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REGIONAL ENERGY RELIABILITY AND SECURITY:

DOE AUTHORITY TO ENERGIZE THE CROSS

SOUND CABLE

HEARING

BEFORE THE

SUBCOMMITTEE ON ENERGY AND AIR QUALITY

OF THE

COMMITTEE ON ENERGY AND

COMMERCE

HOUSE OF REPRESENTATIVES

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

MAY 19, 2004

Serial No. 108–83

Printed for the use of the Committee on Energy and Commerce

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house

COMMITTEE ON ENERGY AND COMMERCE

JOE BARTON, Texas, Chairman

W.J. ‘‘BILLY’’ TAUZIN, Louisiana

RALPH M. HALL, Texas

MICHAEL BILIRAKIS, Florida

FRED UPTON, Michigan

CLIFF STEARNS, Florida

PAUL E. GILLMOR, Ohio

JAMES C. GREENWOOD, Pennsylvania

CHRISTOPHER COX, California

NATHAN DEAL, Georgia

RICHARD BURR, North Carolina

ED WHITFIELD, Kentucky

CHARLIE NORWOOD, Georgia

BARBARA CUBIN, Wyoming

JOHN SHIMKUS, Illinois

HEATHER WILSON, New Mexico

JOHN B. SHADEGG, Arizona

CHARLES W. ‘‘CHIP’’ PICKERING,

Mississippi, Vice Chairman

VITO FOSSELLA, New York

STEVE BUYER, Indiana

GEORGE RADANOVICH, California

CHARLES F. BASS, New Hampshire

JOSEPH R. PITTS, Pennsylvania

MARY BONO, California

GREG WALDEN, Oregon

LEE TERRY, Nebraska

MIKE FERGUSON, New Jersey

MIKE ROGERS, Michigan

DARRELL E. ISSA, California

C.L. ‘‘BUTCH’’ OTTER, Idaho

JOHN SULLIVAN, Oklahoma

JOHN D. DINGELL, Michigan

Ranking Member

HENRY A. WAXMAN, California

EDWARD J. MARKEY, Massachusetts

RICK BOUCHER, Virginia

EDOLPHUS TOWNS, New York

FRANK PALLONE, Jr., New Jersey

SHERROD BROWN, Ohio

BART GORDON, Tennessee

PETER DEUTSCH, Florida

BOBBY L. RUSH, Illinois

ANNA G. ESHOO, California

BART STUPAK, Michigan

ELIOT L. ENGEL, New York

ALBERT R. WYNN, Maryland

GENE GREEN, Texas

KAREN MCCARTHY, Missouri

TED STRICKLAND, Ohio

DIANA DEGETTE, Colorado

LOIS CAPPS, California

MICHAEL F. DOYLE, Pennsylvania

CHRISTOPHER JOHN, Louisiana

TOM ALLEN, Maine

JIM DAVIS, Florida

JANICE D. SCHAKOWSKY, Illinois

HILDA L. SOLIS, California

CHARLES A. GONZALEZ, Texas

BUD ALBRIGHT, Staff Director

JAMES D. BARNETTE, General Counsel

REID P.F. STUNTZ, Minority Staff Director and Chief Counsel

SUBCOMMITTEE ON ENERGY AND AIR QUALITY

RALPH M. HALL, Texas, Chairman

CHRISTOPHER COX, California

RICHARD BURR, North Carolina

ED WHITFIELD, Kentucky

CHARLIE NORWOOD, Georgia

JOHN SHIMKUS, Illinois

Vice Chairman

HEATHER WILSON, New Mexico

JOHN B. SHADEGG, Arizona

CHARLES W. ‘‘CHIP’’ PICKERING,

Mississippi

VITO FOSSELLA, New York

GEORGE RADANOVICH, California

MARY BONO, California

GREG WALDEN, Oregon

MIKE ROGERS, Michigan

DARRELL E. ISSA, California

C.L. ‘‘BUTCH’’ OTTER, Idaho

JOHN SULLIVAN, Oklahoma

JOE BARTON, Texas,

(Ex Officio)

RICK BOUCHER, Virginia

(Ranking Member)

TOM ALLEN, Maine

HENRY A. WAXMAN, California

EDWARD J. MARKEY, Massachusetts

FRANK PALLONE, Jr., New Jersey

SHERROD BROWN, Ohio

ALBERT R. WYNN, Maryland

GENE GREEN, Texas

KAREN MCCARTHY, Missouri

TED STRICKLAND, Ohio

LOIS CAPPS, California

MIKE DOYLE, Pennsylvania

CHRIS JOHN, Louisiana

JIM DAVIS, Florida

JOHN D. DINGELL, Michigan,

(Ex Officio)

(II)

C O N T E N T S

Page

Testimony of:

Blumenthal, Richard, Attorney General, State of Connecticut .................... 45

DeLauro, Hon. Rosa L., a Representative in Congress from the State

of Connecticut ................................................................................................ 19

Donahue, Jeffrey A., Chairman and CEO, Cross-Sound Cable Company,

LLC ................................................................................................................ 52

Kessel, Richard, Chairman and CEO, Long Island Power Authority .......... 63

King, Hon. Peter T., a Representative in Congress from the State of

New York ....................................................................................................... 22

Museler, William J., President and CEO, New York ISO ............................. 49

Otis, Lee, General Counsel, U.S. Department of Energy .............................. 42

Schumer, Hon. Charles E., a United States Senator from the State of

New York ....................................................................................................... 4

Shays, Hon. Christopher, a Representative in Congress from the State

of Connecticut ................................................................................................ 27

Wood, Patrick, III, Chairman, Federal Energy Regulatory Commission ..... 38

Additional material submitted for the record:

Ackerman, Hon. Gary L., a Representative in Congress from the State

of New York, prepared statement of ........................................................... 75

Clinton, Hon. Hillary Rodham, a United States Senator from the State

of New York ................................................................................................... 75

McCarthy, Hon. Carolyn, a Representative in Congress from the State

of New York, prepared statement of ........................................................... 77

Simmons, Hon. Rob, a Representative in Congress from the State of

Connecticut, prepared statement of ............................................................ 76

Spitzer, Eliot, New York State Attorney General, prepared statement

of ..................................................................................................................... 78

(III)

(1)

REGIONAL ENERGY RELIABILITY AND SECURITY: DOE AUTHORITY TO ENERGIZE THE

CROSS SOUND CABLE

WEDNESDAY, MAY 19, 2004

HOUSE OF REPRESENTATIVES,

COMMITTEE ON ENERGY AND COMMERCE,

SUBCOMMITTEE ON ENERGY AND AIR QUALITY,

Washington, DC.

The subcommittee met, pursuant to notice, at 10 a.m., in room

2322, Rayburn House Office Building, Hon. Ralph Hall (chairman)

presiding.

Members present: Representatives Hall, Cox, Shimkus, Pickering, Radanovich, Rogers, Issa, Otter, Barton (ex officio), Boucher,

Waxman, Green, and McCarthy.

Staff present: Jason Bentley, majority counsel; Mark Menezes,

majority counsel; Bob Rainey, fellow; Peter Kielty, legislative clerk;

Sue Sheridan, minority counsel; Bruce Harris, minority professional staff member.

Also present: Representatives Bishop of New York and Israel.

Mr. HALL. It appears that the main ones are present, so we will

get underway.

Today’s hearing is going to provide us with a very good example

of our Nation’s energy problems, and I think we need to pass the

Comprehensive Energy Bill. It is about a dispute between two

States with implications for regional reliability. The Cross Sound

Cable is the first of its kind, merchant transmission project and approved by the Environmental and Siting Agencies of New York and

Connecticut. It is approved by the U.S. Army Corps of Engineers.

The Public Utility Commissions of both States found that the

project would benefit the consumers in their State.

When the project was unable to comply with its permits, the

owners immediately contacted the appropriate agencies. While

most of the agencies were willing to work and work together and

try to work out the differences, Connecticut’s response—and they

made their decision to shut the project down. Not only did they

shut it down completely, the State legislature imposed a moratorium preventing State agencies from issuing or modifying any new

permits for energy projects in that area. They recently reissued the

moratorium and apparently intend to keep doing so indefinitely.

The result is that the Cross Sound Cable investors can’t negotiate with the State to address their problems, and they can’t get

permits to do what’s needed to comply with the original permit.

They are really left with no recourse.

2

So today, we will hear testimony on the benefits of the Cross

Sound Cable and how it has been used over the past 6 months.

Following the blackout last August 14, Secretary of Energy used

his emergency powers to order the cable put into operation. Testimony today will address how the cable was used to stabilize the

grid in the northeast and how it can help relieve transmission congestion in New York and the New England RTO.

When it is all said and done, I think we will see, once and for

all, that the Cross Sound Cable will save money for consumers in

both New York and Connecticut by improving reliability and reducing the delivered cost of electricity. Because of these benefits, we

included a provision in the Comprehensive Energy Bill that now

awaits two votes. We need two senatorial votes, just two.

We could get them both from New York, perhaps, if we included

a provision in the Comprehensive Energy Bill that resolves this

dispute in favor of keeping the Cross Sound Cable in operation. It

is my strong desire that the appropriate parties in Connecticut and

New York—two great States—can come together to reach some

kind of agreement.

I fear however that Connecticut’s just-say-no attitude to regional

energy security and reliability is going to require an act of Congress to resolve. And that is kind of a shame, because we ought to

get a business decision rather than a congressional decision.

The reliability assessment for this summer indicates that the

northeast should have sufficient generation capacity to meet the region’s needs. However, the demand of growth will require significant new investment in the years to come, and the reality of transmission congestion may have significant effects on reliability and

the cost of power this summer.

Long Island is one of those congestion points identified, and the

assessments were done under the assumption that the Cross Sound

Cable would be operational. Since it is no longer in service, we can

expect that supplies will be tighter than predicted this summer and

congestion worse for the northeast.

I hope this hearing today between two great States, two great

areas, well-represented, will help kickstart the dialog between

these two States to resolve their differences and realize that they

both need all the power they can get.

With that said, I look forward to hearing the testimony of our

witnesses, great witnesses, and get a better understanding of just

what some of Connecticut and New York’s concerns are.

We have Steve Israel and Tim Bishop, not members of this committee. We ask that they sit in and be given the rights of questioning the witnesses as other members of the committee.

Is there objection?

The Chair hears none. They are accepted.

Without objection, the Chair is going to proceed pursuant to

Committee Rule 4(e) and recognize members for 3 minutes for

openings statements. If they differ, this time will be added to their

opening round of questions.

At this time, recognize the gentleman from Virginia.

Mr. BOUCHER. Well, thank you very much, Mr. Chairman. And

thank you for convening today’s hearing. We will have an opporVerDate 11-MAY-2000 08:15 Aug 10, 2004 Jkt 000000 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 93979.TXT HCOM1 PsN: HCOM1
3

tunity this morning to evaluate the role of the Cross Sound Cable

in addressing the electricity needs of New York and Connecticut.

The cable is a 330-megawatt undersea merchant transmission

line connecting the regional transmission system in Connecticut

with the New York Independent System Operator on Long Island.

The line was buried beneath the Long Island Sound in 2002, although it was not activated at that time. Opponents of the cable,

largely from Connecticut, raise environmental concerns such as the

question of whether the line is buried deeply enough at certain

points as it crosses Long Island Sound. Officials from Connecticut

have additional objections stemming from concerns that the line

would encourage power flows out of Connecticut, which itself is suffering from electricity transmission constraints.

