINGHOFF. But on your second question with respect to
whether it is technical or political, it is a good mix of both. And
on the technical side, I think it is important to understandand
I know that New England and the eastern seaboard States are very
interested in offshore wind, and I support offshore wind; that is a
great resource.
What we have to understand is, they are not an island either;
they are interconnected to the entire eastern interconnect. So, for
example, if we had offshore wind from Rhode Island, New Jersey,
New York all the way up through New England put in place, developed, say, 10 gigawatts, 10,000 megawatts of wind put into the
East Coast, we could not simply, as I understand it from my reliability engineers, simply interconnect that into the existing grid.
Wein fact, if we had that happen, and we had as little as perhaps
2,500 or 3,000 megawatts of that go off line, we could black out
Florida.
So we ultimately need to look at how to strengthen the entire
interconnect so that all the regions, in fact, can meet the renewable
goals and can do it with their local renewable resources and with
distance-renewable resources, if necessary.
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Mr. Halvey, I certainly appreciate your work toward the Western
region. I understand your desire to streamline the permitting process. Do you have any specific recommendations along those lines?
Mr. HALVEY. Yes, I think a couple of recommendations, one because of the work that we are doing with regard to the Western
Renewable Energy Zones project. We think it will became clear
very quickly which areas represent the most desirable, the richest
and the most developable renewable resource zones. Given that
identification, we think there is the opportunity to prioritize those
areas. Where they exist in concert with federal lands, we believe
there should be a priority given to the permitting on those areas.
Same thing with the transmission lines that would be necessary
to move that power from those renewable energy zones to the market centers where it is needed.
One of the other aspects of the project is that we will identify,
conceptually at least, where the transmission lines need to be in
order to use that power.
Mr. MCNERNEY. So you are really addressing the prioritization,
not the actual process of permitting?
Mr. HALVEY. We think it is both. One recommendation is the
prioritization. The second is to look at the requirements and certainly limit the number of requirements that agencies have to go
through that have no value added in terms of that permitting process, that there is a way to protect wildlife, that there is a way to
address environmental values, that there is a way to go through
these processes and not take the kind of time that we are seeing
with many of these applications.
Mr. MCNERNEY. I agree. And I just want to remark on Mr.
Hibbards optimism that offshore wind can be as significant as it
can. And the fact that it is proximate to load centers, that is an
important consideration as opposed to putting in a lot of transmission. So I appreciate that.
And also the observation about just putting in large transmission
capacity can have a negative impact on renewables. So those are
appreciated, those comments are appreciated.
And with that, I will yield back.
Mr. MARKEY. Gentlemans time has expired.
The Chair recognizes the gentleman from Washington State, Mr.
Inslee.
Mr. INSLEE. Thank you. I wanted to read just a little portion of
Commissioner Azars testimony and ask a couple of questions to
the three of you about it. Commissioner Azar said Congress can
and should play an important role in bolstering and catalyzing
State efforts by setting clear mandates and guidelines as well as
strict deadlines for State and regional transmission planning efforts. If these planning efforts fail to meet these mandates or deadlines, Congress can set up additional backstop authority for Federal
agencies to take action and ensure that projects identified in the
regional planning efforts move forward. I am paraphrasing now.
Examples of the type of leadership that would be helpful include
the following, and the commissioner lists four things. But the fifth
thing is clear and powerful backstop authority for Federal action
to plan for, approve and site transmission lines that are identified
as vital in the State-led transmission planning process.
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I agree essentially with that statement. And I think a bill I have
introduced heads in that direction. The question I would like to ask
Mr. Hibbard, Commissioner Azar and Chairman Wellinghoff is, Mr.
Hibbard has identified this issue that he doesnt want to see offshore wind intruded upon by, say, coal coming in from Ohio or
somewhere else. And I believe if we do have this backstop authority, we can and should build something in that would make sure
that we preserve our goal of enhancing low carbon-based fuels as
part of what you might think of as bonus backstop Federal authority.
Is there a way to do that? And if you could give us your thoughts
on the best way to do that. I will just start with Mr. Hibbard. If
we were going to adopt this backstop Federal authority, what
would you encourage us to do to prevent the scenario that you fear?
Mr. HIBBARD. Well, let me start by saying I think that the legislation as it stands contains that backstop authority. By setting a
cap on carbon and by setting a floor on renewable resource development, you are providing competitive markets the market signal
they need to spur the development.
The question you are posing is what if that is not enough? What
if at some point we look and we see that, for whatever reason, we
are not getting the level of development of renewable and low-carbon resources to meet our clear caps and our clear floors?
What I would urge all of you to consider is to try to come up with
a framework that does so while maintaining the importance of competitive market solutions.
Again, under FERCs leadership, our wholesale competitive markets in New England are critical to keeping prices low to consumers, and not violating that is extremely important. Now, are
there ways to do that? The one example I can give you is that in
Massachusetts we recently enacted legislation that requires our
distribution utilities to enter into long-term delivered-price contracts with renewable power sources so that the utilities themselves would issue solicitations and would select the lowest-cost option for meeting that goal of the Massachusetts State Legislature.
You could consider something along the same lines where at
some point you could evaluate whether or not the country is heading towards meeting its carbon cap and its renewable power floor,
and if there is a deficiency identified, have FERC step in in essentially a backstop planning mode and require that regions, RTOs,
utilities or interconnecting transmission owners issue solicitations
for long-term contracts for renewables on a delivered-price basis.
Mr. INSLEE. I want to make sure, if you could kind of wrap up,
I want to make sure we get to the other two witnesses.
Ms. AZAR. Thank you, Congressman. I am optimistic that if Congress sets the goals and sets the process and has a strong backstop
authority, that we will be able to get this done. If we dont get it
done, again, I think that is when the role of FERC steps in. So if
FERC for instanceif the States came up with a specific plan and
the plan did not meet the objectives of Congress that Congress set,
I think there needs to be essentially an overseer. And I personally
would be fine with that being the Federal Government saying, yes,
this plan actually meets those objectives. But the plan itself has to
be designed by the States.
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Mr. INSLEE. Mr. Chairman.
Mr. WELLINGHOFF. Thank you, Congressman Inslee. Just to respond to Mr. Hibbard, I want to make very clear that FERC is very
committed to competitive market solutions. We wouldnt choose to
do anything that would be counter to that. But I think when we
look at transmission, there are some nonmarket barriers, and those
include the issues of siting and cost allocation. And, again, agreeing
with Commissioner Azar, I think it is necessary to allow the States
to move forward in those areas to see if they in fact can do some
interconnect-wide planning collectively, that they are moving forward to do that both in the eastern and western interconnects, and
then see from that if the siting and cost allocation can be agreed
upon. But if not, we have to I think have that pressure, that Federal pressure behind it to inform that process, to make sure that
it moves forward to ensure that we meet our national goals.
Mr. MARKEY. The gentlemans time has expired. The Chair recognizes the gentlelady from Wisconsin.
Ms. BALDWIN. Thank you, Mr. Chairman. When I hear the discussions about connecting Dakota wind generation through transmission to load centers on the east coast, I sort of feel like Wisconsin could become a State that has an extension cord just running through it. Maybe I should use the swimming pool analogy instead. But that is the image that it conjures up for me. And I worry
that it disincentivizes distributed generation.
And as I pondered in my opening statement earlier this morning,
how we propose to pay for the transmission upgrades that are coming down the pike is a critical question. Will those who do not receive the extensive benefits of this transmission have to pay for the
cost of traversing lines across the country?
The ratepayers that I represent, as you have already heard, have
supported their share of more than $2 billion of new investments
in the Wisconsin transmission system. Clearly there are transmission technology decisions that need to be made, and there are
cost allocation decisions that need to be made. But I guess I would
ask the whole panel and anyone who wants to comment, how we
best protect those ratepayers, how we set up the system in a way
to best protect those ratepayers who will not be receiving the huge
benefits of this transmission buildup.
Mr. HIBBARD. If I may jump in, Congressman. I think the model
that I have been discussing here this morning of requiring that the
cost of transmission associated with moving generation from the
generation source to market be included in the price that is offered
to consumers that will be purchasing it is our first line defense on
that. So that if transmission were coming from the Dakotas and
being put into New England, the price of that would include not
just the cost of developing the generation but also the cost of the
transmission. We can then compare that price to other generation
prices available to us within the New England market for local renewables, for demand resources, or for more traditional generation,
and that ultimately the projects that will go forward will be the
ones that benefit ratepayers.
Ms. AZAR. As far as cost allocation I dont think we can actually
speak to what would be the best cost allocation at this point in
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time. It should be tailor-made to the grid that is essentially
planned. As I mentioned in my initial comments, if you pick a specific cost allocation right now, it is likely to steer the plan in a specific direction. And I would rather have the physics drivethe
physics and the economics drive the plan, and then we can figure
out how to pay for it after the plan is designed. So that is my recommendation.
Mr. COEN. As a Vermont commissioner I would concur with my
colleague from Massachusetts. For the naval perspective, we would
be looking to take a position case by case as it comes forward.
Mr. WELLINGHOFF. And, again, I would agree with Commissioner
Azar. We should not dictate a particular method, number one. But
number two, my preference would be to have the States try to work
it out ultimately. And if those States that were involved in the line,
the line went across the State, but that State could make a case
if there wasnt real benefits to that State. So hopefully that solution could be worked out and ultimately resolved in a collaborative
way.
But ultimately, at the end of the day, if the decision had to be
made and it couldnt be made by the States and the region collectively, I think it would be appropriate for FERC to determine that
allocation; and the allocation, in fact, may decide that a particular
State like Wisconsin did not benefit, depending upon the definition
and breadth of the term benefit from a particular line, and, as
such, may not be allocated costs.
But, again, you have to provide the flexibility for that kind of a
decision to be made. You cant restrict specifically or dictate in a
rule how that has to be done. It has to be in a very broad, in a
broad way that allows FERC to meet its mandate to ensure that
rates are just and reasonable.
Mr. MARKEY. OK. Let me now turn and recognize once again the
gentleman from California for another round of questions.
I had a question for Commissioner Azar. You had some recommendations for congressional action to facilitate projects, transmission projects. Do you feel that those recommendations are widely shared across the country by State commissioners.
Ms. AZAR. I have not had the opportunity to float that idea by
my colleagues, so I cant speak to that.
Mr. MCNERNEY. Well, that is my only question and I yield back.
The Chair will recognize himself just to pursue a few questions
here. Mr. Hibbard, perhaps you could deal. Mr. Wellinghoff said
that if there was 3,000, 5,000 megawatts of wind brought in from
offshore up in New England, that it could cause reliability problems down in Florida. But the converse could also be true with
what Florida Power and Light and, hopefully someday, the Southern Company is doing in Florida to generate renewable electricity