Supporters of the cable believe that its use would bolster transmission system reliability both in Connecticut and in New York

and also help to meet a projected power shortage on Long Island

during the course of this summer.

Following the blackout last August, Secretary Abraham issued

an emergency order activating the line to relieve electricity shortages on Long Island. Two weeks ago, on May 7, secretary Abraham

declared an end to the emergency conditions that necessitated the

lines use and accordingly rescinded the emergency order.

At that time, the Secretary pointed to conclusions reached in the

joint task force report on the blackout that operation of the Cross

Sound Cable would not have prevented the spread of the blackout.

The conference report on H.R. 6, the Comprehensive Energy Bill

contains a provision that would have blocked the Department of

Energy from terminating the order energizing the cable. That provision directed that the order remain in effect unless specifically rescinded by an act of Congress.

Since the recission of the order, Senator Clinton and Representatives Tim Bishop and Steve Israel have introduced in the Senate

and in the House legislation virtually identical to the provisions in

H.R. 6 relating to the Cross Sound Cable. The bills introduced by

the New York delegation would reverse the recission and keep the

cable in operation under the emergency order unless Congress acts

to reverse the order.

We have with us sitting on our panel today Representatives

Bishop and Israel, and I also want to extend a welcome to them.

Today’s hearing will give us an opportunity to learn about the

power generation and transmission needs of New York, Connecticut

and the New England region and the role that the Cross Sound

Cable plays in addressing those needs.

We also welcome the testimony from our distinguished colleagues, former Member of the House and Member of the Senate,

Senator Schumer, and representatives in Congress from both New

York and Connecticut.

We also welcome testimony this morning from the chairman of

the FERC, general counsel of the Department of Energy, the New

York Independent System Operator, the Attorney General of the

State of Connecticut and both the merchant company which operates the cable and the Long Island power authority. Mr. Chairman,

it is a timely hearing, and I commend you for convening it, and I

yield back.

4

Mr. HALL. I thank you. And if there is no objection, Senator

Schumer has other things that he has to do, and we will delay the

opening statements, if you don’t mind, until we hear from Senator

Schumer.

And I am sure he is going back over there and going to work on

trying to pass that energy bill to where we won’t even need this.

Mr. ISSA. Mr. Chairman, is that a commitment?

Senator SCHUMER. All we need is two little changes, and we will

be with you all the way.

Mr. HALL. He is a highly respected former Member of the House

and a great worker over in the Senate.

Senator Schumer, we are pleased to recognize you. Thank you.

STATEMENT OF HON. CHARLES E. SCHUMER, A UNITED

STATES SENATOR FROM THE STATE OF NEW YORK

Senator SCHUMER. Well, thank you Mr. Chairman. I want to

thank your courtesy in inviting me to speak at this hearing and remember the days we were both Members of the class of 1980 that

came here in the Congress.

Mr. HALL. You have done well, and I have gone wrong.

Senator SCHUMER. You have done pretty good, too. You are a

chairman, I am not.

Anyway, thank you and I want to thank my friend, Rick Boucher, the ranking member of the committee also. We served much

time together on the Judiciary Committee.

And my other colleagues here, some of whom I see in the gym

early in the morning. I still go to the House gym, Mr. Chairman,

right in this building.

Ms. DELAURO. Where they still don’t allow women.

Senator SCHUMER. No, they allow women.

Mr. SHAYS. Mr. Chairman, is this Senate time or House time?

Mr. HALL. Don’t you have to hurry?

Senator SCHUMER. Chris is right. Ralph, Chris is right.

When I got to the Senate, and they said, ‘‘How much time do you

need to speak on the floor,’’ and I think, having been in the House

for 18 years, I said, ‘‘Well, 5 minutes,’’ which would be a generous

amount of time in the House, they said no one speaks on anything

for less than 20 minutes on the Senate floor. So pardon me. Anyway, let me get to my testimony.

The bottom line, Mr. Chairman, is that I strongly want to voice

my support for reactivation of the Cross Sound Cable. And in fact,

I hope we don’t have to go the legislative route, which you know

can be The Perils of Pauline.

Today, we are urging the Department of Energy to step up to the

plate, do the right thing, and reactivate the cable, plain and simple. The operation of the Cross Sound Cable is critical to insuring

reliability and reducing electric rates throughout the northeast.

A failure to reach a solution that will allow the cable to operate

will not only hurt both sides of Long Island Sound, but will set a

dangerous precedent and threaten electric reliability from one end

of the country to the other by undermining even responsible efforts

to construct new transmission infrastructure.

5

I join my colleagues—I am glad that Pete King is here. Our colleagues on Long Island, Tim Bishop and Steve Israel are here. And

we are united in our voice in this regard.

And I have great respect for both my colleagues from Connecticut, but we are going to have to agree to disagree on this

issue.

Now, let me just make a few points here. One, this cable made

a lot of sense before the August 14 blackout, but it makes just

about complete sense now. And that is why the Department of Energy reactivated—activated the cable, because there was an emergency. God forbid, we have some hot days and there are brownouts

on Long Island, it will be too late for the Department of Energy to

declare an emergency ex post facto. We need them, again, to step

up to the plate right now.

Let me make a few of the arguments. We all know—and you

have laid it out very well Mr. Chairman—the need for

interconnectivity. This cable will benefit citizens on both sides of

Long Island Sound. When there are shortages of electricity which

occur in ways that we don’t even know, as the blackout showed, to

have this insurance of this cable which can send power from one

part of the power grid to the other, that are not directly connected,

makes imminent sense.

The Department of Energy never should have rescinded their

ruling that this cable was needed. As a result of the Department

of Energy’s decision, the Cross Sound Cable is powering political

controversy when it should be powering homes. Unfortunately, this

is nothing new about the project.

Since it was first proposed, it has encountered political objections

that have, at each step of the way, threatened to prevent the cable

from coming to fruition. The current status is the latest and most

frustrating example. As a condition of the permit issued for the

cable, by the Connecticut Department of Environmental Protection,

the cable must meet a depth requirement of 48 feet below the water’s surface and 6 feet below the seabed. The cable satisfies this

requirement in all but seven places which, taken together, comprise 700 feet of the 24-mile cable’s length. And they miss the requirement only by 6 feet.

To dispel any notion that this has environmental problems, both

the Army Corps of Engineers and DEP acknowledged that operating the cable at its current depth would present no environmental threat. And yet the Connecticut DEP still did not allow the

cable to operate and, as you mentioned, legislatively passed a moratorium.

So Connecticut’s been successful in stopping the operation of a

cable by blocking attempts to solve an environmental problem it acknowledges doesn’t exist.

But those regulatory gymnastics aren’t going to cut it as an explanation if the lights go out. That is why the Department of Energy needs to step up to the plate and do what every objective observer knows is the right thing to do and reactivate the cable to

provide reliability this summer.

One other point, just recently, Connecticut got permission to take

sludge from New Haven Harbor, the very area we are talking

about, and put it in the Long Island Sound. No one disputes that

6

the sludge has more environmental problems to the Long Island

Sound than the cable. And yet from the Connecticut State officials,

particularly the gentleman leading the charge, we don’t hear a

thing.

If the goal was the environmental viability of the Long Island

Sound, you would certainly have a larger outcry against the sludge

dumping than against the cable. So something is not right here.

Any school child, whether they are in Northport or New Haven,

would be able to tell you that toxic sludge is more of an environmental threat than an underground electric cable. It seems that

Connecticut opposition to the Cross Sound Cable is not out of environmental concern but rather out of environmental convenience.

The bottom line, Mr. Chairman, the operation of the Cross Sound

Cable is crucial to the power and economic security needs of Long

Island. And that is why I have been an ardent supporter. I know

it is said—I read the Attorney General’s testimony. He said Long

Island has done nothing to increase its own power needs. Long Island built—LIPA, the energy utility there, built 15 power plants

that include 600 new megawatts for Long Island. I stood with the

environmental groups. I had to sort of drag some of them there to

support another thousand megawatt plant in Melville, which will

be on the road to construction. But as you know, the cable is insurance. It is a safety valve when, in our disconnected northeast

power grid, one side of the sound or the other side has trouble.

Now, in conclusion, Mr. Chairman, we have no problem being a

good neighbor to Connecticut. Senator—Congressman Shays reminded me that our last dispute was over Gardners Island in 1700

or something like that. In fact——

Mr. HALL. I remember that.

Senator SCHUMER. You remember that. Class of 1980. That was

1780. Let me just say, Mr. Chairman, in fact, most of the natural

gas that is used in Connecticut at one point or another goes

through New York Harbor.

We are interconnected. We need one another. We work much better when we work together. I am hopeful that either Connecticut

will find some kind of compromise—and I know that Senator Dodd

has stated publicly that he would try to seek a compromise, and

I welcome that effort—or the Department of Energy step up to the

plate and do the right thing. They don’t have much time to wait.

By Memorial Day, the heating season comes. And that is when we

start our problems. So we hope they will step up to the plate and

do what we have to do and avoid the need to go through the legislative path.

With that, Mr. Chairman, I would ask unanimous consent my

entire statement be put in the record.

[The prepared statement of Hon. Charles Schumer follows:]

PREPARED STATEMENT OF HON. CHARLES E. SCHUMER, A U.S. SENATOR FROM THE

STATE OF NEW YORK

I would like to thank Chairman Hall, Ranking Member Boucher, and the rest of

the members of the Subcommittee for allowing me to voice my support for the reactivation of the Cross Sound Cable. The operation of the Cross Sound Cable is critical

to ensuring reliability and reducing electric rates throughout the Northeast.

A failure to reach a solution that will allow the cable to operate will set a dangerous precedent and threaten electric reliability by undermining even environmentally responsible efforts to construct new transmission infrastructure.

7

Like my colleague on this panel, Rep. King, as well as my fellow New Yorkers

Rep. Bishop and Rep. Israel, I have been a strong advocate for the cable and believe

that it represents a creative, environmentally responsible solution for meeting power

needs on Long Island as well as Connecticut. In the wake of the August 14th blackout I believe even more strongly that the Cross Sound Cable provides a vital capability to prevent future blackouts by quickly transmitting up to 330 MW of electricity, or enough power to serve 330,000 homes.

The Department of Energy’s decision to shut down the cable and take this capacity off of the table as we head into the hot summer months is shortsighted and dangerously heightens the risk that we will see a repeat of last summer’s blackout. As

a result of the Department of Energy’s decision, the Cross Sound Cable is powering

political controversy when it should be powering homes.

Unfortunately this is nothing new for the project. Since it was first proposed, it

has encountered political objections that have at each step threatened to prevent the

benefits of the cable from coming to fruition. The cable’s current status is the latest

and most frustrating example.

As a condition of the permit issued for the Cross Sound Cable by the Connecticut

Department of Environmental Protection, the cable must meet a depth requirement

of 48 feet below the water’s surface and six feet below the seabed. The cable satisfies

this requirement in all but seven places which taken together comprise approximately 700 feet of the cable’s 24-mile length, and only miss the requirements by six

feet.

Despite the fact that the Army Corps of Engineers and the DEP itself have acknowledged that operating the cable at its current depth would present no environmental threat, the DEP will still not allow the cable to operate. Connecticut has also

enacted a moratorium that prevents the supposed shortfalls from being rectified.

Connecticut’s been successful in stopping the operation of the cable by blocking

attempts to solve an environmental problem it acknowledges doesn’t exist, but those

regulatory gymnastics aren’t going to cut it as an explanation if the lights go out.