could cause reliability problems up in New England. How do we resolve that issue?
Mr. HIBBARD. Thank you, Mr. Chairman. The issue, the engineering issue that the Chairman refers to is really one of the size
of the transmission and the associated capacity being put onto the
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transmission network in the region. So for example, if as Commissioner Azar was referring to you have a 765 kv line and it is
Mr. MARKEY. You know, can you imagine the audience right
now? OK, what is that? What is that?
Mr. HIBBARD. If you have a really extra high-voltage line
Mr. MARKEY. What does that mean? What does that mean?
Dropping, what does that mean?
Mr. HIBBARD. Think of it this way.
Mr. MARKEY. OK. Try again.
Mr. HIBBARD. When a transmission line interconnects or it hooks
up with the transmission system in New England, it looks like a
generating facility. So if you have a really high-voltage line it looks
like a really big power plant.
Mr. MARKEY. So when people are riding down the street or out
on the highway, and they look off and they see something, explain
it in those terms just so they can understand why peoples sensibilities might be affected by what it is that is constructed, so that
you can put it in those terms, because 765 kilovolts doesnt really
mean anything to people.
Mr. HIBBARD. What they would actually see is a really big tower.
But from the standpoint of how it affects the grid it just puts a lot
of electricity onto the grid in a single location. And if that were
suddenly to disappear, then there could be problems if the transmission system cant withstand it, and cause the type of widespread outage that he was referring to.
The value I see in offshore wind technology along the eastern
seaboard is it completely overcomes that problem, because it can be
built out incrementally at lower voltages that hook on individual
lines into the major load centers along the east coast so that we
can build it out without the need for increasing the reliability, the
potential reliability risk on the underlying transmission system.
So that, while I think if we were to take the path of interconnecting 3,000 megawatts in a single pointthat would be the
problem that the Chairman is referring to but that offshore wind
has the potential to be dispersed on a much more widespread geographic basis and actually enhance the reliability of the grid.
Mr. MARKEY. Mr. Wellinghoff, would that solve your Florida
problem, or, from our perspective, our New England problem?
Mr. WELLINGHOFF. I am not sure that it would, Mr. Chairman.
Mr. MARKEY. Can you explain why?
Mr. WELLINGHOFF. I am not sure that it would, Mr. Chairman.
Ultimately, even though you may disperse the 3,000 megawatts
over a number of locations, the issue is going to be the variability
of that wind and the effect of that variability on reliability across
the interconnect with respect to frequency. And I have actually directed our reliability division to commence a study that will look
at this issue and determine how that incursions infrequency can affect reliability across both the eastern and/or western interconnects.
Mr. MARKEY. Mr. Hibbard, you are back at a FERC hearing right
now; what are you going to say to Mr. Wellinghoff when they raise
that issue?
Mr. HIBBARD. First I will commend the Chair and FERC for looking into reliability.
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Mr. MARKEY. Good.
Mr. HIBBARD. And I would encourage them to consider in that
study the difference between variability of 3,000 or 4,000 or 5,000
megawatts being connected at a single point to the variability, and
the impact of it being spread over a very wide geographic region.
And whatever the outcome is I am certain it will be the right answer.
Mr. MARKEY. And would you agree that there could be a distinction made between a concentrated renewable source and something
that is dispersed over hundreds or thousands of miles?
Mr. WELLINGHOFF. Mr. Chairman I try to not practice electrical
engineering without a license, but I would agree there may be a
difference between the two.
Mr. MARKEY. Thank you. And by the way, would those same
issues exist in a Western State, for example, that might want to
produce 3,000 or 4,000 or 10,000 megawatts of renewable in their
State and try to move that, for example, into a metropolitan area
in another State or several other States? Would it create the very
same issue?
Mr. WELLINGHOFF. Yes, it could be applicable in either interconnect.
Mr. MARKEY. So it is an issue that we ultimately have to resolve
here. I think that going back to this 765 kilovolt issue is an important thing to understand. Because in my experience, at least on
this committee for 33 years, there are corporate entities that really
think big; the bigger the facility, the bigger the plan, the better it
is. And then there are others that think, well, maybe we can disperse the way in which we generate electricity. Maybe we can do
this in a wayand here it is going to be increasingly important
to generate solar and wind and other renewables from more dispersed sources. And that is to a certain extent where the smart
grid comes in so that we are doing it. We not only need a smart
grid, but we need smart people planning a smart grid so we dont
overbuild it and put those burdens back on to the consumer.
And we saw all of that happen back in the 1970s and early 1980s
where all of these nuclear power plants that were guaranteed to be
needed by the yearif we didnt build 500 new nuclear power
plants, they told us, by the year 2000, we would have blackouts all
over America.
So we need to think big and put all these costs on the shoulders
of ratepayers all across America. In the New England region we
really suffered from the overenthusiasm, I will say, of these big
central planners. And so we have to be careful here that those
types ofwe will call it plannersdont control this process, because it is just the opposite era that we hope we are entering in
terms of the development.
And I can just feel the hoofbeats of the large central planners
moving towards this whole concept. And after 33 years, I am kind
of aware of what can happen. There is an old saying that a smart
man learns from his own mistakes and a wise person learns from
other peoples mistakes. But at my age and service in Congress, I
am an expert in both areas of mistakes, and so I just dont want
to see that happen again. And that overbuilding issue is really
something that is quite important to me.
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So if you could, Ms. Azar, could you go to the question of AC/DC.
And first of all, explain to our viewing audience what that is and
why different results occur depending upon the decision which is
made.
Ms. AZAR. Yes. The alternating current system is the primary
transmission grid we have right now, and it is completely interconnected. So when you put an electron on that AC grid it is going
to go to the path of least resistance. With models, you can predict
where it is going to go but you cant direct it. The electron goes
where it wants to go. On a DC line it is actually very directed. It
has one direction.
Mr. MARKEY. So DC means direct current.
Ms. AZAR. Direct current, thank you. The direct current line. You
have a lot of control over it. The electron goes in one direction. You
know, for instance, when you drop an electron on one end of a DC
line, you know where it is going to end up. It is going to end up
on the other side of the DC line. Whereas in an AC grid, if you
drop an electron at the same point, you are not sure what path it
is going to take. The only thing you know is you are pulling power
off at certain locations. So there are two very different models.
Mr. MARKEY. And for the purposes of our discussion today, how
does that instruct this discussion in terms of the goals that we are
seeking to achieve.
Ms. AZAR. I can give two answers to that. One is we need to
know what the goals are from Congress. And then we are going to
be able to decide which of those, or the combination of the both of
them, will solve the problems that you are going to put forth to us.
I can tell you from a personal perspective that the DC lines, if
your problem is trying to get power from a fairly localized location,
lets just say in the Dakotas, and you are trying to get it far east,
as long as you are over 400 miles long, DC lines will likely be a
very good solution to that problem.
Mr. MARKEY. Are they more or less expensive?
Ms. AZAR. That is a good question. As a general rule I would say
they are less expensive, but it depends on what kind you are building.
Mr. MARKEY. And that should be a decision, in your opinion,
made by the regions.
Ms. AZAR. That is correct.
Mr. MARKEY. And that could actually turn on how much burden
is placed upon consumers in terms of their electricity bill each
month.
Ms. AZAR. That is correct.
Mr. MARKEY. Mr. Wellinghoff, if I may, you heard Mr. Hibbard
and others talk about what the impact would be of the WaxmanMarkey bill on the marketplace. The signal will be sent to move
away from carbon-producing electrical generation; there will be a
national renewable electricity standard now as a result encompassing an additional 20 States. And he largely believes that that
is going to now force States on a regional basis, because of these
national goals, to reach a combination on these new lines, and that
the Federal Government is actually going to be less needed in the
future, perhaps with the exception of the Federal lands issue, to resolve these issues.
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What is your response to that in terms ofbecause we are trying
to create a market-based response. And I will just give you an analogy and perhaps you couldor an analogous situation and perhaps
you could reflect upon it.
After we passed the 1996 Telecommunications Act, all of a sudden there was an explosion of broadband deployment across the
country. Telephone companies, cable companies, others who had
been telling the local PUCs, oh, it is not in fact cost-effective to be
deploying fiber optic or broadband technology. We are now in a
mad race to do so because there is now a new Federal law which
is placing a premium upon it, and by the time we reached 2000 we
actually had a dot-com bubble because of the vast and very rapid
deployment of broadband across our Nation.
Now, we created thousands of new companies. Some survived,
some didnt. But it was great for our country in the long run. Is
there any reason to believe that the legislation, as it is now drafted, wont unleash a similar and very, very significant deployment
of renewables across the country and kind of press regions and individual utilities to finally resolve their longstanding, call itno, I
wont call it opposition, I will call it skepticism. Because I saw it
in the telephone sector, I saw it in the cable sector. They moved
overnight to challenging their perspective.
Do you think the legislation will do that, and, as a result, perhaps this Federal role isnt going to be as needed, with the exception of the Federal lands issue?
Mr. WELLINGHOFF. Well, certainly as you are aware, Chairman
Markey, there are approximately 29 States now that have renewable portfolio standards. In fact, my State of Nevada is one of
those. We have a standard that is 20 percent by 2015, so it is far
ahead of most State standards. And those standards have in fact
created markets, created markets for renewable energy, and moved
renewable energy into those markets very effectively. So I think
that is happening already on the one hand.
But on the other hand, I have people coming into my office who
tell me that wind is being curtailed in the Midwest because we
dont have adequate transmission. So that tells me we have a problem. It is not simply the markets are creating these new markets
for renewables, it is the need to somehow ensure that this transmission gets built to make a deliverable. We need to make a deliverable.
Mr. MARKEY. You are saying that the States are not cooperating
in the Midwest in the transmission of wind.
Mr. WELLINGHOFF. No, I am not saying necessarily the States or
the Federal Government. I think it is a combination of the fact that
we have certain barriers, which include issues of planning, siting,
and cost allocation that need to be relooked at in ways that we can
facilitate more transmission for renewables.
Mr. MARKEY. You are basically saying the Federal Government
needs more authority because the States arent doing the job in
moving that wind around in the Midwest.
Mr. WELLINGHOFF. I am saying that ultimately what we need to
do is ensure that the States understand
Mr. MARKEY. And I appreciate that.
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Mr. WELLINGHOFF [continuing]. Those priorities, and that in
fact
Mr. MARKEY. But you are saying they will need that,in addition to the new law which we are passing, which will create all
those incentives for utilities to move and for states to move, you
are saying that that is not going to be sufficient; that you believe
that the States themselves have some built-in inertia, and some of
those utilities do as well, and that because they dont move, even
though we passed this new law and created these high goals that
have to be met by national mandate, that we will still need the
Federal Government to come in as a club. Is that what you are saying?
Mr. WELLINGHOFF. I am saying that I am not blaming the States,
nor am I saying the Federal Government is the panacea. I am ultimately saying
Mr. MARKEY. Right. But here is the problem. In terms ofand
I appreciate what you are saying, and you are engaging in a bit of
terminological inexactitude which is necessary for to you maintain
good relationships with the States, and I appreciate the position