That’s why the Department of Energy needs to step up and do what every objective

observer knows is the right thing to do and reactivate the cable to provide reliability

this summer. In the newly deregulated markets of the Northeast everyone will suffer if the grid is not upgraded and more strongly connected by projects like the

Cross Sound Cable.

It’s not matter of theory that the operation of the Cross Sound Cable would have

no detrimental environmental impacts, it’s been clearly demonstrated. As a result

of Secretary Abraham’s emergency order following the August 14th blackout we

have had a chance to see through actual operations that the cable is not an environmental threat and plays a critical role in ensuring electric reliability throughout the

Northeast.

I also find the claims of environmental concern issued by those in Connecticut,

not necessarily include my colleagues here, who oppose of the cable to be inconsistent with their stance on other issues. Some have advocated the dumping of toxic

sludge into the Long Island Sound as part of a project that would deepen Connecticut’s harbor, creating an economic benefit. Any schoolchild in Northport or New

Haven would be able to tell you that toxic sludge is more of an environmental threat

than an underground electric cable. It seems that Connecticut opposition to the

Cross Sound Cable is not out of environmental concern but environmental convenience.

The operation of the Cross Sound Cable is crucial to the power and economic security needs of Long Island, which is why I have been such an ardent supporter of

the project. However, I also believe that Connecticut and New York have a responsibility to be good neighbors to each other, and the Cross Sound Cable would allow

that.

If allowed to operate, the Cross Sound Cable will increase the availability of imported power to Connecticut both directly and by helping to loop power through the

already operating Norwalk cable.

In fact, during its operation, the cable was available on 108 instances to provide

voltage support to Connecticut, bolstering reliability. It was in fact the absence of

this type of support that exacerbated the August 14th blackout.

The Cable also transmitted power directly to Connecticut, automatically responded to a number of unanticipated system disturbances, and could help displace

generation from old, air polluting power plants. In the short time that the cable has

been allowed to operate, it has proven to be a benefit not just to Long Island, but

also to the region as a whole.

New York has no problem being a good neighbor to Connecticut. In fact, almost

all of the natural gas used in Connecticut at one point or another is transported

through New York. However it seems like the neighbor we have tried to be so good

8

to has just put up a regulatory fence and is threatening to turn out our lights this

summer.

The continuing objections and obstacles to the operation of the Cross Sound Cable

are creating a public policy failure in the making by placing irrational regulatory

obstruction over the needs of families and businesses in the Northeast. In order to

rise above this regulatory game of ‘‘Gotcha’’ and prevent blackouts this summer, the

Department of Energy needs to show some leadership and reactivate the cable.

It’s even more clear after the events of last summer that the Department has a

responsibility to ensure that blackouts don’t again affect millions of Americans. If

the Department does not activate the cable and blackouts result the cause would

be nothing short of negligence.

By paving the way for the reactivation of the Cross Sound Cable, Congress and

the Administration have the opportunity to send the message that needed improvements in transmission can be made, and that the federal government has indeed

made a serious commitment to preserving reliability. I urge the Subcommittee to

send that message before it is too late.

Mr. HALL. Without objection, and if you would continue to bless

us with your presence——

Senator SCHUMER. I am going to stay Mr. Chairman.

Mr. HALL. Until the chairman of the big committee speaks, in

order that the chairman of the little committee can keep his chairmanship.

I would ask you if you would—Joe Barton. We are going to recognize Mr. Barton at this time for as much time as he needs to consume.

Chairman BARTON. I won’t take that Mr. Chairman. I would ask

that my formal statement be included in the record.

[The prepared statement of Hon. Joe Barton follows:]

PREPARED STATEMENT OF HON. JOE BARTON, CHAIRMAN, COMMITTEE ON ENERGY

AND COMMERCE

Today’s hearing presents a number of interesting issues. Some of these issues are

addressed in the Conference Report for H.R. 6, the comprehensive energy bill, which

was passed by the House and is awaiting action in the Senate. Other issues raised

by today’s hearing will require renewed discussions between officials in Connecticut

and New York in order to be resolved. I hope that by the end of today’s hearing

we have an agreement from the witnesses here today to work on resolving both sets

of issues.

The issues raised by today’s hearing that would be resolved in the comprehensive

energy bill are as follows:

• As to the question of whether the Cross Sound Cable should remain in operation,

the comprehensive energy bill keeps the cable energized unless Congress decides it should be turned off.

• As to the question of whether a State can delay a decision on a natural gas pipeline indefinitely, the comprehensive energy bill requires States to make a decision one way or another, and removes the appeal of that decision to Federal

court. This, and other provisions in the comprehensive energy bill, will help get

projects, like the Islander East natural gas pipeline, constructed.

These provisions in the comprehensive energy bill will help the citizens of New

York by increasing energy security and reliability, reducing the price consumers pay

for electricity, and providing more, and more affordable, clean-burning natural gas

to heat their homes and generate electricity.

These provisions will also help the citizens of Connecticut, by reducing transmission congestion costs in their State and, in the words of the Connecticut Siting

Council, ‘‘enhance[ing] the inter-regional electric transmission infrastructure and

improve[ing] the reliability and efficiencies of the electric system here in Connecticut as well as in New York.’’ If Connecticut is concerned that New York is not

doing enough to generate their own power, then help them construct a gas pipeline

to fuel their own power plants.

Other issues that may arise today will need to be worked out between officials

in New York and Connecticut. As to who should pay to upgrade the existing transmission cables between Connecticut and New York, that issue needs to be worked

out between those States and the FERC. On the question of whether New York is

9

doing enough to build it’s own generation, I need to point out that there is an 1100

megawatt power plant waiting to be approved that would supply much needed future power to Long Island and New York City. To be fair, though, if folks in Connecticut think New York should supply all of its own power needs, I would only

point out that Connecticut imports more than 15% of its total annual electricity consumption from other States.

My point is that these are regional energy problems that require regional energy

solutions. Just like the examples of the Cross Sound Cable situation and our inability to finish construction of the Islander East gas pipeline, the comprehensive energy bill pending before the Senate provides us with real solutions to our Nation’s

energy problems.

We are two votes short of the sixty needed to defeat the filibuster in the Senate.

Fifty-eight Senators have voted in support of passing an energy bill this year. Senator Schumer, who is testifying here today, is leading the effort in the Senate to

stop the energy bill. Two votes are all we need Senator. I know there are things

in the bill that you may not like. There are things in there I would do differently.

But every provision in the bill is important to some region of the country and some

State. And together, they represent a balanced package, with the broadest bipartisan support we will likely get this year. I know you agree with me that the American people deserve a comprehensive energy policy. Given your interest in resolving

this Cross Sound Cable dispute, I hope we can count on your vote in the Senate.

With that said, I hope this hearing today does two things:

(1) I hope officials in New York and Connecticut can start working again to resolve

their differences; and

(2) I hope it helps us all to better understand the need to pass a comprehensive energy bill this Congress.

I look forward to hearing from our witnesses.

Mr. HALL. Without objection.

Chairman BARTON. I know that Senator Schumer has to leave,

so I want to make a few comments. I do appreciate this panel. It

is good to see our friends in the House from New York and Connecticut and, of course, our good friend from the Senate, Senator

Schumer, who is a former Member of this body.

My main point is more directed to you, Senator, since we don’t

get to see you all the time over here. We have a comprehensive energy bill that is been languishing in the Senate for I guess about

6 months now. The issues that are before us today are addressed

in that bill.

We have a siting protocol, so that when States disagree, we let

the FERC and the Federal courts intervene in an expeditious fashion. On the particular project in mind, the conference report would

allow that cable to continue to be energized unless the Congress decided it should not be.

And I am not saying the Congress should intervene between

States. It looks like Connecticut and New York are trying to work

this out slowly but surely, and I think, over time, you will.

But my request to you Senator Schumer, would be to try to find

a way in your heart, talk to your other Senator from New York.

We just moved a bill through the subcommittee and full committee

on the New York watershed. That is, I think, a bill that you and

Senator Clinton moved over there. So we are not anti-New York,

nor are we anti-Connecticut. I don’t want my Connecticut friends

to think that. But I would really like to see if we couldn’t get that

energy bill up for a vote. We only need two more votes for cloture.

And you and Senator Clinton could be those two votes.

If there is an issue that is just so sensitized that we need to work

it out as a sidebar, I am sure the Speaker and the Majority Leader

and myself and Mr. Dingell and others would be happy to work on

that.

10

So you know, my request to you is, we have got gasoline prices

at all time highs. We have got natural gas prices at all times highs.

We have got coal prices at all time highs. Surely think there ought

to be a way to get two more senators to let the energy bill come

up for a vote in the Senate.

Senator SCHUMER. Okay.

Well, Mr. Chairman, if I might respond. And first, I very much

appreciate your coming and making the time, Mr. Chairman.

The bottom line is a simple one. As you know, the bill was

blocked in the Senate by a bipartisan coalition. In fact, every Republican from the northeast, from New England and the northeast,

opposed the bill. And that is because the bill may be very good for

some regions of the country, but it does real damage to those of us

in the northeast.

Two issues in particular led me to work with your colleagues, Republicans John Sununu and Judd Gregg to block the bill. One is

the issue of MTBEs and the right to sue. We have here on Long

Island, we have our whole watershed, we have 27 water districts

who may not have any water anymore because the MTBEs went

into their water systems. We can’t stand by as their taxes might

go up a thousand or $2,000 to have to build a new watershed.

And the second was imposing ethanol on the East and West

Coasts. Our gas prices, as you say, are high enough. If this energy

bill passed, we would be forced to pay for ethanol, even if we didn’t

buy it, which we wouldn’t because it is so expensive to ship from

the Midwest. We would love a compromise. In fact our bipartisan

group, including—I guess it is five. There are five Republican Senators from the northeast, all who voted against it, every one of

them. But our bipartisan group has reached out and said you

solve—you give us a waiver on ethanol. You want to use ethanol

in Texas or—well California doesn’t want to use ethanol. Illinois,

you want to use it in Illinois, that is great. Don’t force us to use

it when gas prices are high enough.

And on MTBEs, allow the process to continue. We have had negotiations with some of those who have spilled these MTBEs. Long

Island just has one aquifer. You pollute it and you ruin a water

supply for millions. So I would love to sit down with you and work

out those two pieces, as would all of our bipartisan coalition. But

the energy bill has to serve the whole country, not just a portion

of it.

Chairman BARTON. Well, the energy bill that is being blocked

from a vote because of the two votes needed for cloture——

Senator SCHUMER. It is four by the way. It went down two.

Chairman BARTON. Has a very good reliability section on electricity that would help the northeast tremendously. It doubles the

funding for the leaking underground storage tank program that

would solve the real problem of MTBEs. I mean, I could go on and

on. But if it never gets to a vote, I mean, then there is no compromise at all if we can’t get it up for a vote.

Senator SCHUMER. It needed two votes about 4 months ago. Now,

it needs four votes.

Chairman BARTON. Well, if I get you and Senator Clinton, it is

back down to, we need two votes.

Senator SCHUMER. Well, I can’t speak for Senator Clinton.

11

You give us a waiver on ethanol, allow the MTBE process to go

forward, don’t retroactively stop lawsuits that have been going to

help the districts, I will support the bill. I have made that clear

from the get-go. And I am not saying change what it does in your

area, but at least make it work for us.

Chairman BARTON. Well, we—I will take that under consideration.

Senator SCHUMER. Thank you.

Chairman BARTON. But we want to see some movement our way,

too, from the Senate.

Mr. HALL. All right. I thank the chairman and thank the Senator. Enjoyed the debate, but, you know, really the people that we

have to think about right now are the youngsters that are going

to have to go overseas and take some energy away from someone

when we don’t have enough of it right here at home. That is the

real thing. And we all surely can get together when it is that important.

I thank you, Senator, and if you need to go, we understand. If

you would stay, we would be honored to have you stay.

Senator SCHUMER. I am happy to stay.

Mr. HALL. The Chair recognizes Mr. Pickering for 3 minutes, and

2 minutes is already gone.

Mr. PICKERING. Mr. Chairman, thank you and thank you for this

hearing. I enjoyed the last colloquy between our colleagues.

A couple of principles that I think should guide us in our deliberations here: One, Congress should not favor one State over another. This is a dispute between States. I hope that they can reach

a compromise and work through the different issues. But it sets a

very dangerous precedent that a large State could dominate a

small State. And being from a small State, I think that is a very

dangerous precedent to establish.

Two, the solution should be part of a comprehensive solution to

our Nation’s energy policy. As Chairman Barton said, there are

two, possibly four, senators that would break the filibuster in the

Senate and allow all regions to benefit from greater energy reliability, greater transmission generation, distribution. It would have

a mechanism that would resolve disputes between States. So as

you look at who is responsible here, as far as solving this problem,

that is very—and I agree with the senator from New York.

It is a very significant issue for New York. It could play a role

in the reliability of electricity in New York. If there is a blackout

in New York, this could give a back-up that would allow the reliability and the energy needs of his State to be met.

But it is hard for me to imagine why, if that is the case, that

we could not find a way to move the energy bill through the Senate. If it is that important, that significant, if it has that much at

stake, then I believe it should be part of a solution to have legislation—comprehensive legislation—that is good for my region, good

for the northeast, good for the Midwest and good for the west—

done and passed in a fair way. So with the stakes this high, I don’t

think that we should be playing a game of political chicken and

saying that the responsibility is with everybody else but not with

the New York senators. It starts there; it ends there.

12

And when they are able to find a way to get the legislation, the

comprehensive energy bill that is good for every region, passed

through the Senate, then I think that they have the credibility to

be able to come and ask for a specific issue that benefits their

State.

With that said, I yield back my time.

Mr. HALL. Thank you.

At this time, we would recognize—brevity is wonderful here. We

recognize Congressman Green, the gentleman from Texas for 3

minutes. And you will be rewarded if you don’t use all 3.

Mr. GREEN. Thank you, Mr. Chairman. But knowing your rewards, I will take my 3 minutes.

Mr. HALL. Your times is expired.

Mr. GREEN. Well, let me say something nice. Chairman Hall, I

want to thank you for holding this hearing because I think this is

an issue that talks about the need for a National energy policy on

a localized basis.

The Cross Sound Cable, I think, is so important, I am glad to see

our colleagues here and a former colleague who is now in the Senate. The Cross Sound Cable is a classic example of a project addressing both the basic and urgent energy supply needs just as urgent as energy reliability needs.

The Long Island Power Authority tells us that, during the peak

summer demand, they are within 1 percent of capacity. As a result,

last August, the northeast, including Long Island, had the equivalent of a heart attack. The Cross Sound Cable is the bypass surgery

that is needed to relieve the clogged arteries of Long Island, New

York.

And I commend our colleague Congressman Bishop for recognizing the urgent need to turn on the Cross Sound Cable immediately and permanently and look forward to his testimony. With

the stability of long-term contracts and redundancy of interconnection, the increased flexibility provided by cable will greatly benefit

the entire region.

Energy Bill H.R. 6 contains a provision that is calling for the

final Federal siting authority transmission facilities siting to the

similar—to the authority exercised by FERC over natural gas pipelines. H.R. 6 provides for such authority and limits it to situations

where the relevant State or regional authorities are shown to have

failed to act appropriately with regard to facilities for areas found

by the Secretary of Energy to be transmission constrained.

I think the Cross Sound Cable is a classic case of why this provision is necessary to address this problem in interstate commerce

today.

And again, Senator, I would hope the Senate would deal with the

energy bill. And of course, there are some other things you and I

disagree on, but I would like to see the full energy bill pass because

I think we need it for our country.

But this is an example of one of the local needs that has to be

done.

And again, thank you Mr. Chairman. I will look forward to the

testimony.

Mr. HALL. All right. The Chair recognizes the gentleman from

New York, Mr. Fossella.

13

Mr. ISSA. The gentleman from California, Mr. Issa. But that is

all right. We are kind of look-alikes. Vito Issa.

Senator Schumer, you just got another ally up here on the dais,

and he is not even present. You know——

Mr. HALL. And his times expired for sure. And your time is almost over.

Mr. ISSA. My time has expired again. I will take Vito’s time.

You know, we use a lot of expressions here in the Congress. You

use even more in the Senate. You know, the expression that you

know Nero fiddled while Rome burned, to a certain extent, speaks

well here today. Both your State, New York and California, the

East and the West Coasts have experienced—and Connecticut—

have experienced very tight constraints on its energy supplies. In

the information age, in the modern era, if we have people, but we

don’t have communication, which needs energy, and don’t have energy, which runs every machine that makes our world go round,

then in fact we are the Third World again. And we are not very

good at being the Third World. As a matter of fact, we are real bad

at it. And China and India and other countries still are pretty good

at it.

So we have to make sure that we have reliable energy, reliable

communication. And that is this committee’s primary responsibility

as it falls in that way. And so, rather than fiddling while Rome

burns, I would ask you, Senator, even though you and I see each

other in the gym with great regularity, to our mutual benefit, is

there something between the colloquy that you had with the chairman—in other words, as a Californian, don’t want to be paying for

Midwest ethanol to make corn farmers happy forever, even if we

have no need for them.

But I recognize that an abrupt halt in consumption, at a time in

which they have planned and it is part of the economy also is unacceptable to many Members of this body and the one on the other

end of the Capitol. So let me ask you, would you be willing to consider and take back to your body, in order to move this issue and

others, some form of a—once our States have established an alternative to ethanol, which we have not done, neither one of us has

certified alternatives, but once we have done it, to have a phaseout,

a period, mutually acceptable, sufficient to allow ethanol to—and

the underlying farmers not to abruptly lose it, perhaps even one

that says essentially, as consumption rises, we get phased out.

And at the same time, recognizing MTBE, which also has polluted our watersheds—and we have multiple, but they all have the

same problem. And we are very concerned about it. Some form of

a fund in lieu of absolute liability so that at least there would be

predictability. And I believe that reasonable parties on both sides

could come to at least agreement to agree, and then we would find

the numbers.

Could you consider that? And I know this is an opening statement, but I would appreciate a response.

Senator SCHUMER. Yeah. No, I think those are both excellent

questions. On the second, I have proposed that. But it has to be

a fund—and I know that Chairman Barton mentioned that the leak

fund has been doubled. It wouldn’t even cover Suffolk County’s

14

needs, let alone the whole country’s. It is a very small fund. It has

to be much larger.

But I have proposed to some of my colleagues from Texas that

we do just what you said on MTBE. I don’t care about the liability

stuff. I don’t care about the ethos of lawsuits. I just want to make

sure that the homeowner—let me tell you a little example. I went

and visited Fort Montgomery. A lot of retired people right across

from Westpoint, they took their whole savings, invested it in their

little homes after they served our country for 20 years. Now they

have to drive a mile to take a shower. They have to buy all bottled

water, all because a nearby gas company, the gasoline went into

the water. They didn’t tell them. They didn’t do anything. They are

ready to negotiate. So yes, a fund would do the job.

On ethanol, as you know, it is not just phasing out the use of

ethanol. What the bill does, it says you have to pay for ethanol if

you don’t use it. Now, maybe there is no alternative in California.

We have an alternative in New York. I have talked to Mr. O’Malley

and others, the head of our largest refiner——

Mr. ISSA. We have an alternative. We just don’t have it yet approved.

Senator SCHUMER. We can do it. They can crack the oil differently and meet the clean air standard, and they will do that because it is still cheaper than ethanol. But then they have to pay

what is called an ethanol credit. It is the most anti-free-market

thing—I know you are an advocate of the free market, as am I—

that I have ever heard. And we know why it is done. I can’t sit

there and let my New York drivers pay another 20 or 30 cents a

gallon, which is what would happen, because the Midwestern corn

farmers and lots of these ethanol producers want to do it.

So all we are asking on that one, give us a waiver. Not on the

Clean Air Standards; keep the air clean. But if, in certain areas,

it makes more sense to use another process, other than ethanol or

MTBEs for that matter, give us the waiver. That is all. It is very

simple again.

You need four more, you need five votes, because we have 56

now. It went down two. And every one of my northeast colleagues—

this is not an issue of party. This is issue of maybe region. Your

two senators have said the damage that would occur if you imposed

ethanol on California, Diane Feinstein has led the charge. And so—

and I know that Congressman Cox has been out there as well. It

is anti-free-market. It is unfair, and I think it is unfair to ask my

drivers to pay 20, 30 cents a gallon to get some of the other good

things, the reliability stuff, in the energy bill.

And I would say that every one of you on this committee, if your

State were in that position, would do the exact same thing we have

done.

Mr. HALL. In order to be fair with the other participants, I would

ask that you make your statement, and then we will have the questions and answers later.

The gentleman has finished his statement.

Mr. ISSA. Yes, Mr. Chairman. Thank you.

Mr. HALL. All right. At this time, we recognize Mrs. McCarthy,

the gentlelady from Missouri for 3 minutes.

15

Ms. MCCARTHY. Mr. Chairman, I would like to waive that and

get to the panel.

I am just so glad to see each and every one of you. This is a joy,

so I will put my remarks in the record and let’s give you some more

time.

Mr. HALL. I thank the gentlelady.

The gentleman from California, Mr. Cox.

Mr. COX. Thank you, Mr. Chairman.

I will be very brief, particularly because we have a good opportunity with our colleagues from both sides and from both States,

as well as FERC and DOE and representatives from New York and

Connecticut.

So rather than read you my opening statement and tell you how

I would solve this problem, I just want to suggest to those who are

going to give opening statements and testimony that, if you would,

I would like you to help me understand a couple of things. First,

given that the Connecticut Department of Environmental Protection has agreed that the cable’s operation as it was installed would

lead to no environmental harm or hinder navigation in the harbor,

why can’t we, while methods for reaching the required depth are

devised, permit operation of the cable?

Mr. HALL. The gentleman will have a chance to answer that

when we question the panel. You go ahead with your statement.

Mr. COX. I am not asking questions to anybody. This is just my

statement.

Mr. HALL. Oh, I am sorry. Go ahead. I didn’t mean to interrupt.

Mr. COX. Second, didn’t we learn from the August 14, 2003,

northeast blackout that our electrical networks’ vulnerability and

the general need for greater reliability should be uppermost in our

decisionmaking?

Third, why so soon after the biggest blackout in North American

history would anyone want to make it harder to get power where

it needs to go?

And last, as a Californian who has seen what our State’s decades-long failure to build new generating capacity has meant for us

and the problems that that has created, why is it that the States

of New York and Connecticut can seemingly agree on only one silly

point, which is that both would prefer to feed the ever-growing

needs of their populations by getting their power from somewhere

else, rather than building new generating capacity of their own?

I thank you, Mr. Chairman.

Mr. HALL. I thank you.

The Chair recognizes the gentleman from Illinois, Mr. Shimkus,

for a fast 3 minutes.