that I am putting you in. But at the same time, we are going to
create a brand new law here that is going to affect all these States.
Mr. WELLINGHOFF. That is correct.
Mr. MARKEY. So we need some evidentiary basis for preempting
the States that is based upon a Federal perception of the problem
that exists in these States. So while we wont use the word
blame, we need to find some way in which we pinpoint what it
is that is occurring that is the problem, and then we can tailor a
solution to it. But we cant deal with it in kind of broad generalities. We need to have the specifics, and then even in the report
language of the legislation we can ensure that we are explaining
the problem as it exists, lets say, in a particular region. And here
we are talking about the Midwest and the fact that wind is not
moving around, even though it is readily available. So pinpointing
what that problem is helps us then to tailor the language to reflect
that problem.
So maybe you can elaborate a little bit on that Midwestern problem where the bottlenecks are, what causes it; and then we can
kind of contemplate, cogitate, on what might be necessary.
Mr. WELLINGHOFF. And I am suggesting part of the bottlenecks
are the fact that, number one, FERC really doesnt have the authority to allocate across boundaries. So between Misol and PGM,
for example, we dont have the ability to allocate costs of transmission across these boundaries, and, as such, we are not really
getting the types of transmission built.
And I think you are going to hear from Mr. Welch from ITC in
the next panel, and he has a very interesting transmission project
that I would commend you to explore this with him further, because he is in the Midwest trying to get large amounts of wind out
of the Dakotas into the Chicago area. And I think one of his issues
he is talking about is cost allocation across two regions.
So what I am suggesting ultimately is that Congress needs to
look at an entire structure of planning, siting and cost allocation
that is initially deferred to the States, and I would say that the
States should in fact ultimately solve that problem. But if they
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cant, then the pressure should be there to allow the Federal Government to step in if necessary.
Mr. MARKEY. Thank you. Mr. Wellinghoff. I was the author in
1992 of the wholesale transmission access provisions in the Energy
Policy Act that, for the very first time, gave the FERC the ability
to force utilities to stop blocking requests for open and nondiscriminatory access to wholesale transmission lines so that there could
be more competition in that area.
The FERC then built upon that new law that I created and
issued a generic order 888 on transmission access, which is an historic order, and that is based upon my 1992 law.
So I am very sensitive to this issue, but, again, I dont think we
should tailor something that goes beyond what is needed. And I say
this to you, Chairman Wellinghoff, that part of the problem we
have up in Massachusetts, and New England as well, is theand
it is not you, it is your predecessor of FERC that has just left officebut preempting our State and local governments from granting FERC siting authority on wholesale electric transmission lines,
that issue is illuminated by the fact that the FERC has seemed to
be completely unresponsive to our local concerns when it comes to
the siting of the liquefied natural gas facility in Fall River, Massachusetts. I have an LNG facility in my district in Everett, Massachusetts.
Massachusetts, working with the Federal Government, has licensed two LNG facilities about ten miles off of our coastline to
bring LNG into our market and into the New England market. It
is upwards now of 30 percent of the natural gas that we use in
New England, and we support LNG and we have licensed two facilities.
But notwithstanding Massachusetts saying to the FERC, we
dont need another one on land, we are doing it offshore and we
have licensed them, the FERCnot your FERCbut the FERC up
until this point has been saying, no, you are going to have another
one in Massachusetts. And even that decision itself could affect the
amount of renewables that we need. Notwithstanding the fact that
natural gas may be half of the carbon in its use as coal, it is not
nearly as good as renewables will be, but it is going to affect our
marketplace by having that be forced upon us.
And the FERC has been pressing that now for the last 4 or 5
years. So that kind of calls into question kind of this Federal onesize-fits-all process, where, even when the State is saying back off,
the FERC continues to come in and say, no, this is what you are
going to have for New England. So how do we reconcile that, Mr.
Wellinghoff?
Mr. WELLINGHOFF. Well, Mr. Chairman, I am not suggesting a
one-size-fits-all process. Again I am suggesting, unlike the LNG
process, where FERC has the primary and initial responsibility
with respect to siting and permitting, that in fact States be given
the initial opportunity in this regard. And that opportunity I think
should be given all the tools necessary for it to succeed.
Mr. MARKEY. Thank you, Mr. Wellinghoff.
Are there other members who wish to ask questions of this
panel? Let me recognize the gentlelady from Wisconsin.
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Ms. BALDWIN. Thank you. Just one more rather big question. But
I appreciate the Chairman for asking our witnesses to make this
understandable for a viewing audience.
We had a discussion recently of follow the electrons. And I actually would like to pose a question about following the money. I ask
anyone who wants to give just a very brief primer on the economics
of transmission, is there a guaranteed rate of return; how is that
determined; who decides; and, if so, what is that guaranteed rate
of return for transmission?
Mr. WELLINGHOFF. Congresswoman Baldwin, I will attempt that.
I like to believe in rate-based regulation and transmission is not
first of all, you have to understand transmission is not a market
item, it is an item that we have a limited number of entities who
are putting in transmission, and it is under a rate-based cost service scheme.
So they are authorized a return on their investment and they
have an opportunity to earn a return. But to earn that return they
have to manage their expenses and they have to manage their operations in an efficient way to ensure that their expenses match
what their projections are, so that their return comes out to the
level that they hope to achieve. The regulators, whether it be a
State regulator or a Federal regulator, would authorize a level of
return on equity that would be authorized. But, again, that is only
an opportunity to earn that level of return.
Ms. BALDWIN. Do you have any averages of what that rate of return might look like?
Mr. WELLINGHOFF. I am sorry; what it might look like?
Ms. BALDWIN. What is the average rate of return? I know there
are variables. A ballpark.
Mr. WELLINGHOFF. I can submit that to you in writing but I dont
have an average today for you.
Ms. BALDWIN. OK. Thank you.
Mr. MARKEY. I thank the gentlelady. And I thank all of our witnesses. You have been absolutely fantastic.
And you, Mr. Wellinghoff, I want to tell you how much we appreciate your willingness to take on this job. This is one of the toughest jobs we are going to have in America. You have an outstanding
record. And I have already had an extensive conversation with you
privately, and I really am very very glad you have this job. I think
you are going to do a tremendous, tremendous service to our country there in that position. It is very sensitive. It is going to require
people like you who are willing to spend the time to get this right
so we have a long-term solution. And as we are going forward, especially over the next week or so, we are going to need some specifics to help us to think through this issue in terms of where the
problems have been, what has caused the problems, and what
would be needed in order to correct those problems.
We will need some examples and some specifics with regard to
what has been used as a blocking mechanism to the resolution of
these regional issues, because we want to get at that issue. We
want to have real competition out there in the marketplace. So for
you especially, Mr. Chairman, we hope that we can work with you
in the next week. You have an outstanding staff and you are an
outstanding individual and I think we can accomplish that.
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Mr. WELLINGHOFF. We would be happy to do that Mr. Chairman,
and thank you very much for your kind words.
Mr. MARKEY. I thank you. What I am going to do now is to work
now in reverse and I am going to give each one of you 1 minute
to tell us what you want us to remember as we consider this issue
over the next week.
And we will begin down on this end with you, Mr. Halvey. You
each have 1 minute apiece.
Mr. HALVEY. Thank you, Mr. Chairman. I think the two things
that we would emphasize are the issue of supersizing, which relates directly to the cost allocation issue that we spoke about. It
doesnt make a lot of sense for us to use up whatever goodwill we
might have trying to locate a lineor, excuse me, locate a line that
is undersized.
The second thing is I think the Federal lands issue, the permitting issue, I have elaborated some on that. But this we see as a
very large impediment. Those would be the two things that I think
we would like you to bear in mind.
Mr. MARKEY. Thank you, sir. Mr. Hibbard.
Mr. HIBBARD. Thank you, Mr. Chairman. I would just say that
certainly from our perspective in the Commonwealth, we completely agree with the goals of the ACES legislation. We absolutely
have to address the carbon issue and we have to address it now.
What I would urge you to consider from the standpoint of transmission is to try to retain the competitive market structure that delivers benefits to our ratepayers in the designs that you implement
going forward. the carbon cap that provides a value or cost, additional marginal costs associated with allowance purchase for fossil
generating resources, and a renewable portfolio floor that provides
additional revenues to renewable resources should provide the financial incentives needed to get the renewables and the associated
transmission built. And that we want to maintain the distinction
between who is responsible for paying for transmission if it is a
generating facility, and who is responsible if it is needed for reliability.
Mr. MARKEY. Thank you. Commissioner Azar.
Ms. AZAR. Thank you. Number one, define the goals that we need
to be with the transmission grid.
Number two, define a State-led process by which we can meet
those goals. One of the primary aspects of that needs to be that the
decision maker must be beholden only to the public interest.
Number three, ensure there is Federal backstop authority so that
we get our job done,
Umber four, dont do harm. And with regard to that dont define
a specific technology and please dont define a cost allocation process.
Mr. MARKEY. Thank you. Mr. Coen.
Mr. COEN. Thank you, Mr. Chairman. Very, very briefly, I just
want to reiterate that the States are here to help. We would like
to work closely with your committee in developing some transmission planning, and that Federal preemption of transmission
siting should only be used as a last resort.
Mr. MARKEY. Thank you. And, Mr. Wellinghoff.
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Mr. WELLINGHOFF. Mr. Chairman, thank you. I would suggest
that hopefully you come away with this, number one, that we are
not as far apart as we initially seemed to be, I think, when we
started out in our testimony. But we all have the same goals: to
reduce carbon and to ultimately develop as much renewables as
possible to do that.
But I think we need to remember that there are nonmarket barriers that we need to look at how to get that development done.
And as part of those nonmarket barriers I think we need to do, put
a construct together that would allow the States to initiate the
processes of planning, siting and cost allocation, to have the transmission developed to deliver renewables. We also have to have that
back pressure of the Federal Government standing there, being
able to step in if necessary to make it happen and get it done.
Mr. MARKEY. Thank you, Mr. Wellinghoff, very much.
And in the spirit of what Mr. Wellinghoff said, we may not be
as far apart as the initial statements indicated. Lets work towards
that goal. Time is of the essence, so all of these conversations now
continued outside of this hearing room over the next week or so
would be very helpful to us. With the thanks of the committee, this
panel is dismissed, and we will ask the next panel to come up to
the table.
Mr. MARKEY. We thank you all for being here and we apologize
for the delay. This is obviously a very important issue. We may be
writing the transmission rules for the next generation of electricity
generation in our country. Over the next couple of weeks we will
see if that can be accomplished, perhaps it can, perhaps we cant.
But your testimony is going to be central to accomplishing that
goal. We could not do it without your participation.
We apologize to you for the delay in your panel being recognized
and for it being Friday afternoon, getting later as the minutes transpire.
STATEMENTS OF RALPH IZZO, CHAIRMAN AND CEO, PUBLIC
SERVICE ENTERPRISE GROUP; JAMES NIPPER, SENIOR VICE
PRESIDENT, AMERICAN PUBLIC POWER ASSOCIATION;
GLENN ENGLISH, CEO, NATIONAL RURAL ELECTRIC COOPERATIVE ASSOCIATION; REID DETCHON, EXECUTIVE DIRECTOR, ENERGY FUTURE COALITION; JOSEPH WELCH, PRESIDENT AND CEO, ITC HOLDINGS CORPORATION; CHRIS MILLER, PRESIDENT, PIEDMONT ENVIRONMENTAL COUNCIL;
AND DAVID JOOS, CEO, CMS ENERGY CORPORATION
Mr. MARKEY. We will begin with Ralph Izzo. He is Chairman,