Mr. SHIMKUS. It was going to be really fast, but based upon some

of the comments, Mr. Chairman, first of all, in the energy bill, if

you negligently handle and spill MTBE, there is a liability and you

are liable to be sued. This—the energy bill provision is for faulty

products status which we here—and you are a Member—approved

MTBE and the Clean Air Act. So let’s put that aside.

Second, energy security and ethanol—I am not going to belabor

it. I would just say that, right now, anywhere across this country,

7 to 10 percent of fuel being used right now is ethanol. Where are

we going to get the additional 7 to 10 percent fuel, gasoline, that

16

is being displaced by ethanol, and at what cost? There is a benefit,

and some States actually have lower prices because of the ethanol

additive right now.

Third, wholesale electricity is an interstate commerce issue and

is under the jurisdiction of our committee. It is critical for market

competition, lower prices and reliability we have this provision in

the national energy plan. We worked real hard. I look forward to

hearing, but it is very curious that the northeast would now ask

for special exemptions. We do have legislation that would fix many

of these problems. I yield back my time.

Mr. HALL. All right. Thank the gentleman.

Congressman Israel or Bishop would you like to make an opening

statement.

Mr. ISRAEL. Mr. Chairman, let me just thank you very much for

extending us this courtesy. And in deference to all of my colleagues, I would like to submit my statement for the record.

[The prepared statement of Hon. Steve Israel follows:]

PREPARED STATEMENT OF HON. STEVE ISRAEL, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF NEW YORK

The blackout that occurred across North America last August reinforced my belief

that the United States must pursue a national energy policy that fosters greater energy security and reliability. The 24-mile Cross Sound Cable that runs from

Shoreham, NY to New Haven, CT is a microcosm of the challenges that lay ahead.

It is unfortunate that this issue is pitting New York and Connecticut against one

another. The blackout in August of 2003 illustrates the sense of urgency and fully

demonstrates the consequences of inaction, complacency and parochialism. We must

look past the rhetoric and seek a feasible approach to bring greater energy security

and reliability to the Northeast region of the United States.

Since August 28, 2003, the Cross Sound Cable has provided 330 megawatts of

power to Long Island and helped stabilize this fragile power grid. It should be noted

that this cable does not run one-way, but has the potential to send power back to

Connecticut as well. An advantage of the Cross Sound Cable is that it has successfully smoothed out system spikes in both New York and Connecticut. In fact, the

Cross Sound Cable provided voltage support nearly 100 times since August of 2003

with nearly 90 percent of requests for support coming from the New England Region.

When operating on a full-time basis, the Cross Sound Cable responds automatically to system disturbances and helps reduce congestion in Connecticut. Since last

August, the Cable was used 17 times for stabilization due to lighting strikes, transformer failures, transmission line faults and other events. It is important to note

that 12 of the 17 responses were for disturbances to the grid in Connecticut. Additionally, the Cross Sound Cable will enable Connecticut to relieve internal congestion by circulating power through Long Island and back to isolated parts of the

state. ‘‘Loop wheeling,’’ which is only possible by using the Cross Sound Cable, enables power to flow from Connecticut to Long Island through the Cross Sound Cable

and back to southwestern Connecticut via the existing 1385 Cable.

The Cross Sound Cable is not about one state siphoning power from another.

Rather, the Cable will be used to benefit energy customers on both sides of the Long

Island Sound. In fact, Long Island has already shown a willingness to send power

to Connecticut to help meet energy demand. On July 2, 2002 during an extended

heat wave, power was sent to Norwalk, CT using the 1385 Cable that runs underneath the western portion of the Long Island Sound. There is no reason to believe

that Connecticut will not also benefit from the Cross Sound Cable in this manner.

I applauded the Secretary of Energy for taking previous steps to ensure greater

energy reliability by authorizing use of the Cross Sound Cable on two separate occasions. I am concerned by the timing of the most recent action to terminate use the

Cross Sound Cable and I am troubled by the belief that the Secretary must now

wait for a ‘‘true emergency’’ to permit its use again. Families and businesses in the

region deserve more than a wait-and-see approach to energy security. I am not confident that a bureaucratic process can effectively respond to the known uncertainties

in the power grid. The real question is how long will we have to wait for the Secretary of Energy to declare, for the third year in a row, a power emergency that

17

energizes the Cross Sound Cable? The Old Farmer’s Almanac is telling the region

to ‘‘expect the worst heat wave in several years, with oppressive heat and humidity’’

in mid-August of this year. Spring temperatures are already above seasonal averages and air conditioners are beginning to drain from the power supply.

I believe we must act quickly to reinstate use of the Cross Sound Cable to avoid

unnecessary delay and reduce the vulnerability to the region’s energy grid. I sent

a letter to Energy Secretary Spencer Abraham on May 14, 2004 along with Congressman King, other members of the Long Island Congressional Delegation, and all

three New York members on the House Committee on Energy and Commerce. We

respectfully requested that the Secretary of Energy rescind the termination of Emergency Order No. 202-03-02 and allow permanent use of the Cross Sound Cable. I

eagerly await the Secretary’s response and hope he will quickly act to re-energize

the Cross Sound Cable.

I have also introduced legislation with Congressman Tim Bishop that would authorize use of the Cross Sound Cable. H.R. 4349 would permanently reinstate Department of Energy Order No. 202-03-2 unless it rescinded by an act of Congress.

This legislation would provide all necessary authority for the Cross Sound Cable to

operate on a full time basis. If the Secretary of Energy were unable to rescind the

termination of the Cross Sound Cable, and with comprehensive energy legislation

stalled, I would hope for quick action on H.R. 4349.

The Cross Sound Cable is part of a larger national struggle to enforce reliability

standards and foster greater energy stability throughout all regions of the country.

The New York economy can ill-afford additional energy costs and unstable supply

lines. I am confident that we can work together to find a long-term solution to this

problem.

Mr. HALL. Fine. Without objection. Mr. Bishop?

Mr. BISHOP. Mr. Chairman, I would take the same position. I

thank you so much for convening this hearing, but I will submit

my remarks for the record as well. Thank you.

Mr. HALL. All right.

I thank all of you and thank you for your brevity, and I thank

you for your answers, Senator. If you have to leave——

Senator SCHUMER. Thank you Mr. Chairman. I appreciate the

courtesy, and I enjoyed the dialog and hope we can come up with

a compromise on the energy bill. And I hope we can move forward

with the cable.

Mr. HALL. Go straight to work on the energy bill, and we will rig

the drawing for you in Texas.

[Additional statement submitted for the record follows:]

PREPARED STATEMENT OF HON. EDWARD J. MARKEY, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF MASSACHUSETTS

Thank you, Mr. Chairman, for calling today’s hearing.

While all of us are hopeful that New York and Connecticut resolve their outstanding differences over the Cross Sound Cable, there is a larger issue that this

Subcommittee needs to address. On August 14, 2003 our nation experienced the

worst blackout in our nation’s history. More than 60 thousand megawatts of power

was cut off from those who needed it, leaving 50 million consumers without electricity. Those consumers—our constituents—want us to ensure that it never happens again.

While I am certain that the Cross Sound Cable has importance to those living in

Eastern Connecticut and Long Island, New York, it is far from clear whether its

operation or non-operation of this cable will have any major impact on the broader

issue of the reliability of our nation’s electricity grid. In fact, in its May 7, 2004,

order terminating the requirement that the Cross-Sound Cable operate, the Department of Energy (DOE) cited the April 2004 report of the U.S.-Canada Power System

Outage Task Force, which it stated did not ‘‘identify any particular role that the

Cross-Sound Cable would have played in stopping the spread of the outage . . .’’.

Based on that finding and other information, the Secretary of Energy found an

emergency no longer exists, that DOE’s Order should be terminated. The Secretary

also announced that DOE would ‘‘continue to monitor the transmission and electric

reliability situation in New England and New York’’ and that the Department might

issue additional orders if circumstances changed.

18

So, what do we need to do to address the potential of a repeat of last year’s blackouts?

First, I think that we should adopt H.R. 3004, which was introduced by Representative Dingell last year, and which I have cosponsored, which would make electricity reliability standards mandatory and enforceable. Democratic members of the

Committee have been pressing for action on this legislation for several months, but

the Republican majority has chosen instead to link its passage to enactment of the

Bush-Cheney energy plan, which is filled with other extraneous special-interest provisions for the oil, gas, and nuclear industries and which would weaken our nation’s

environmental laws. In fact, even the Bush Administration’s own Department of Energy’s Energy Information Administration has admitted that enactment of the Republican energy bill would have a negligible impact on energy production, consumption or prices. I don’t think we should allow H.R. 3004 to be held hostage any

longer. We should take it up now and pass it.

Second, with respect to the situation in New England and the Northeast, it appears that while some transmission upgrades may be needed, the Cross Sound

Channel has little real relevance to the reliability issues that are most pressing in

our region. In this regard, I note that in testimony submitted to the Subcommittee

in connection with today’s hearing, ISO New England, the operator of New England’s wholesale transmission system, has stated that while it supports operation

of the Cross Sound Cable, the question of whether or not the cable is in operation

has virtually no effect on New England’s electricity transmission.

In particular, ISO New England’s testimony states that:

‘‘The Cross Sound Cable has no bearing on the electric reliability situation in

Southwest Connecticut. It is simply not in the right location. The inadequate

transmission system limits transportation of power from the cable location to

the area of most need.’’

ISO New England’s testimony concludes that ‘‘operation of the Cross Sound Cable

does not improve the daily reliability problems that exist in Southwest Connecticut

due to an extremely weak transmission system.’’ At the same time, the ISO notes

that ‘‘There may be, however, emergency situations in which either New York or

New England would benefit by having an additional external interconnection from

which to receive emergency power.’’ Instead of the Cross Sound Cable, the ISO notes

that ‘‘the 1385 cable between Southwest Connecticut and Long Island is a critical

interconnection, and is in urgent need of repair’’ and that ‘‘When addressing the

issue of interconnections between Connecticut and Long Island, it is appropriate

that the situation on the 1385 cable also be addressed and resolved.’’ I would urge

FERC and state regulators to address this matter quickly, as it appears to be much

more relevant to the issue of regional reliability than the Cross Sound Cable.

Finally, I think that the Subcommittee needs to look very closely and skeptically

at some of the proposals that are now under consideration at the FERC to provide

transmission utilities with higher ‘‘incentive rates’’ for meeting their obligation to

provide wholesale transmission service, and to simultaneously provide generators

with higher ‘‘locational installed capacity’’ (or LICAP) payments to subsidize uneconomic operations. While many of these proposals are being couched in arguments

about reliability, it is not at all clear to me why such increased payments are justified and whether they bear any reasonable relationship to ensuring system reliability. FERC has a duty to help ensure that our electricity grid is reliable, but it

also has a responsibility to ensure that the rates charged to consumers are just and

reasonable. Why should FERC allow a monopoly transmission owner to receive high

‘‘incentive’’ payments in excess of the guaranteed return on equity that has historically been provided? And why should FERC authorize a LICAP subsidy for generators? Are such steps really necessary for grid reliability, or are they just a mechanism for increasing utility and generation company shareholder profits? These are

questions that I think the Subcommittee needs to explore in much greater detail.

Thanks again for calling today’s hearing, Mr. Chairman. I look forward to reviewing all of the testimony.

Mr. HALL. The Chair is very pleased to recognize Ms. DeLauro.

She is a long-time Member and a lady that works just day and

night, is the only time she works and is highly respected. We are

happy to recognize you for as much time as you take.

19

STATEMENT OF HON. ROSA L. DELAURO, A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF CONNECTICUT

Ms. DELAURO. Thank you so very much Mr. Chairman. It is a

delight to be here before your committee. I am hopeful that the testimony of myself and my colleague from Connecticut, Mr. Shays,

will persuade you in a different direction.