President and Chief Executive Officer of the Public Service Enterprise Group, Incorporated. He is a leader within the utility industry in the public policy area. We thank you once again for being
here. Mr. Izzo, whenever you are ready please begin.
STATEMENT OF RALPH IZZO
Mr. IZZO. Mr. Chairman, members of the subcommittee, thank

you for this opportunity to appear before you today to testify. PSEG
distributes electricity and natural gas to more than 2 million customers in New Jersey, and owns and operates electric generating
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capacity in the Northeast, Mid-Atlantic and Texas. PSEG has long
supported policies to promote renewable generation.
We are planning major investments in solar, offshore wind generation, and in energy storage technology that will make renewable
energy more competitive.
The question today is not whether we should vigorously promote
renewable generation, but how. Specifically, how should we use
transmission policy to promote renewable generation at the lowest
possible cost? This would include not just Federal siting authority,
but decisions about transmission planning and cost allocation that
are fundamental to determining how much transmission is built
and where.
There are two competing views on this. One view which I strongly favor is that government should establish prices for externalities
such as the cost of emitting greenhouse gases, and let market
forces determine which technologies and which locations are most
promising for investment. This is the approach taken in the landmark ACES legislation. It establishes a price for carbon through a
cap-and-trade program and a market-based subsidy for renewable
generation through the Renewable Electricity Standard. With these
price signals developers can compare the cost of renewable generation in different locations, including the associated transmission
cost.
The alternative view is that some central entity should plan and
site transmission that will connect the areas with strong renewable
resources to areas of high electric demand via some grand superhighway, paid for by a broad group of taxpayers. Under this model
government would essentially pick winning renewable technologies
and locations, and build transmission to facilitate them.
I have several concerns about this approach. First, it could lead
to unnecessarily expensive outcomes. All business owners know
that if they establish their factory at a distant location to keep production costs down, they have to weigh that against shipping costs.
But if we socialize shipping costs of renewable generation, we skew
decisions away from locally based options that may have a lower
total cost.
That is why a bipartisan coalition of ten Northeastern Governors
wrote to Congress warning that this policy would undermine their
efforts to grow renewable industries. Moreover, building thousands
of miles of transmission lines in anticipation of the arrival of renewable generation may lead to an expensive excess of transmission capacity.
Transmission planning is a delivered process meant to respond
to long-term reliability and economic concerns. It is not intended to
predict and facilitate dynamic markets.
Second, as has been said so many times already, there is no such
thing as a green transmission line. Transmission lines carry all
electrons without regard to the carbon footprint of the generator.
In fact, the dispatchability of renewable resources would suggest
you would have a significant underutilization of the transmission
line unless you filled it with other forms of generation. So a green
transmission line will give market advantage to any power plant
fortunate enough to be close to the new line.
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Third, creating a new planning process across regions is unnecessary. We already have regional planning processes that are effective and sensitive to local concerns. Cross-regional issues should be
addressed through improved coordination between regional planning bodies, which is exactly the approach taken in the committeepassed bill.
Finally, existing tools can help renewable projects connect to the
grid without distorting locational price signals and without potentially burdening consumers with an excess of expensive transmission.
For example, if the costs of connecting to the grid and getting
power to market are too much for one developer to bear, multiple
developers can share costs among their projects. Or FERC can require that ratepayers initially bear these costs, provided they are
reimbursed by developers after the projects become operational.
In closing I believe we will meet our long-term carbon reduction
goals. But sitting here today, I cannot tell you what renewable
technologies, and, more importantly, in what locations, it will take
to get us there to serve our customers at the lowest possible cost,
and neither can government.
That is why I strongly support policies such as an RES and carbon pricing that send price signals to the market and unleash the
creativity and entrepreneurial spirit of the American people. Thank
you.
Mr. MARKEY. Thank you, Mr. Izzo, very much.
[The prepared statement of Mr. Izzo follows:]
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Mr. MARKEY. Our next witness is Joe Nipper who is the Senior
Vice President for Governmental Affairs of the American Public
Power Association, representing the Nations more than 2,000 community-owned electric utilities. We thank you for being here.
Whenever you are ready, please begin.
STATEMENT OF JAMES NIPPER
Mr. NIPPER. Thank you, Mr. Chairman, and members of the subcommittee. I appreciate the opportunity to be here today.
APPA, as you mentioned, represents the interests of 2,000 publicly owned State and locally owned utilities across the country, collectively serving 45 million Americans; 110 public power utilities
collectively own about 8 percent of the Nations transmission lines
of 138 kilovolts or greater.
However, the great majority of APPAs members are transmission-dependent; that is, dependent on facilities owned by others,
in order to acquire the electricity they need for redistribution of
their retail customers.
Our members report that more transmission is needed in almost
every area of the country to serve a variety of purposes, including
increased use of renewable energy, reliability and to enhance competition.
In our view, the single most significant impediment to getting a
new transmission built continues to be siting, and we urge Congress to clarify and continue to support the Federal backstop siting
authority included in EPAct05. EPAct05 siting authorities were a
major step forward but have been called into question by the recent
court decision in the Fourth Circuit Court of Appeals.
As an intervener the side of FERC in this case, APPA believes
that legislation should clarify the original congressional intent in
EPAct05 by expressly providing FERC with the authority to consider backstop transmission siting applications when a State denies
an application.
It is important to note for us that as units of local and State government, public power utilities are not typically supportive of Federal policy that diminishes State authority, and we certainly have
had concerns about Congress and FERCs attempt to expand authority in other areas. However, e importance of siting new interstate transmission lines cannot be understated, and thus our continued support of the compromise crafted in EPAct05.
There is some misconception, though, that higher voltage lines
are always better. In actuality, the interconnected nature of the
grid is such that a lower voltage line, located strategically, could
have a greater ability to relieve congestion and to enhance reliability than a higher voltage line, d could experience less local resistance to the siting and cost less than a higher voltage line.
Of course there are situations where higher voltage lines is preferable and necessary, but we want to make it clear that bigger is
not always better when it comes to the grid. This is one reason why
regional planning is so important.
The impact of proposed new higher voltage facilities on an existing transmission network needs to be fully considered so that the
optimal mix of facilities can be determined. Encouraging proportional joint ownership of transmission facilities by load-serving en-
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tities, including public power utilities in a given region, another
way to get more transmission built.
If the responsibility for building and owning the transmission
grid is spread more broadly among the entity serving customers in
a region, en joint transmission planning will be facilitated simply
because there are more participants at the planning table supporting the immediate projects.
If network customers of a dominant regional transmission provider are encouraged to own their load ratio share of the transmission system, transmission usage and ownership will be more
closely aligned, d the friction between transmission-dependent utilities and transmission owners can be reduced. There are many examples, Mr. Chairman, where that is the case.
With respect to planning, APPA supports the transmission planning provisions, including the committee-passed version of the
American Clean Energy and Security Act, as we believe they will
bolster rather than duplicate or further complicate the existing and
extensive transmission planning process under FERC Order 890 occurring at the regional and subregional levels across the country.
The manner in which transmission facilities costs are allocated
among generators, transmission owners, transmission-dependent
utilities and other stakeholders is one of the most controversial topics related to transmission.
APPA strongly supported the language included in EPAct that
underscores FERCs flexibility in determining the appropriate
transmission pricing methodology. We dont always agree with the
decisions made by FERC on cost allocation. We continue to believe
that Congress had it right in leaving these decisions with appropriate stakeholder input and administrative due process to FERC
to determine under sections 205 and 206 of the Federal Power Act.
The issue of who pays for transmission facilities to provide regional benefits is a difficult one. Such facilities can provide Presidents future system benefits that extend well beyond the specific
entities wherein the facilities are constructed. Therefore APPA
urges FERC to provide greater guidance on cost allocation for new
major transmission facilities that afford regional benefits.
APPA does not support the allocation of costs of facilities to regions, subregions or entities that will receive little or no benefit
from the facilities, and therefore opposes a Federal statutory requirement to allocate such costs on an interconnection-wide basis.
And lastly, Mr. Chairman, APPA has concerns with respect to
FERCs application of its incentive rate authority provided under
EPAct05, for it seems to regard section 219 as a statutory requirement to offer a variety of different transmission incentives to applicants. It appears that these entities have been helping themselves
to those incentives and that the Commission has not taken a sufficiently disciplined approach to awarding rate incentives.
We appreciate your long-held concern in this area and your recent letter to FERC asking for an explanation of their use of their
incentives, and we look forward to their response and to working
with the Chairman on that issue. Thank you very much.
Mr. MARKEY. Thank you, Mr. Nipper, very much. And I appreciate the very diplomatic way in which you used the word entity
in your testimony.
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[The prepared statement of Mr. Nipper follows:]
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Mr. MARKEY. Our next witness is Glenn English. He is the Chief
Executive Officer of the National Rural Electric Cooperative Association. But more significantly, he served in the United States Congress for ten terms as one of our most distinguished members. And
it is our honor to have you back before the subcommittee. Glenn,
whenever you are ready please begin.
STATEMENT OF GLENN ENGLISH
Mr. ENGLISH. Thank you very much, Mr. Chairman. I appreciate

that. I am not sure my board of directors would agree with the
more significantly, but I appreciate that and understand where
you are coming from on that.
Mr. MARKEY. I think the one thing that the board and I can
share in comment is that we will each reserve to ourselves which
of us believes that you had a more important job.
Mr. ENGLISH. Well, I appreciate both of you thinking I have an
important job.
Mr. MARKEY. The fact that you are so important to both of us.
Mr. ENGLISH. You are very kind Mr. Chairman. I appreciate
that.
As I think the members of the committee know, electrical cooperatives are consumer-owned. We are in 47 States across the
country and we serve, however, 7 percent of the population through
about three-quarters of the land mass of the United States. So
when we talk about transmission and when we talk about the fact
that you are talking about generating renewable energy in this
country, it is most likely going to come from areas that are served
by electric cooperatives. So we have a big stake in that. We plan
to have a big part of the future as we move forward in that general
direction.
Mr. MARKEY. Can you just repeat that number again; 7 percent
of the customers, but
Mr. ENGLISH. We have got three-quarters of the land mass.
Mr. MARKEY. OK. Thank you.
Mr. ENGLISH. And it is all owned by those individual consumers
throughout those 47 States, Mr. Chairman.
Also I think we can all agree that the signing of the American
Clean Energy and Security Act of 2009 is going to bring about a
profound change in the way that not only energy is generated in
this country, but the way that we use energy in this country. It is
going to change our lives.
And with that understanding, I hope that we can also recognize
that we have got to be prepared for that kind of a dramatic change.
The transmission system as it he exists today was certainly not designed for this kind of change. In fact, it wasnt designed for the
1992 Energy Act with the deregulation on the wholesale level, so
we are still trying to adjust to that.
What we would suggest, Mr. Chairman, is that we need a sense
of urgency here. And certainly we need transmission as a part of
this act. It needs to be addressed in this act. And as a result of
that, we think there are some very basic principles that need to be
incorporated as you move forward with any kind of legislative language as it applies to this new transmission system, new transmission policy, that the country is going to be following.
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As I think you know, Mr. Chairman, we have established now a
National Renewable Cooperative so each cooperative in every one
of those 47 States can participate in any renewable project in any
part of that three-quarters of land mass of the United States. So
a wind project in South Dakota,for instance, may be invested by
people from Wisconsin, co-ops from Wisconsin, or they may be from
Alabama or Georgia or wherever. They can own a piece of that.
And what we are looking for is a way in which we can generate
that power through renewables in the most efficient way possible,
no matter where it is located. We should be looking for the most
cost-effective way in which we can do that. And just as we know
that certain wind corridors exist that will provide us with a great
amount of production of wind energy throughout the Great Plains,
not every farm is the same, not every State is the same, that we
also then have got to make sure that when we locate that kind of
generation in those areas that we can move that power out of those
regions. So we need an efficient and effective transmission system
to do it.
But we also, I think, have to be very aware of the fact thatand
it has been our experience that bottom-up planning works the best.
So you need local regional planning, you need local folks putting
this plan together to determine what is the best way to move forward on this. And so that is a principle I think we need to adhere
to, a bottom-up rather than top-down as far as planning the transmission system of this country.
I would also suggest that under these conditions, and given the
fact that we are going to have to move in a more efficient transmission system, we are going to have to move that transmission
across State lines, that we may run into difficulties and encumbrances, we may run into delays that, quite frankly, the national
best interest is not being served.
So I think we have got to, while we are having that local planning, we have got to also make sure that we dont have impediments put in the way that are going to prevent that local planning
from being implement. We have got to make sure that the overall
national policy of moving across State lines is dealt with. And for
that reason we do think that there is going to have to be some authority on the Federal level as far as siting is concerned. But,
again, it should be focused on certain qualifiers as we look at that
siting authority.
First of all, it should be facilities that are only identified on regional planning. It should be facilities that are interstate projects.
In fact, the owners of those facilities should not be eligible for enhanced rates or any other financial incentives as far as where they
are building that transmission. And the cost of facilities should be
fairly and broadly allocated, along with the use of the facilities,
should not be limited to just one kind of power.
It should not just be renewables only. And that is mainly because
of the fact that the law of physics, as we have heard expressed here
today, doesnt distinguish between electrons. They are all the same
once they get into that transmission system.
And we would also suggest that the law which we are proposing
this become a part of, would in fact itself dictate the direction that
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we would be manufacturing or generating those particular electrons.