I also want to welcome the Attorney General of the State of Connecticut here this morning, Attorney General Blumenthal. Delighted to have him here.

And to the ranking member, thank you for your time and attention to this issue. If I can just make one——

Mr. HALL. Rosa, would you turn your mike on.

Ms. DELAURO. Here we go. Thank you again, Mr. Chairman.

And I guess I would just say that I miss you, so I will just leave

it at that.

I wanted—Mr. Pickering is gone, but I would like to pick—there

he is. I am sorry. I think you were exactly right when you said that

we shouldn’t be favoring one State over another. But let me refer

you to Section 1441 of the energy bill, and quite honestly, if you

read that section, you will see that that is what precisely this does

in the energy bill because it requires that the cable be activated in

perpetuity. And that is something I wanted to call to your attention, because I don’t think it is the role to take sides, one State

against another. And I commend you for that comment.

I am delighted to have this opportunity to share my concerns regarding Cross Sound Cable, which stretches from New Haven Harbor in New Haven, Connecticut, through the Federal navigation

channel and across the Long Island Sound to Brookhaven, New

York.

Mr. Chairman, to allow this transmission cable to operate indefinitely, without complying with the conditions and the requirements

that were outlined in both the Federal permits and in the State

permits issued for the construction, installation of the cable is to

condone the kind of poor energy planning that no one sitting here

today wants.

In that sense, I also ask that you not penalize the hundreds of

commercial shipping and family fishing vessels that use New

Haven Harbor by intervening in this dispute between the States

and allowing this cable to operate.

Since its initial proposal in 2001 the Cross Sound Cable has

found steady and vocal opposition in Connecticut. And it is just not

among those elected officials who are often quoted in the daily

newspapers, but from communities of all background, the harbor

pilots who utilize New Haven Harbor’s Federal Navigation Channel, the fishing industry, which is a sizable proportion of the revenue of the State of Connecticut, environmental groups, yes, and

concerned citizens. Groups, quite honestly, which rarely share any

kind of a common interests. They all came together in an effort to

stop the installation of this electricity transmission line.

The proposal went through the regulatory process, both at the

State level and at the Federal level. It eventually received the necessary permits for construction and for installation. However, the

permits were not issued without consideration of the very, very

valid economic, navigational and environmental impacts that this

20

project would have, both on the Federal Navigation Channel and

the Long Island Sound. In both the Federal and the State permitting process, numerous conditions were outlined by the regulatory

bodies, and they were accepted by Cross Sound Cable.

Among those conditions was the requirement that the cable be

buried 6 feet below the seabed, in accordance with the Army Corps

of Engineers requirements for harbor navigation. That condition is

not met in several places. If the city of New Haven, which I represent, ever wanted to widen and deepen the harbor, it would require the removal of the cable or the burial of the cable to a further

depth. New Haven is a port. And if we wanted, in order to bring

in additional cargo vessels and increased economic activity around

the port, this would be extremely difficult. The burial cannot occur

without drilling through bedrock, which would have significantly

adverse effect on the shellfish industry.

Unfortunately, Cross-Sound Cable did not heed the warnings of

the harbor pilots and fishermen. These are folks who have been in

these waters for generations. They come from families who have

utilized the harbor, and they made it clear that it would be impossible for Cross-Sound to install the cable at the required depth

throughout the channel using the proposed techniques because

they were going to come into contact with that bedrock. It was

known from the outset that this was going to happen.

So instead of returning to the drawing board, what the company

decided to do was to move forward, and as predicted, they ran into

problems in several areas where they were unable to meet the required depth conditions. It is my understanding that in one of

these problem areas, it is probable that the company will not be

able to meet the requirement without significantly more damage to

the channel.

Following the multi-state blackouts of August 2003, Energy Secretary Abraham issued an emergency order that allowed the cable

to operate indefinitely. The basis of the decision was that the Cross

Sound Cable would act to stabilize the electric grid. On May 7 of

this year, Secretary Abraham issued another order that called for

the cable to cease operations. In issuing the May 7 order, Secretary

Abraham found that the emergency conditions that required activation of the cable no longer existed.

I applaud the secretary for recognizing the reality of current conditions and acting appropriately. I just might add a note that, by

February, the blackout commission’s interim report laid the blame

squarely on the shoulders of transmission problems in Ohio.

No one wants—no one here wants to tie anyone’s hands in terms

of an emergency. That would be wrong, and this is not what we are

talking about here. What we are talking about is a law and about

abrogating what was laid down.

In the last month, both the New York Independent System Operator, the New England Independent System Operator, the two organizations responsible for operating the region’s electric power

grid have released reports on the electricity supplies for the summer of 2004. Both reports express confidence that, with normal

summer weather, there will be an adequate supply of electricity to

meet demand. Even in the event that summer weather conditions

21

are unusually warm, there is no justification for reactivating the

cable.

Put simply, Cross-Sound Cable, LLC has a responsibility to meet

the conditions of both the Federal and the State permits. And

again, it is whether or not Cross-Sound Cable will be allowed to

break the law. Until it can do so without further degradation of the

New Haven Harbor or the Long Island Sound, Cross-Sound Cable

should not be able to financially benefit from the operation of the

cable. That is simply a matter of good and responsible business

practice.

The Secretary’s August 17 order and efforts to legislate the activation of this cable represent an unfortunate decision to trump the

regulatory measures taken by several other Federal agencies, including the Army Corps of Engineers, the EPA, the Fish and Wildlife Service. That order, H.R. 6 and the legislation that has been

introduced by members of the New York delegation all represent

a real assault on State and Federal regulatory decisions. Failure to

address the very real concerns of Federal and State regulators

would essentially allow the company’s bottom line, to supersede

any and all regulatory authorities.

I just state here that this is not good public policy. It is a dangerous path for us to travel. I hope the committee recognizes the

need to remove this language from the energy bill before it is reconsidered.

With that, I thank you so much for indulging the amount of time,

Mr. Chairman.

I appreciate all of your courtesy here today.

I thank the distinguished ranking member as well and the committee for giving me this opportunity to speak to you. Thank you.

[The prepared statement of Hon. Rosa L. DeLauro follows:]

PREPARED STATEMENT OF HON. ROSA L. DELAURO, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF CONNECTICUT

Mr. Chairman, distinguished colleagues, thank you for this opportunity to share

with you my concerns regarding the Cross Sound Cable which stretches from New

Haven Harbor in New Haven, Connecticut, through the Federal Navigation Channel, and across the Long Island Sound to Brookhaven, New York. I am grateful to

have this opportunity.

Mr. Chairman, to allow this transmission cable to operate indefinitely without

complying with the conditions and requirements outlined in both the federal and

state permits issued for the construction and installation of the cable is to condone

the kind of poor energy planning that no one here wants. In that sense, I also ask

that you not penalize the hundreds of commercial shipping and family fishing vessels that use New Haven Harbor by intervening in this dispute between the states

and allowing this cable to operate.

Since its initial proposal in 2001, the Cross Sound Cable has found steady and

vocal opposition in Connecticut ’ not just among those elected officials who are often

quoted in the daily newspapers, but from communities of all backgrounds. Environmental groups, the fishing industry, the harbor pilots who utilize New Haven Harbor’s Federal Navigation Channel, and concerned citizens ’ groups which rarely

share common interests all came together in an effort to stop the installation of this

electric transmission line.

The proposal went through the regulatory process both at the state and federal

levels and eventually received the necessary permits for construction and installation. However, these permits were not issued without consideration of the valid environmental, economic, and navigational impacts this project would have on both

the Federal Navigation Channel and the Long Island Sound.

In both the federal and state permitting process, numerous conditions were outlined by regulatory bodies and accepted by Cross Sound Cable. Among those conditions was the requirement that the cable be buried, quote, ‘‘no less than 6 feet below

22

the seabed or to an elevation of minus-48 feet mean lower low water, whichever is

greater, within the Federal Navigation Channel in New Haven Harbor . . .’’ In addition, under the permits, specific technology was accepted which was to be used by

the company to install the cable.

Unfortunately, Cross Sound Cable did not heed the warnings of harbor pilots and

fisherman—many of whom come from families who have utilized the Harbor for generations—that it would be impossible for them to install this cable at the required

depths throughout the Channel using these techniques because they would come

into contact with bedrock. Instead of returning to the proverbial drawing board, the

company chose to move forward and, as predicted, ran into problems in several

areas where they were unable to meet the required depth conditions. It is my understanding that in one of these problem areas, it is probable that the company will

not be able to meet this requirement without doing significantly more damage to

the Channel.

Following the multi-state blackouts of August 2003, Energy Secretary Spencer

Abraham issued an emergency order that allowed the cable to operate indefinitely.

The basis of his decision was that the Cross Sound Cable would act to stabilize the

electric grid. On May 7th of this year, Secretary Abraham issued another order that

called for the cable to cease operations. In issuing his May 7th order, Secretary

Abraham found that the emergency conditions that required activation of the cable

no longer existed. I applaud the Secretary for recognizing the reality of current conditions and acting appropriately.

In the last month, both the New York Independent System Operator (NYISO) and

the New England Independent System Operator (ISO-NE)—the two organizations

responsible for operating the regions’ electric power grid—have released reports on

electricity supplies for the summer of 2004. Both reports expressed confidence that,

with normal summer weather, there will be an adequate supply of electricity to

meet demands. Even in the event that summer weather conditions are unusually

warm, this is no justification for reactivating the cable.

Put simply, Cross Sound Cable, LLC has a responsibility to meet the conditions

of both the federal and state permits. Until it can do so without further degradation

of the New Haven Harbor or Long Island Sound, Cross Sound Cable should not be

able to financially benefit from the operation of the cable. That is simply a matter

of good, responsible business practice.

The Secretary’s August 17th order and efforts to legislate the activation of this

cable represent an unfortunate decision to trump the regulatory measures taken by

several other federal agencies, including the Army Corps of Engineers, the EPA and

the Fish and Wildlife Service. That order, HR 6, and the legislation introduced by

members of the New York delegation, all represent a real assault on state and federal regulatory decisions.

Failure to address the very real concerns of federal and state regulators would

essentially allow a company’s bottom line to supercede any and all regulatory authority. That is not good public policy. It is a dangerous path to travel, and I hope

the committee recognizes the need to remove this language from the Energy Bill before it is reconsidered.

With that, I would like to again thank the Chairman and the distinguished ranking member for giving me this opportunity today. Thank you.

Mr. HALL. We thank you very much.

At this time we recognize Peter King, the distinguished Member

from New York.

STATEMENT OF HON. PETER T. KING, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF NEW YORK

Mr. KING. Thank you, Mr. Chairman, Ranking Member Boucher,

members of the committee, I certainly appreciate the opportunity

to be here today.

And Mr. Chairman, I was really almost tempted to rely on the

eloquence of your opening statement to make our case. But since

I am getting paid by my constituents, I better go ahead and make

the statement anyway, but it won’t be as eloquent as yours was.

I am really proud to testify here today on the importance of

maintaining the Cross Sound Cable. The cable is a vital tool that

provides energy security and reliability to the northeast region of

23

the country. I think it is important to emphasize the concept of the

region. Contrary to what we hear from Connecticut officials, the

Cross Sound Cable has and will continue to benefit both Long Island and Connecticut. And the environmental fears that the Connecticut officials are expressing with the cable are just not supported by the facts.