Also we would suggest there needs to be broad fair-cost allocation. We think that is a very important point. Obviously those of
us who are electric cooperatives are very sensitive about that. We
would have a few people. And all the costs being dumped on those
few people would be unbearable, so it should be allocated on the
basis of who is getting the benefit, who are the folks that are receiving the benefits of that energy that is being generated and produced.
Also, we would suggest, Mr. Chairman, that we move forward
and recognize the fact that there are more benefits to building such
a transmission system across this country in different areas of this
country than just the movement of that power. The right-of-ways
for any kind of transmission like that would become extremely valuable. And it would also be a way in which it would in fact. Become
a new technologies right-of-way; ways in which you could move new
technologies. And I know you are particularly interested in the
smart grid. And obviously there are many uses that could be incorporated into any new transmission system along those lines. Fiber
between the towers is obviously another way in which we can make
good use of that transmission system.
So, Mr. Chairman, I would suggest to you that we need a new
transmission system to go along with the legislation that is being
proposed.
Mr. MARKEY. Thank you, Glenn, very much.
[The prepared statement of Mr. English follows.]
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155
Mr. MARKEY. Our next witness is Reid Detchon. He is Executive
Director of the Energy Future Coalition, a nonprofit organization
that seeks to reform U.S. energy policy. We welcome you, sir.
Whenever you are ready, please begin.
STATEMENT OF REID DETCHON
Mr. DETCHON. Mr. Chairman, thank you for inviting me to testify today on this important and timely topic. I find a great deal
of agreement across the table, and particularly with Congressman
English.
Last year, in partnership with the Center for American Progress
and the Energy Foundation, the Energy Future Coalition undertook a series of listening sessions with a diverse group of stakeholders including Federal agencies, grid operators, transmission
companies, utilities and environmental groups, and we found broad
support for changes in Federal law to facilitate the transmission
needed to bring stranded renewable resources to market.
Wind in the great plains; solar in the desert Southwest; and yes,
offshore wind in the East.
Our vision statement for the national clean energy smart grid,
which is attached to my full statement, was endorsed by some 55
organizations, including the AFLCIO, the Council on Competitiveness and the Digital Energy Solutions Campaign, along with many
renewable energy advocates and environmental groups, including
the Sierra Club, who are not usually prone to supporting new
transmission capacity.
What brought these environmental groups to the table and ultimately to agreement was the imperative of action to address with
urgency the growing climate crisis. Time is running out for the
world to avoid serious harm from climate change.
Mr. Chairman, you understand this challenge very well, and we
owe a great debt of gratitude to you and Chairman Waxman for
your leadership and acumen in advancing H.R. 2454, the American
Clean Energy and Security Act. You have set the appropriate longterm target for emissions reductions, more than 80 percent by
2050.
The changes in our energy system needed to reach this goal are
profound. We need to begin planning today to reach those reductions by 2050. And one thing is clear, we cannot deliver that much
low-carbon energy without changes to the grid. Low carbon electricity will be expected to power not only our homes and businesses
but also an increasing portion of our vehicle fleet.
The system we have today for planning, permitting and financing
transmission lines was not designed to respond quickly to a challenge of this magnitude, moving many thousands of megawatts of
renewable energy from remote areas to load centers.
Our discussions with those who must deliver on this promise, renewable energy developers and transmission companies, quickly focused on the obstacles of planning, siting, and cost allocation that
we have heard repeatedly today. Of these, planning turned out to
be the linchpin, as our group concluded the better planning could
reduce the difficulty of siting and financing new lines.
We recommended enlarging the scale of the planning process to
the two principal power grids in the United States, the Eastern
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and Western Interconnections, for two reasons. First, long-distance

transmission is needed to support development of some major renewable energy resources and necessarily will cross State and regional boundaries. For example, almost 300,000 megawatts, an
enormous amount of wind, 300,000 megawatts of proposed wind
projects, which is more than enough to meet 20 percent of our electricity needs, are waiting to connect to the grid because there is inadequate transmission capacity to carry the electricity they would
produce.
Second, planning for transmission to support the renewable energy standards of State and Federal legislation must occur on a
broad regional basis, just as the benefits of such investments will
be shared on a broad regional basis. Your discussion of the impact
of wind resources and ease is a good illustration of the need for
planning across the entire interconnection.
An enhanced regional planning process of this kind should build
on, not replace, the current engagement of stakeholders, including
States, grid operators, utilities, consumer and environmental interests and landowner groups.
This will remain a State not a Federal process. Siting authority
would rest with FERC, but the States collectively would have more
power not less than they do now, because their plans would govern
the exercise of that Federal authority. Only if planning process
breaks down would FERC have the ability to resolve disputes and
get transmission built to bring renewable energy to market.
We have been gratified to see many of our recommendations reflected in H.R. 2211, introduced by Congressman Inslee, a system
of interconnection wire transmission planning supported by
broadbased cost allocation and underpinned by Federal siting authority. We would be pleased to work with the committee on further legislative language if you think that would be helpful.
Mr. Chairman, you and your colleagues have taken an enormous
step forward by reporting legislation that will begin the process of
transforming our Nations energy system to deal with the threat of
global climate change. Expanding and modernizing our transmission grid is essential to that transformation. By addressing
transmission directly and comprehensively, you can help our common goal of a clean-energy future become a reality and not be left
stranded by regulatory impediments. Our economy, environment
and national security deserve no less. Thank you very much.
[The prepared statement of Mr. Detchon follows:]
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173
Mr. MARKEY. Thank you so much for your testimony.
Our next witness is Joseph Welch, chairman and president and
chief executive officer of ITC Holdings. That is the Nations first
independent transmission company.
We welcome you sir, please begin.
STATEMENT OF JOSEPH WELCH
Mr. WELCH. Thank you and good afternoon.

Mr. MARKEY. Could you move the microphone in a little closer
and turn it on?
Mr. WELCH. Thank you and good afternoon, Chairman Markey,
and members of the subcommittee.
As the Chairman said, my name is Joseph Welch. I am chairman, CEO and president of ITC holdings, the Nations first and
only independent transmission company in the United States.
Being independent means that we are not affiliated with any
market participant. We have no ownership or have any dealings in
energy transactions. Our job is to facilitate the market, to facilitate
the interconnection of any sources of generation that are put before
us, and to make sure that we connect the loads and reliably do so.
We own and operate about 15,000 miles of high-voltage lines in
Iowa, Minnesota, Illinois, Missouri, Michigan and our developing
regional transmission projects in Kansas and Oklahoma. As we
have worked through these various States, each time we come to
the point where we need to build transmission, for whatever reason, we have come up against a set of obstacles, each one different
in every State.
Probably that is as it as should be, but when we get to the outcome of where we want to go in this country, this is going to become a major impediment for us to move forward as a country who
dearly and necessarily needs to seek energy independence.
I brought with me today a report from the Council on Competitiveness and Energy Sustainability which I believe is a good framework, and I will leave it with you all for you to read. I think it offers a lot of information which is very consistent with the very
principles and items that you are considering here.
But going to the fundamental principles that we need, and at the
top of the list, and I want to go to right to the top of the list, we
need a policy for energy in this country. We have talked about all
the things underneath, and we debate about whether it is right or
wrong, but the fundamental issue is that we need a policy and
something to plan to.
With that policy in place, the rest of the items become a lot clearer and a lot more succinct. And a lot of the debates that we hear
from all of us who really are closer than further apart really start
to come together. For instance, with a policy, then the planners,
and when I say the planners, and we have talked about this in the
item I support and my company supports, is that we need independent planning authority. We need to take the policy and get the
policy implemented in a very clear and succinct way.
Secondly, if you have the policy, then the cost allocation can be
dictated by the policy itself, meaning that from that policy, we now
know where we want to go. We now know who are the benefactors
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and what those benefactor issues are. And so that policy sits at the
top and we need that.
And last but not least, when we get down to the very bones, I
always tell people being in the transmission business it is a great
business until I do one of two things, and the first item is build
new transmission lines. The minute we start to build them, it becomes a nightmare. And the process a hard, and it is long. And
what we need is true Federal backstop siding authority. That is not
meant to cut the States out of the process. The States should be
involved in the process. They are the most knowledgeable about
local issues. But at the end of the day, we have to get a regional
transmission grid built.
As you have heard here, there are literally thousands upon thousands of megawatts of renewable energy that this country needs to
deploy, and we need to deploy it now. And if we start now, we are
years and years away from our goal line. So please lets have this
conclusion and bring it to an end, and I thank you very much for
my opportunity to speak here today.
[The prepared statement of Mr. Welch follows:]
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Mr. MARKEY. Thank you, Mr. Welch.
Our next witness is Christopher Miller. He is president of the
Piedmont Environmental Council, an environmental organization
focused on conservation issues in the Piedmont region of Virginia.
We thank you for being here, sir.
STATEMENT OF CHRIS MILLER
Mr. MILLER. Thank you, Congressman Markey. Thank you for

the opportunity to testify on behalf of the Piedmont Environmental
Council, also for land trusts and land conservation organizations
across the country. We are a very active member of the Land Trust
Alliance and are working hard on this issue with them. And they
have asked us to express some of their concerns.
I have a couple of maps which I hope the staff can put up, because I think they will help instruct this conversation.
We appreciate the time and attention that this committee is taking to consider the complex issues associated with the transmission. We appreciate the willingness of the committee to deal
with transmission as part of a broader energy policy and not as an
end in itself.
From our perspective, transmission is only a tool for moving electricity from the source of generation to the end user, but much
more important are the policies that will reduce demand for electricity, modify peak demand so that the need for generation and
transmission infrastructure is minimized. And encourage clean
generation close to load centers, which will reduce the losses of energy caused by long-distance transmission.
For in the end, the high-voltage transmission lines with towers
that can exceed 180 feet in height and wide rights of way are part
of the energy system with the largest footprint and often the most
dramatic impacts on communities that lie along them. The transmission system has the potential for substantial land-use impacts,
including impacts that directly conflict with Federal, State and
local policies to protect and enhance important natural and cultural
resources.
In the brief amount of time I have, I want to focus on a couple
of issues that have not been raised yet. The first is the assertion
that the only way to meet national and State goals to reduce greenhouse gas emissions and to increase the role of renewable sources
of energy is to build a national transmission grid. One example of
this grid is up here. This is the grid proposed AEP for the 765 KV
system that would link resources.
It was originally overlaid over wind resources, but in fact, the
correspondence with coal resources is actually higher when you actually go see where those lines are laid out. That is one of the
causes of concern that in fact what you would be doing by doing
a transmission-loaded set of incentives is in fact encouraging greater transmission of coal-fired generation than in fact of renewables.
The reason for that is that no where in the legislation do we recommend a change in the economic dispatch rules that govern which
generation is brought on line first. All the renewable goals notwithstanding, we dispatch energy by price, and the auctions are by
price. We have heard lots of calls for competitive pricing, but the
potential that that will in fact increase the amount of transmission
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that is carrying coal-fired emissions, and in fact from the dirtiest

and oldest plants, is very real.
Unless this committee can also ensure that, before that transmission is made available, we are in fact putting in the carbon cuts
through the carbon cap-and-trade and otherwise governing the
emissions of grandfathered coal plants who have never reduced
their emissions, there is a very real possibility in the Eastern
Interconnect that the gains that have been made by RGGI, the 45
million tons or so of carbon emissions reductions, could be offset.
Second, an issue that has not been addressed so far is the issue
of peak versus average demand. The transmission and generation
system is being designed to meet peak loads, and the more we can
do to reduce peak loading, the less we have to build across our
landscape. And so it is very important that this committee address
the fact that transmission planning that has been done to this
point really hasnt addressed the full incorporation of some of the
policies that are in the ACES legislation. They did not take into account the amount of demand-side management that is recommended and in fact assumed a level of per capita electricity used
that steadily increases over time rather than is reduced.
The final thought is this, to the extent the transmission is necessary, and obviously connecting some renewables will require
transmission, it is very important to respect the other public policy
values that are out there, and particularly related to the lands that
have to be crossed by transmission. We should be seeking to avoid
wherever possible the natural resources, the historic resources, the
cultural resources and, yes, even the landscapes that America values so much.
Current legislation draws a distinction between publicly-owned
lands and privately-owned lands. And that is something that I
think this committee needs to look at hard. East of the Mississippi,
most natural resource lands, most historic lands are privatelyowned but protected through public-private partnerships, whether
it is the designation of historic districts or the donation of conservation and historic easements. Those easements are often approved by State government.
In the case of Massachusetts, hundreds of thousands of acres are
actually individually approved each time by the attorney general.
The same is true in the State of Virginia. And they are due all of
the respect that a national park or national wildlife refuge or State
park would. So as you think forward on those transmission lines
that have to be built, make sure we are avoiding the resources, the
private resources as well as the public resources. And make sure
we mitigate and compensate for the impacts on those resources.
[The prepared statement of Mr. Miller follows:]
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Mr. MARKEY. Thank you, Mr. Miller, very much.
And other final witness is David Joos. He is the president and
chief executive officer of CMS Energy, and chief executive officer of
its principal subsidiary, Consumers Energy.
We welcome you, sir.
STATEMENT OF DAVID JOOS
Mr. JOOS. Thank you, Mr. Chairman.

And thank you also for pronouncing my name properly. I appreciate that.
I appreciate the opportunity to address the subcommittee this
afternoon. Consumers Energy, our principal subsidiary, serves 1.8
million electric customer; 1.7 natural gas customers in lower peninsula of Michigan.
I would suggest that we have a bit of a unique opportunity. Having developed, owned, and operated transmission assets along with
distribution and generation assets for a century, Consumers Energy now no longer owns transmission assets. We sold our transmission system in 2002, and it is now independently operated.
We therefore appreciate the difficulty in siting new transmission
and support Federal backstop authority for new interstate lines as
a last resort. We also see a need for new transmission in Michigan
to interconnect new wind resources that are being developed in the
Thumb in particular and along the Lake Michigan shoreline as
part of the renewable portfolio standard compliance effort in the
State of Michigan.
We believe new transmission development should meet three key
commonsense principles. Number one, benefits of proposed projects
should exceed the cost by a reasonable margin. Number two, proposed projects should be similar or should be superior to other alternatives, which would include other transmission solutions, distribution solutions, perhaps lower-voltage transmission solutions
and generation solutions. And finally, costs ought to be fairly allocated to the beneficiaries of the project as determined through the
planning process.
I would concede that these principals are complex to apply and
therefore need an independent planning authority of some sort to
apply them, a regional transmission organization or a group of
RTOs, for example, to conduct the evaluation.
They cannot be objectively performed by market participants, including independent transmission owners that have a vested interest in new transmission. In our view, overly generous FERC incentive policies have created a rush to invest in transmission, often
not justified on a cost-benefit basis. I provide some specific Michigan examples within my written testimony and wont go over those
now.
Fortunately for new intrastate projects in Michigan, we have a
certificate-of-need process that fully vets these projects before allowing condemnation. I suggest that might be a model that is appropriate at the Federal level as a Federal backstop.
Now there are proposals to build massive new high-voltage infrastructure over the entire Eastern Interconnect, the so-called overlays. Part of that, a $3.2 billion 765 KV project largely in Michigan
has already been evaluated by the Midwest Independent System
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Operator and determined not to meet a cost-benefit test for the

State of Michigan.
A number of independent system operators and planning authorities in the Eastern Interconnect recently studied a joint coordinated system plan that was referred to earlier involving $56 billion
high voltage overlay. Some have referred to it as the equivalent of
constructing an interstate highway system. That study concluded
that Michigan would receive virtually no benefit at fairly large cost.
Looking just at consumers customers, if cost were spread a postage stamp basis to all our customers, we would pay about $159
million a year of increased cost for roughly a $2 million annual
benefit. I would submit that Michigan simply cant afford that.
Another $10 billion to $12 billion project that has been proposed
to bring wind power from the Dakotas to as far east as Chicago,
of course, does not reach Michigan, but further, when the cost of
that transmission is included in the equation, Michigan-based generation is less expensive to develop. On that score, we agree with
the 10 Northeast and Mid-Atlantic Governors with regard to the
potential implications on developing renewable resources locally.
Let me be clear, we dont object to such projects if the benefits
exceed the cost by a reasonable margin; reasonable alternatives
have been considered; and the costs are spread appropriately to the
beneficiaries. That might be, for example, Dakota wind developers
or purchasers of that power who need it meet their own standards.
Finally, Michigan transmission rates today are four times what
they were in 2002 when we sold the system. Even without these
overlay projects, we are forecasting they will increase by another
50 percent from todays rates over the next 6 years. Transmission
investment is occurring in the State of Michigan.
We dont feel that FERC rate making oversight currently is sufficient in States where transmission is independently owned and
therefore not subject to State regulatory oversight. That situation,
along with overly rich incentives, are causing in our view transmission development that is sometimes not in the best interest of
our customers.
In summary, we think targeted transmission investment is needed both in Michigan and nationally. We believe that planning and
evaluation by our RTOs or groups of RTOs that are independent
from market participants is an appropriate way to pursue that.
And we think three key principals need to be followed: One, benefits exceed cost by reasonable margin; two, reasonable alternatives
have been considered; and three, the costs are appropriately allocated to the beneficiaries.
Thank you again.
[The prepared statement of Mr. Joos follows:]
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239
Mr. MARKEY. Thank you, and we thank our entire panel.
I turn and recognize the gentleman from Washington State, Mr.
Inslee.
First, I would like to put on the record a white paper which is
quite instructive. It is entitled Green Power Super Highways,
provided by the American Wind Energy Association and the Solar
Energy Industries Association.
Mr. Chair, if I may.
Mr. MARKEY. Without objection.
[The information was unavailable at the time of printing.]
Mr. INSLEE. I appreciate that, Mr. Chair.
This does confirm what the witnesses talked about, which is that
we have got 300,000 megawatts of wind projects waiting in line essentially to connect to the grid. And they point out that the lack
of transmission capacity is also hindering States ability to meet
multiple renewable energy goals, and it just confirms what several
the witnesses have testified today.
I want to ask Mr. Detchon about the greenhouse gas interconnection standard that your proposal has incorporated that basically
would essentially allow Federal backstop authority. It would encourage it in relationship to those sources that are low and zero
greenhouse-gas-emitting generators. Can you tell us how you envision that working?
And by the way, would it help in at least some sense some of the
concern of the Northeast States who dont want to see their offshore wind projects intruded upon by, say, if we can call it dirty
sources from far away intruding on their corridor.
Mr. DETCHON. Thank you for the question.
I think there is confusion how a greenhouse gas interconnection
standard would work. In the first place, it is an interconnection
standard. It doesnt govern what electrons are on the line because,
as everybody has pointed out, you cant distinguish between green
and brown electrons.
But if we are going to provide some additional authority to site
and pay for special new transmission lines to benefit renewable energy, lets make sure that the generation that is hooked up to it
is not conventional coal. And so what we have suggested is that,
since you are going to need probably gas to balance renewable energy on these lines, that up to a single-cycle gas turbine, emission
level would be acceptable to connect to these lines, but above that
would not. And that seems like a fairly straightforward way to approach that.
With regard to the question of competition with local resources,
I think what should be important and I think inevitably would
happened if the States are driving this planning process even on
an interconnection-wide basis is that they take into consideration
State policies considering local resources and use delivered prices,
as was mentioned in the last panel, as the basis for comparing different resources. I think that is a very straightforward way to
make sure that the competition is fair.
Mr. INSLEE. I will ask you what I hope is a rhetorical question,
but in the bill that I have introduced, we have tried to preserve the
bottom-up planning, so that the States and regions really do the
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planning rather than a cramdown from the Federal Government.
Do you think that is a fair characterization of the proposals that
we have made?
Mr. DETCHON. No, absolutely. And I think that there has been
a lot of talk about top-down or Federal intervention here, but I
think the legislation that you have proposed, Congressman, establishes mechanisms for States to work collaboratively addressing
these regional issues. And those decisions will be executed with the
assistance of FERC, but FERC would only be able to step in if the
States are unable to reach a plan.
Mr. INSLEE. And could you suggest any other solutions to the
concern that the gentleman from Massachusetts expressed about
this offshore wind being crowded out, if you will? I perceive that
greenhouse gas interconnection standard would help solve that
problem, because it would essentially allow the use of the Federal
backstop authority for clean source, green sources of energy. I
think that would help solve that problem. Do you agree with that,
and is there anything else you could suggest that would help solve
that concern?
Mr. DETCHON. Well, I think a stronger step which Mr. Miller
suggested, which would be to have Federal intervention on the
loading orders for the use of different kinds of resources, I doubt
that that would be politically saleable right now. So I think, within
the context of what is doable, I think the approach you outlined is
about as strong as it could be.
I might add the greenhouse gas standard to a certain extent over
time gets overtaken by the requirements of the cap-and-trade legislation, assuming that that is enacted, but I think your legislation
reflects that as well as.
Thank you, Mr. Chair, for your cooperation.
The Chair will recognize himself for a round of questions.
Lets go down the line and each of you could answer yes or no.
Do you support giving FERC the authority to modify any transmission plans that are established through bottom-up regional
planning processes?
Mr. Izzo.
Mr. IZZO. I would not.
Mr. MARKEY. Mr. Joos.
Mr. JOOS. Nor would I.
Mr. MARKEY. Mr. Nipper.
Mr. NIPPER. No.
Mr. ENGLISH. No.
Mr. DETCHON. I think that if the plans are developed by a broad
array of States in the way we are describing, I would agree no.
Mr. MARKEY. No.
Mr. Welch.
Mr. WELCH. Bottoms-up is each State brings it up, or how do you
envision that?
Mr. MARKEY. Regional planning that is agreed to by the State.
Should the FERC be able to modify a regionally agreed-upon plan?
Mr. WELCH. If the planning process is independent, no. If the
planning process is not independent, yes.
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Mr. MARKEY. Not independent meaning?
Mr. WELCH. That it is influenced by market participants and
other political entities. The planning process to me
Mr. MARKEY. Even if the State governments agree to it?
Mr. WELCH. I believe that all the transmission within the State
that is not regional in nature shouldthe State should have as
much authority over it as they want when we develop regional
transmission, which is for the good of the region or the good of the
country.
Mr. MARKEY. Should the FERC be able to override that original
plan agreed-upon by those States?
Mr. WELCH. I stand by what I said. If it is done by an independent planning authority, yes. I am saying no. And if it is not,
yes.
Mr. MARKEY. Mr. Miller.
Mr. MILLER. I think one of the concerns we would have if FERC
were involved, that the right of appeal ought to be not only limited
to the transmission proposers but also those with other perspectives. Right now
Mr. MARKEY. Under those circumstances, you would give FERC
the authority to modify a transmission plan?
Mr. MILLER. Well, there are legitimate Federal issues with anything involving interstate transmissions, but if you are going to
create that, it ought to be equally available to both the proponents
and those that have concerns.
Mr. MARKEY. OK. Let me go down the line again, how many of
you would support a greenhouse gas interconnection standard of
the type proposed by Mr. Inslee?
Can we go down and ask how many of you would support that?
Mr. IZZO. I would not for the simple reason that a greenhouse
gas interconnection standard does not speak to existing carbon-intensive generation being able to piggyback.
Mr. MARKEY. Thank you.
Mr. Joos.
Mr. JOOS. I will have to qualify my answer, I am not 100 percent
sure the specifics of the standard. I havent read them.
I would say we have, of course, standards for interconnecting all
kinds of renewable capacity already. I would not be supportive of
something that limited the use of the transmission line to certain
types of technology simply because I agree with what has been said
earlier, that you cant label the electrons.
Mr. MARKEY. Thank you.
Mr. Nipper.
Mr. NIPPER. No, sir, we would not.
Mr. MARKEY. You would not.
Mr. English.
Mr. ENGLISH. I believe that the bill in itself, since this is going
to be part of the legislation, the bill in itself takes care of that
issue, so no.
Mr. MARKEY. No.
Mr. Welch, I know you do support it. Mr. Welch.
Mr. WELCH. With my company, we are an independent transmission company. You make the policy, we are going to support the
policy.
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Mr. MILLER. I think it is an interesting concept would apply to
lines that feed into the grid, but unfortunately, the authorities that
are being discussed would apply to transmission that is not simply
for bringing new generation on to the grid but for expansion of the
grid as a whole. So I would have to say no.
Mr. MARKEY. And I will let you answer for the record, Mr.
Detchon.
Mr. DETCHON. Just to touch on these two points, we are talking
about specially authorized renewable energy transmission lines
that would be feeding into the larger grid, not to the larger grid.
And I agree with Glenn that if this is attached to H.R. 2454 and
enacted, then some of the reason for it goes away. But there is always the possible that this will become disconnected from that bill,
and as a free-standing measure on transmission, we think that a
greenhouse gas standard would be important.
Mr. MARKEY. How many of you would limit Federal authority to
only lines that affect renewable electricity that is generated? How
many would limit Federal authority just to that?
Mr. IZZO. I would do quite the opposite, Mr. Chairman. I would
limit Federal siting authority to lines that affect reliability.
Mr. MARKEY. Reliability, ok, thank you.
Mr. Joos?
Mr. JOOS. I would limit Federal authority as only a backstop provision and rely on local and regional planning as the primary
mechanism.
Mr. MARKEY. Mr. Nipper.
Mr. NIPPER. Assuming the backstop authority, no, we wouldnt
limit that.
Mr. MARKEY. You would not limit.
Mr. English, would you limit?
Mr. ENGLISH. And again, backstop.
Mr. MARKEY. MR. DETCHON, WOULD YOU LIMIT IT JUST TO RENEW-
ABLES?
Mr. DETCHON. What I would say is that, if we are going to create