In fact, they have even been rebutted by Connecticut’s own Department of Environmental Protection, as well as the New England

Office of the Army Corps of Engineers. And I do have letters here,

one from the New England District Corps of Engineers, December

30, 2002, and also Connecticut’s Department of Environmental Protection. And Mr. Chairman, I would like to ask unanimous consent

to have these submitted into the record.

Mr. HALL. Without objection they are admitted.

Mr. KING. Actually, I was going to read them until Mr. Shays,

in a typical bit of Connecticut pilfering, took them from me.

No, seriously, I would just like to quote actually one section, and

then the entire letter is made part of the record. But the Army

Corps of Engineers said, ‘‘The Corps of Engineers in consultation

with the National Marine Fishery Service has determined there

would be no undue short-term environmental harm or interference

with navigation with the cable in its present location.’’ I think it

is important to keep that in mind.

Also, as Senator Schumer pointed out, the dredging that is currently taking place in the New Haven harbor is doing significant

more environmental damage than the cable would. Now, it is essential we work together as a region to expand our energy infrastructure and to increase supply. We are all too aware of the economic insecurity consequences of last year’s blackout. Our region

can’t afford another power failure, and it is imperative that Connecticut and New York find a way to cooperate on this issue.

This is a high voltage direct current cable system so the Cross

Sound Cable allows for electricity to flow either way, and it is has

been vital to stabilizing the region’s energy grids since it was

turned on. The electricity does not automatically flow in one direction but rather is directed by operators when a need is detected.

In addition, it has responded quickly and automatically 18 times

to reduce transmission system disturbances caused by lightening

strikes, transformer failures, transmission line faults and other

events and provided preventive voltage support over 100 times in

Connecticut and New York under the direction of system operators.

In fact, it was prepared to send 200 megawatts of power to Connecticut during a particularly cold spell last January. Even the

Connecticut Energy Advisory Board in its energy plan for Connecticut submitted in March 2004 stated, ‘‘The Board believes that

extending the existing moratorium is potentially counterproductive.

During the first moratorium, the task force produced some helpful

deliberative work pertinent to our process and standards. However,

the second moratorium has restricted State authorities from negotiating acceptable compromises for projects like the Cross Sound

Cable and the 1385 cables in Norwalk.’’

Mr. Chairman, the Cross Sound Cable provides energy security

and reliability to the region. But it is also important to the region’s

economy. As we saw last August, much of the northeast was shut

24

down when the blackout occurred, costing businesses millions of

dollars. Neither New York nor Connecticut can afford another

power failure.

In addition, the Long Island Power Authority and its top man,

Richard Kessel, will be testifying in a subsequent panel. They have

estimated that Connecticut’s failure and refusal to act could lead

to $38 million in additional costs this year, which likely would be

passed along to Long Island rate-payers. Additional costs will stem

from State power authorities mandating utilities be able to sustain

the capability to generate a certain amount of electricity. With

summer temperatures approaching, now is not the time to reduce

the supply.

In conclusion, Mr. Chairman, I want to thank you for inviting me

to testify on this issue. I really want to thank this subcommittee

for its leadership in improving our Nation’s energy policy and increasing reliability in the northeast. I was particularly pleased that

there were negotiations last year, even though Ms. DeLauro was

opposed to it, that a provision was included that would have made

permanent Secretary Abraham’s decision to turn on the Cross

Sound Cable.

I believe it has to be made permanent. It is essential for New

York. It is essential for the Northeast region.

I really know that the subcommittee will go forward with due deliberation. I thank you for this opportunity here this morning, Mr.

Chairman. Also I ask for permission to include my full statement

in the record. In deference to your desire of expedition, I eliminated

many eloquent remarks, but people who want to read the record

can see them later on. Thank you, Mr. Chairman.

[The prepared statement of Hon. Peter King and the letter follow:]

PREPARED STATEMENT OF HON. PETER KING, A REPRESENTATIVE IN CONGRESS FROM

THE STATE OF NEW YORK

Chairman Hall, Ranking Member Boucher, Members of the Subcommittee on Energy & Air Quality: Thank you very much for the opportunity to testify at today’s

hearing and express my strong support for the Cross Sound Cable. The cable is a

vital tool that provides energy security and reliability to the Northeast region of the

country. Contrary to what you may hear from Connecticut officials, the Cross Sound

Cable has and will continue to benefit both Long Island and Connecticut. In addition, the environmental fears that some Connecticut officials have expressed with

the cable are just not supported by the facts. They have even been rebutted by the

Commissioner of the Connecticut Department of Environmental Protection, Mr. Arthur J. Rocque, as well as the New England office of the Army Corps of Engineers

and various independent interest groups. At this time, I would like to ask for unanimous consent for the purpose of submitting these documents.

Additionally, private specialists in marine and freshwater site surveys, such as

Ocean Surveys Inc., has stated that the cable has had only ‘‘minor/short term effects

on bottom dwelling organisms located in the Sound’’ and the New England District

of the Army Corps of Engineers asserts ‘‘there will be no undue short-term environmental harm or interference with navigation with the cable in its present location

until full burial depth can be achieved.’’ Finally, according to Commissioner Rocque,

the dredging that is currently taking place in New Haven Harbor is doing significantly more environmental damage to the area than the cable would do.

It is essential that we work together as a region to expand our energy infrastructure and increase supply. We are all too aware of the economic and security consequences of the August 13th blackout. Our region cannot afford another power failure and so it is imperative that Connecticut and New York cooperate on issues such

as the Cross Sound Cable.

The Cross Sound Cable is essential to increasing the supply of electricity to Long

Island and preventing future power failures. According to the Cross Sound Cable

25

Company, it has ‘‘operated at 98% availability since September 2003 and transmitted an average of 200 megawatts per day to Long Island and nearly 500,000

megawatt-hours of power to Long Island.’’ Since it is a high voltage direct current

cable system, the Cross Sound Cable can allow for electricity to flow either way and

has been vital to stabilizing the region’s energy grid since it was turned on. The

electricity does not automatically flow in one direction but rather is directed by operators when a need is detected. In addition, it has ‘‘responded quickly and automatically 18 times to reduce transmission system disturbances caused by lightning

strikes, transformer failures, transmission line faults and other events and provided

preventive voltage support over 100 times to Connecticut and New York under the

direction of system operators.’’ In fact, it was prepared to send 200 megawatts of

power to Connecticut during a particularly cold spell last January. The operation

of the Cross Sound Cable not only increases reliability in the region, but it also decreases Connecticut’s reliance on its pollutant emitting power plants [New Haven].

Even the Connecticut Energy Advisory Board in its Energy Plan for Connecticut

submitted in March 2004 states, ‘‘[the Board] believes that extending the existing

moratorium (originally established under Public Act 02-95) is potentially counterproductive. During the first moratorium, the task force produced some helpful, deliberative work pertinent to both process and standards. However, the second moratorium has restricted state authorities from negotiating acceptable compromises for

projects like Cross Sound Cable and the ‘1385’ cables in Norwalk.’’

The Cross Sound Cable provides energy security and reliability to the region, but

is also important to the region’s economy. As we saw on August 13th, much of the

northeast was shut down when the blackout occurred costing businesses millions of

dollars. Neither New York nor Connecticut can afford another power failure.

In addition, the Long Island Power Authority (LIPA) has estimated that Connecticut’s failure and refusal to act could lead to $38 million in additional costs this year,

which likely would be passed along to Long Island ratepayers. Additional costs will

stem from the state power authorities mandating that utilities be able to sustain

the capability to generate a certain amount of electricity. With summer temperatures approaching, now is not the time to reduce the supply.

In conclusion, I want to thank the Chairman for inviting me to testify on this critical issue and I would like to thank the Subcommittee for its leadership on improving our nation’s energy policy and increasing reliability in the Northeast. I was particularly glad to see that during negotiations last year on the energy conference report (H.R. 6), conferees included a provision that would make permanent Secretary

Abraham’s decision to turn on the Cross Sound Cable. I look forward to continuing

to work with you and the Subcommittee on these very important energy issues during the remainder of this Congress.

STATE OF CONNECTICUT

DEPARTMENT OF ENVIRONMENTAL PROTECTION

June 13, 2002

The Honorable RICHARD BLUMENTHAL

Attorney General of the State of Connecticut

55 Elm Street

P.O. Box 120

Hartford, CT 06141-0120

DEAR MR. ATTORNEY GENERAL: Thank you for your letter of June 5, 2002, concerning the Department of Environmental Protection’s permit number 200102720-

MG issued to the Cross Sound Cable Company. While I appreciate your advice and

your viewpoint, I believe that your interpretation of the permit conditions for this

permit and recommendations regarding the project are inconsistent with past practices of the Department.

While it is apparently true that the cable is not presently installed at all points

to the depth specified in the permit, Cross Sound has currently stopped work in

compliance with the seasonal restrictions in the permit. As you know, these restrictions were imposed by DEP in order to protect spawning shellfish and anadromous

fish. No extension or wavier of these restrictions has been requested; it is unlikely

that it would be granted under present habitat conditions even if requested. The

permit, however, provides in its terms and conditions for a three-year construction

time-period, a standard practice on such permits. Therefore, Cross Sound is clearly

authorized to resume their construction activities insofar as they are permitted

when the seasonal restrictions expire without any additional authorization from this

Department. Should Cross Sound elect to seek modifications of their construction activities under this permit, such modifications would be evaluated to determine

26

whether or not they constitute minor modification. Under most circumstances and

consistent with longstanding agency policy, such modifications would not be deemed

either a new application or a new proceeding.

I would be remiss if I did not note my disappointment in your characterization

of the impacts associated with both the installation of the cable and the failure to

attain greater depths in part of the federal channel as serious, critical and devastating environmental impacts. At no time has any reviewing permit analyst with

expertise in marine projects, at either the state or federal level, raised concerns in

terms approaching these. Given my own background in marine environments in

general and Long Island Sound in particular, I must confess that I agree with the

analysts. From an environmental perspective this cable project pales in comparison

to even maintenance dredging of the federal navigational channel in New Haven

Harbor. Moreover, in terms of direct impact on shellfish beds in particular, neither

the cable project nor maintenance dredging begin to compare with the impacts associated with deepening the federal navigation channel. I point this out not to express

concern over the permittability of New Haven Harbor dredging projects for which

I know you have expressed support; they have been permitted in the past. Rather,

I point this out over concern that published rhetoric has eclipsed facts on this

project, at least from an environmental impact standpoint.

Without a specific request before me, I think it unwise for me to speculate as to

what our conclusion will be on the future options available for the Cross Sound

Project. Rest assured, however, that this Department has taken the Cross Sound

Cable project very seriously and would have done so even if it were not controversial. We will endeavor to make sure that the applicant completes the project to the

best of their ability in accordance with the terms and conditions of the issued permit. Should they do otherwise, we will pursue the appropriate remedy. If that remedy includes the need to enforce any of the terms and conditions of the permit, we

will, as we most always do, turn to your staff for assistance.

If you have any questions or any additional comments you would like to make,

I would be pleased to receive them.

Sincerely,

ARTHUR J. ROQUE, JR.

Commissioner

cc: Jane Stahl, Deputy Commissioner

Charlie Evans-DEP

DEPARTMENT OF THE ARMY

NEW ENGLAND DISTRICT, CORPS OF ENGINEERS

December 30, 2002

Regulatory Division

CENAE-R-2000-01773

CROSS SOUND CABLE COMPANY, LLC

Attn: Mr. James P. Nash

110 Turnpike Road, Suite 300

Westborough, MA 01581

DEAR MR. NASH: This is in response to your letter of December 23, 2002 regarding

the status of the on going effort to reinstall the cable in those areas where the -48’

mean lower low water (mllw) depth as required by your Department of the Army

permit was not achieved due to physical constraints.