special new authorities, they ought to be targeted at the problem,
which is renewables.
Mr. MARKEY. Mr. Welch.
Mr. WELCH. I would not limit the Federal backstop siting authority.
Mr. MILLER. I think we would support limiting it and also respecting the Fourth Circuit opinion that we were involved in.
Mr. MARKEY. Mr. Izzo, do you support Federal back-up siting authority for lines for any reason other than reliability?
Mr. IZZO. No, I would not.
Could you talk a little bit about that first map which Mr. Miller
put up that showed very rich wind resources along the East Coast
of the United States. With the exception of some portions of the
Great Lakes and out on the West Coast, it looks like it has the
greatest potential for renewable electricity generation in our country.
Mr. IZZO. You are absolutely right, Mr. Chairman.
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And as I may have mentioned, we pursuing 150 megawatt wind
farm. And as you mentioned, we can do that 20 miles out and still
be within 140 feet of water. That is not to underestimate the challenges of construction and operations and maintenance cost. We expect to fully bear the cost of the short-haul transmission and would
be opposed to having a nationwide support for a long-haul transmission and be unfairly disadvantaged.
Mr. MARKEY. Well, what could happen if we take Mr. Millers
chartsI guess they are not Mr. Millers charts. They are AEPs
maps that have been put together. Is that right, Mr. Miller?
Mr. MILLER. The transmission map is AEPs. We overlaid it on
wind and then the coal resource maps.
Mr. MARKEY. If that transmission plan was implemented, it
would bring a transmission line in from the Midwest very close to
the East Coast. What impact might that have on your planning for
renewable electricity off of the coastline or other parts of New Jersey?
Mr. IZZO. We would stop planning for that.
Mr. MARKEY. Why would you stop?
Mr. IZZO. Well, because we would not be able to be competitive
with the cost of the wind if it is not burdened by the cost of transmission. So the wind from the Midwest if it does not face the transmission charge would be cheaper in that case.
Mr. MARKEY. Now you are up in the Great Lakes, Mr. Joos.
Could you talk about that as well in terms of the potential renewables coming in off the Great Lakes and what impact that
could have for Michigan and what could happen if, instead, power
is wheeled in from other parts the country through Federal preemption and Federal eminent domain takings?
Mr. JOOS. It is a bit similar but maybe two aspects to what Mr.
Izzo said.
First of all, it is clearly windier in the Dakotas for example that
it is Michigan. Michigan has wind resource even on land, but it is
not as windy in the Dakotas. So instead of 42 percent roughly capacity factors, you might see in the range of 30 percent capacity
factor.
However, once the cost of transmission to get the power from the
Dakotas to Michigan is taken into account, it is cheaper to develop
it in Michigan.
Now you mentioned offshore, Michigan does have a very strong
offshore wind resource. Unfortunately, offshore is still about twice
as expensive to develop than onshore resources. So when that calculus is taken into account, we think it makes more senses to develop the onshore resources in Michigan first.
Mr. MARKEY. Now you heard the earlier testimony about the
problem getting renewable energy resources from Dakotas over to
Minnesota and the blame being laid at the feet of the Federal Government. In that region, do you believe that is one of the main
problems that otherwise the regions have been able to harmonize
their electricity transmission policies in a way that is viewed as
fair to all States?
Mr. JOOS. I am not familiar with specific Federal Government
problems that may have come up in Minnesota. My observation is
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that the regional planning process has been effective and is a good
solution to the problem.
I think as many of us are pointing out, you warp the economics
when you start putting effectively free transmission or postagestamp transmission across broad regions, and then you change the
economics dramatically rather than having them compete on a
stand-alone basis.
Mr. MARKEY. Now for our audience, when we say postage
stamp, what are you referring to? Why is the phrase postage
stamp used?
Mr. JOOS. Effectively what a postage-stamp rate is, and it is used
an analogy to the Federal postal system, where you put a stamp
on a letter, and you can send it anywhere for the same price.
Mr. MARKEY. You could send it from the Dakotas to New Jersey
for the same price.
Mr. JOOS. The reality, of course, is the costs are not the same.
And when we look at the cost of transmission to move power from
West to East, there is a significant cost involved. However, if that
cost is ignored and everybody pays the same price regardless of
how far it moves, it changes the economics, and yes, Dakota wind
would then be more economic on that basis, once the cost of transmission is ignored, than Michigan or the East Coast. We dont
think that is the right way to look at it.
Mr. MARKEY. And one of the things that we are really trying to
accomplish obviously in the Waxman-Markey bill is to generate renewable electricity and renewable energy jobs generally in all 50
States.
So Mr. Izzo here has a plan to, along with many other people in
New Jersey, to generate new renewable energy jobs that help with
the employment in his company, but in the State of New Jersey as
well. And we dont want to invoke the law of unintended consequences here and have a great revolution, have a standard imposed upon New Jersey and not have the jobs created in New Jersey, especially if they have the richest renewable energy resource
right off their shore.
Mr. English.
Mr. ENGLISH. Mr. Chairman, I think you make a good point, but
I also suggest one other thing, that it might make more sense, in
light of the objective of the legislation and in light of the fact that
we are entering into a little different world than we have in the
past, that really what we are trying to do here is maximize the
amount of renewable energy that we get produced all over this
country.
Now the fact of whether it is produced in one State versus another State, as long as it is the most cost-effective way in which
we produce it and we can in fact make use of it all across this Nation, I would think would be the ultimate objective.
Now I can understand why some folks may want to look at this
very localized, and it may be a very parochial thing, but this is a
national piece of legislation. And we are trying to achieve a national objective, and the thing that is limiting us to being efficient
is this transmission system.
Mr. MARKEY. Absolutely, and by the way, we couldnt agree more
on this.
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Mr. ENGLISH. So if you are looking at this map and the fact that
we are talking about along the coast, and they may have more
wind there, then obviously we ought to be looking, that is where
we ought to produce it, and we should use that most cost-effectively. And that should be the driver in where we go. If we cant
do that and have to do it out in the Dakotas, then fine, do it in
the Dakotas.
But it shouldnt matter whether it is off the coast of Massachusetts or in the Dakotas, as long as we are meeting the Nations
needs, and we are going to have a huge amount of power that is
going to be necessary to come from renewable energy if we are
going to meet the objectives as outlined in the legislation.
One quick point, I know, I have a home down in South Carolina.
It is up on a mountain top. We have a huge amount of wind up
there, but I can assure you, if you try to build a wind generator
on that mountain, you are going to have a lot of people that are
going to be objecting to it, unlike what you will find in the Dakotas.
Mr. MARKEY. Absolutely.
I think the point that Mr. Izzo is making and Mr. Joos as well
is that, using this postage stamp analogy, it doesnt cost $0.47 to
really move a letter from New Jersey to New York City. It probably
costs less, but the average is $0.47, so that someone from South
Dakota can mail a letter to New York City, and we have communications across the country. That is great, and we accept that. It
is the way it should be.
But what Mr. Izzo is saying is that if you do the same thing for
electricity and you make it the same price to transmit electricity
in from the middle of America to New Jersey as it would be to
bring it in off the coastline of New Jersey, then that is going to undermine the economics of all the projects along the East Coast because it hasnt factored in how much it costs to transmit that electricity 1,500 miles all the way into the East Coast market. And so
the question then becomes, how many new jobs will be created
along the East Coast of the United States if there is no incentive
any longer for Mr. Izzo because he is almost bound by his obligation to his shareholders to take all of this very inexpensive but subsidized electricity coming in from the Midwest?
So how do we square this circle, Glenn, so that Mr. Izzo and Mr.
Joos and others are not disincentivized to produce renewable electricity within their own service area?
Mr. ENGLISH. Broadbased fair rates, that is basically what you
are talking about. The people that are receiving the power, that are
using the power, are paying the cost. That is what it really comes
down to. If you are not talking about mailing that letter from the
Dakotas to some other region of the country, and you are talking
about, instead, what it costs to actually mail that letter to that location, that is the real issue that you are coming down to.
Mr. MARKEY. Mr. Izzo, what would you respond to that?
Mr. IZZO. So I would say that, if I looked at just this last year
alone, the price difference associated with transmitting power from
the plains States to New Jersey, depending upon how busy the
transmission lines were, range from $20 to $80 a kilowatt hour.
Typically, it was $30 to $40 a kilowatt hour. That means it would
be cheaper for a customer in New Jersey to use a wind farm oper-
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ating 25 percent of the time than to use a wind farm operating in
the plains 40 percent of the time, because it is the total cost that
matters.
If you eliminate transmission, then suddenly the 40 percent time
of the Dakota farm looks cheaper, but you have put a burden on
the American taxpayer, and you have ended our economic development in that region.
Mr. MARKEY. Well, we want to be fair here, though, right? I
mean, that is our goal of the bill. We want to incentivize renewablethis green energy revolution should be everywhere, not just
in certain parts of the country. So we need to find a way then to
make sure that we dont invoke this kind of consequence that undermines economic development in States that have incredible resources indigenous to them, and that is a real difficult problem
here and something we that we have to work through.
I apologize to everyone. I really could spend a whole afternoon
with you, and next week I might spend an afternoon with each one
of you in working out this issue, because we have to be fair. We
have to be fair. We have a big vision, but everyone, every State can
actually play a role here. There is actually a role for everyone, and
we have to make sure that we render to the East Coast the things
that are theirs; the things to the South that are theirs; and the
Midwest that are theirs; and the West that is theirs. The prairie,
the desert.
And, Glenn, even as you were saying you represent 75 percent
of the land mass of the United States, there is an ocean mass, too,
that is also out there. And we have to
Mr. ENGLISH. We do have coastal co-ops, Mr. Chairman.
Mr. MARKEY. That is what I am saying to you, and so I want to
make sure those coastal co-ops are able to go out into the ocean
and have the incentive
Mr. ENGLISH. I am with you.
Mr. MARKEY. So we have to work out a fair formula.
So I thank each of you. And we are going to have to stick close
together over the next couple of weeks so we can have this conversation and reflect what our national goals are, but with each
State, each region, and the history of each State and region; States
that are not even States, commonwealths, whether it be Virginia
or Massachusetts, have their own traditions in terms of what lands
are sacred that might not follow the traditional Federal Lands Act
but have just the same impact in terms of the relationship with the
history our States.
So I thank each of you, and I am going to turn over the remainder of the hearing to Congresswoman Baldwin who will bring it to
a conclusion. Thank you so much.
Ms. BALDWIN [presiding]. I dont get to sit in this chair very
often, but I wont make you stay long just because I am enjoying
it.
First, a quick comment, and I am construing or interpreting from
some of Mr. Welchs testimony that there is a frustration with
some of the planning that is occurring at the State-level process.
And one of the things that I would just point out, and certainly we
have heard some testimony in the first panel about very successful
State-level planning, but if you look at Order 890 and this process,
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it is really relatively new and I think I would argue hasnt yet been
given the chance to play out.
If you look at the area that I am most familiar with, the first
time MISO Order 890 planning processes were approved by FERC
and then subject to additional compliance requirements was on
May 15th, 2008. And thereafter, they had to do a filing in August
of 2008, where it was just approved on May 20th, 2009. So you
could make an argument that really just 3 weeks ago this is getting underway, and it is a process to be given 12 to 24 months to
occur.
So it certainly concerns me to have a characterization of this
State and regional planning processes as not beingas being broken or not working when really much of the new focus that is subject to Order 890 is just underway.
I have one question for the panel with regard to, it goes without
saying that construction of a transmission super highway will be
a money maker for certain parties involved, and we heard the
chairman of FERC testify about the economics of transmission
siting, and construction as well as the guaranteed rate of return.
And so I guess I would like to ask you all what role, if any,
should these entities with profit interest play in the transmission
siting and decision-making process? How should we appropriately
limit or not the role that they play?
And why dont we go from left to right this time and start with
Mr. Miller.
Mr. MILLER. I appreciate that question, that has been one of the
most troubling aspects of the planning process in the PJM region.
The PJM is essentially, from our perspective, a trade association of
utilities who are proposing projects and then ratifying the proposal
amongst themselves. They do not, until very recently, have a process that complies with the FERC Order 890. They were looking
only at transmission solutions and not at alternatives. And they do
not do the kind of balancing of impacts, you know, other issues of
the public interest that State utility commissions more clearly have
authority to do.
So the current way we do regional transmission planning is very
disturbing. The owners of the transmission lines propose projects.
There is a reactive approval process, and there is no balancing of
other considerations, even within the alternative energy solutions
like energy efficiency DSM. They are starting to incorporate those
things, but the process is very conservative and very oriented towards producing transmission solutions.
Ms. BALDWIN. Mr. Welch.
Mr. WELCH. Well, to go to your question, first, the frustration
that I feel with the planning process is that I would agree with you
that Order 890 went a long way, but the one thing that we dont
have in MISO or any of the other RTOs, we dont have full participation from all of the affected people. As a result of that, when you
are trying to do regional planning, you are not going to get to the
solution set that you need, number one.
Number two, like when we had problems in 2003 with the largest blackout that affected this country, we finally came to the conclusion that NERC was funded improperly and wasnt independent
in their decision-making for setting reliability standards. As a re-
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sult of that, we changed the way NERC was funded. It reports to
FERC. It is funded through an assessment through all the utilities,
and that assessment is paid to FERC, who then pays NERC, and
we have taken the financial incentives of the market participants
out of the RTO or, in this case, the reliability council.
So when we talk about independent planning, it is not about
some kind of closed-door deal here. It is about getting the financial
impacts off the back of the RTO so that they can do the job that
they are supposed to do.
Then when we get to that point, you have the question that says,
who should participate and which of the rates of return that these
companies should earn? I think that the fair thing to say, when you
start to build regional projects, that everyone is affected by it; they
should be all participating in as financial investors. This shouldnt
be just a one-stop, one-person place, but those people should be
part of that investment proposition because they are all there to
make the grid work and work in a concert way.
When you build a regional grid, you have to have yourself in a
position where you can also maintain it. No one company could
ever go across thousands of miles, have linemen and line crews,
warehouse facilities and everything that we need. So it is going to
take the participation of all of those people on the route, but without everyone being there at the table, this gets tough to do. So
when you get to that point, whatever the FERC says is just and
reasonable; that is what it will be.Ms. BALDWIN. Mr. Detchon?
Mr. DETCHON. I thank you for the question, let me suggest a way
to think about cost allocation and rate of return together. Under
the current system, private companies enter into agreements to
provide transmission, and they go out, and they raise the capital
on the markets to do that. So as our regulators consider that, they
have to provide the cost of that at the high cost of raising that capital and then a rate of return on top of that.
If the costs are more broadly shared, first of all, you have a guaranteed revenue flow which will reduce the cost of capital to raise
the money in the first place. And in the second, and therefore a reduced rate of return to the companies would be justified. So there
would be two ways by sharing the cost that you would reduce the
cost of building out this transmission, sharing it across a broader
range of customers.
Ms. BALDWIN. Mr. English.
Mr. ENGLISH. We have had many complaints about the fact that
it is difficult for electric cooperatives to participate in this process
both because of the size and the complexity and the type of expertise that is required to participate independently, but also I think
a lot of it does come down to the situation that the big entities of
the region, quite frankly, are the ones that seem to have the control and the influence or at least feel that they should.
And many of thoseso that basically does not have an all-inclusive broad participation locally in designing many of the systems
that come forward.
Mr. ENGLISH. So, I think there is much work that needs to be
done in the improvements in that, and hopefully we are going to
see that in the future, but we need a broad-based planning system
in place.
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Ms. BALDWIN. Mr. Nipper.
Mr. NIPPER. Yes, maam. We would agree with the comments
that have been made that it really requires a participation by everyone involved, all the stakeholders, it is varied in our members
views among regions, some a bit better than others, but it really
is necessary that everyone be at the table and be participating and
their input be counted.
I will say that, following up the comment on the RTO and ISO
regionsand they vary a bit, as well, among them; but the opportunities to participate, equally participate in the stakeholder process with some of the other stakeholders, for our members leaves a
lot to be desired. I will say that.
And then I will lastly mention the benefits that I mentioned in
my testimony about joint ownership, and if there are opportunities,
equal opportunities for folks, and yet American transmission company is a good example of this, where an opportunity for broad and
joint ownership by multiple entities provides planning and other
benefits as well.
Ms. BALDWIN. Mr. Joos.
Mr. JOOS. Well, I might just pick up on something Mr. Miller
said.
I think that FERCs incentive policies have created a situation
where not only independent transmission companies but integrated
utilities that hold distribution, transmission and generation favor
investment and transmission for solutions to the problems, even if
they are not the most optimum solution. Because frankly the rates
of return are higher and the levels of risk are significantly lower
than other kinds of investments that might be under State regulatory policy vis-a-vis, for example, what the FERC has put in
place. So our concern is you see a rush to invest in transmission.
Now, I want to clarify again there are transmission projects that
make sense, and if they make good economic sense, they ought to
be supported. I think we have to be careful not to incent investment because of the low-risk, high-return environment vis-a-vis
public interest; and therefore, I do think broad public planning of
some nature is necessary with broad participation.
Ms. BALDWIN. And Mr. Izzo.
Mr. IZZO. We operate both a regulated transmission and distribution business and an unregulated generation business. And the regulated transmission business provides reliability 99.99 percent of
the times through a regional planning process. It works and it
works well. And that is regulated and rates are based upon our
cost of service.
Our unregulated generation business always has to consider the
cost of connecting to the grid as part of its investment strategy and
fully bears that cost.
We need to dispel the notion that renewables are not being built
because of the transmission system. Renewables are not being built
because we are not sending clear price signals. This committee deserves congratulations on doing that through cap-and-trade and
through setting an RES.
And now, at the risk of being a little slip, the next thing I expect
to hear from people is that if only we had refrigerated freight
trains running free of charge from the North Pole, our local super-
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market would get its ice cubes through there. It just doesnt make
sense to ignore the transportation charges.
Ms. BALDWIN. I want to thank all of you gentlemen again for
your time and expertise and your patience.
Before I adjourn, I need to ask unanimous consent that two letters from FERC to Chairman Markey are put in the record. Without objection so ordered.
[The information appears at the conclusion of the hearing.]
Ms. BALDWIN. And with that, our hearing is adjourned.
[Whereupon, at 2:40 p.m., the subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
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The Future of The Grid: Proposals For Reforming National Transmission Policy

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THE FUTURE OF THE GRID: PROPOSALS FOR

REFORMING NATIONAL TRANSMISSION POLICY

SUBCOMMITTEE ON ENERGY AND ENVIRONMENT

COMMITTEE ON ENERGY AND

JUNE 12, 2009

Serial No. 11148

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