We appreciate your cooperation in responding to our requests for information and

moving towards meeting the required depth. We understand you are simultaneously

working with Connecticut Department of Environmental Protection, Office of Long

Island Sound Programs regarding state approval for the additional reinstallation

work as it relates to issues associated with the state moratorium against processing

applications for authorizations for cables crossing Long Island Sound until June,

2003.

The Corps of Engineers, in consultation with National Marine Fisheries Service

has determined that there will be no undue short-term environmental harm or interference with navigation with the cable in its present location until full burial

depth can be achieved. Since you are working in good faith to reach the required

burial depth, the Corps of Engineers has no objections to you operating the cable

at this time.

However, we will not be relaxing the requirement to bury the cable to -48’ mllw

and we look forward to working with you and Connecticut Department of EnvironVerDate 11-MAY-2000 08:15 Aug 10, 2004 Jkt 000000 PO 00000 Frm 00030 Fmt 6633 Sfmt 6621 93979.TXT HCOM1 PsN: HCOM1
27

mental Protection to insure full compliance with the terms and conditions of your

permit is achieved as soon as possible.

Sincerely,

THOMAS L. KONING, Colonel, Corps of Engineers

District Engineer

Mr. HALL. I thank the gentleman.

Your offer to Mr. Shays, your letter reminded me of Henry Wade,

former district attorney of Dallas, made a speech and sent his

brother a copy of it, and his brother called him and said, good

speech, Henry, who wrote it for you? He wrote him back and said,

I am glad you enjoyed it. Who read it to you?

You weren’t about to read to Mr. Shays, were you?

The Chair recognizes the gentleman.

STATEMENT OF HON. CHRISTOPHER SHAYS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CONNECTICUT

Mr. SHAYS. Thank you, Mr. Chairman. It is nice to see you in

that position as Chair in spite of your misguided statement.

I want to say that Mr. Schumer, like a good attorney, could

argue on both sides of the case, and I think he would probably prefer to argue on the other side. The fact is we can all agree there

is a clear need for electricity to go back and forth between States

to protect regional energy security and ensure there is sufficient

generated energy in ample supply to meet present and future demands. We can all agree on that. We may ultimately disagree

about the value of environmental protections and review processes

in meeting these goals, but we shouldn’t.

In the course of setting national energy policy, important environmental concerns cannot be dismissed as some want to. While we

must make sure we have plans in place to provide Americans uninterrupted service, we also have a responsibility to future generations to ensure due diligence is done to prevent unnecessary and

unavoidable environmental harms and follow due processes established to ensure we adequately consider environmental objections.

Back in 2002, the Connecticut Department of Environmental

Protection and the Army Corps of Engineers published minimum

environmental requirements for the cable. These were minimum

requirements. These included a stipulation for the depth at which

cable should be buried. The cable does not comply with these requirements at several points along its course. Its failure to meet

this requirement, and its activation despite that significant shortcoming, has been a serious source of concern for Connecticut. It

should be for the region and for the entire country.

The fact is the cable does not comply with the State of Connecticut’s construction permit that was designed in consultation with

the Army Corps of Engineers. It does not comply with the minimum environmental standards established to protect this precious

estuary. Its permanent activation could have consequences for Connecticut’s ecosystem, oyster industry, power supply and marine

business. After ordering the cable indefinitely activated on August

28, Secretary Abraham shut down the Cross-Sound Cable on May

7, an action we are grateful for.

Now, we have had plenty of disagreements between our States,

but we have worked over time to clean up Long Island Sound. And

when some talk about dredging, we have, in fact, the strongest

28

dredging requirements, in consultation with our colleagues on both

sides of the aisle, of any estuary in the entire country. We are the

only estuary that comes under ocean-dumping laws. If it is toxic

material, it is not going to be allowed to be the material placed in

the sites that have been allocated. So I think that is a red herring.

The bottom line is this: We have a permit process. When they

comply with the permit process, then they should be allowed to activate this cable, and until then, they shouldn’t.

[The prepared statement of Hon. Christopher Shays follows:]

PREPARED STATEMENT OF HON. CHRISTOPHER SHAYS, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF CONNECTICUT

Mr. Chairman and members of the Committee, thank you for allowing me to testify today about concerns we have regarding the activation of the Cross Sound

Cable, which connects the electric transmission grids of New England and Long Island and transfers power in both directions.

We can all agree there is a clear need for electricity to go back and forth between

states to protect regional energy security and ensure there is efficiently-generated

energy in ample supply to meet demands. We may ultimately disagree about the

value of environmental protections and review processes in meeting those goals.

In the course of setting national energy policy, important environmental concerns

are too often dismissed.

While we must make sure we have plans in place to provide Americans uninterrupted service, we have a responsibility to future generations to also ensure due

diligence is done to prevent unnecessary environmental harms and to follow processes established to ensure we adequately consider environmental objections.

Back in 2002, the Connecticut Department of Environmental Protection and the

Army Corps of Engineers published minimum environmental requirements for the

Cable. These included stipulations for the depth at which the Cable should be buried that it does not meet at several points along its course. Its failure to meet those

requirements, and its activation despite that significant shortcoming, has been a serious source of concern for Connecticut.

The fact is the Cable does not comply with the State of Connecticut’s construction

permit. It doesn’t even comply with minimum environmental standards established

to protect this precious estuary. And its permanent activation could have consequences for Connecticut’s ecosystem, oyster industry, power supply and maritime

business.

After ordering it indefinitely activated on August 28, Secretary Abraham shut

down the Cross Sound Cable on May 7, an action we are grateful for.

Nonetheless, it is still important to recognize that the method by which he had

activated the Cable in the first place overrode the State’s legally constituted authority to regulate its construction in a manner that protects this important natural resource, and circumvented important review processes in place to ensure the environmental integrity of the project.

Secretary Abraham’s decision to activate the Cable and the effort to codify that

decision in the Energy Policy Act was simply the wrong way to proceed.

These actions, which followed the August 14 blackout, came despite Connecticut’s

vigorous opposition and the North American Electric Reliability Council’s public assurances that the electric grid in the Northeast had returned to normal operation.

There is a right way and a wrong way for the system to work. State laws need

to be respected and when they are overruled, there should be a process that’s fair

for ensuring their concerns are addressed. In this case, we have a system in place

for doing exactly that, but the way in which the Cable was activated bypassed the

process and was therefore objectionable.

Mr. Chairman, the bottom line for me is, when dealing with a project of this magnitude, there is a process for ensuring environmental fitness, which in this case, was

not followed.

It is clear we must take action to maximize energy security, but environmental

review need and must not be compromised in the process.

Mr. HALL. Thank you.

Where you and Ms. DeLauro won’t be too despondent, nor Mr.

King too jubilant, when I read my statement to you, like you, I

29

heard it for the first time. The Chairman is supposed to be neutral.

I am trying to do that.

At this time I recognize the gentleman from Virginia for any

questions he may have.

Mr. BOUCHER. I don’t have any questions, Mr. Chairman.

Mr. HALL. The Chair goes to Mr. Pickering, the gentleman from

Mississippi.

Mr. PICKERING. My question is what are the current ongoing discussions between the two States? What would be the process if the

energy bill, which does have a dispute mechanism in it for how

siting is done, work paths, then that would give it a process. What

concerns me now is the current process. And I take the point of

Congresswoman DeLauro, well, how do we not favor one State over

the other, but create a fair process that resolves disputes?

This is an important issue not only for New York and Connecticut, but for all States as we look forward in the future, as we

create new generation, hopefully, the need for new transition lines.

And then the siting of those lines, whether it is in the Southeast

or in the Northeast, are very important. What is the current process? I know that we are currently under appeal, Connecticut. Are

there ongoing discussions between the two States to resolve this

dispute? If so, what are they?

Mr. SHAYS. I will be happy to jump in, but I would say that when

you have Attorney Blumenthal address you, I think he can give you

more of the specifics.

There is the general view in Connecticut that this cable will be

done and must be done under the permitting process. And so we

don’t want to concede that, having built it, that possession is ninetenths of the law. And so the dialog, in our judgment, needs to conform to the permitting process, and let’s get the job done.

Ms. DELAURO. Let me—I concur with my colleague because I

think the specifics of the legal process are left to the attorney general, and he will be speaking with you. But this is not an issue of

whether or not the cable can be a reliable provider of electricity.

The question is whether we want to circumvent State and the Federal regulatory process, and risk serious commercial damage and

environmental damage to the port of New Haven in this process.

That is what this is about.

And you know, if there had been the decision, to move elsewhere

or to heed the word of people who understood and knew the Sound

and know about the areas where there is bedrock, this would just

not be a problem. And to abrogate the law, as I said, for the bottom

line of the company does not seem to be the direction that we ought

to go in. Thank you.

Mr. KING. Congressman Pickering, I think, indicates there was

not really much dialog going on between the two States, I don’t believe. However, Richard Kessel, who is the chairman of the Long

Island Power Authority, will be intimately involved in whatever

talks are going on. He lives with this issue day in and day out. He

will be much better qualified than I am to tell you what the nuances and particulars are. My own feeling is there is not much

going on constructively between the States.

Mr. PICKERING. Congressman King, earlier Senator Schumer indicated that he would support the establishment of a fund that

30

would clean up MTBE. As Congressman Shimkus mentioned, there

are provisions in the energy bill now saying that if you are negligent, or if you were at fault under normal standards, not under

the faulty product which was mandated by the government, but by

other standards of litigation, that there is the right to sue.

If we were to work out a compromise on a funding mechanism,

and the reality of the political situation—I don’t think Speaker

Hastert or Leader Daschle would support a waiver on ethanol, that

is just political reality, but there is a way that we can solve the

MTBE question—would it be in the best interest of the Northeast

if that compromise were reached to all come together, Republican

and Democrat, to support the passage of a comprehensive energy

policy?

Mr. KING. My concern with the energy bill was not the ethanol.

I am not pleased with it, but I can live with it. I understand that

if you are talking about a national bill, there has to be regional accommodations made, and I understand that.

My concern is with the MTBE, especially as it affected lawsuits

that were already in place. As Senator Schumer said, I live in Long

Island. It is a sole-source aquifer. There are many water districts

that have really been damaged severely, and the property tax impact, you have people’s taxes going up 20, 25 percent as a result

of this. So my concern was on the retroactive application of the law.

But, again, if we can start talking about a fund and have constructive talks, I would certainly support the bill.

Mr. PICKERING. I would just encourage you to encourage the Senators from New York to work with us on that. I think that there

is a way that we could resolve that with the fund. I do have—I realize the problem with retroactively rescinding the right to sue, but

at the same time it was government-mandated, and we need to

now go forward, find a solution that actually cleans it up, cleans

the water, helps the people that are affected, as Senator Schumer

described, but, more importantly, get a comprehensive energy bill.

I think your leadership in New York of publicly saying so hopefully would help the two Senators as they perform their duties in

the Senate. Thank you.

Mr. HALL. I thank the gentleman.

We don’t normally question Members. You can volunteer to answer if you want to, but I understand how busy each of you are

and other commitments you have. We would excuse you at this

time if you want to be excused. We would leave open for everyone

here the opportunity to send written questions to you or catch you

in the hall or in between votes or something to talk to you. But we

really thank you for your time.

Mr. SHAYS. Could I make a short comment, sir? No one has

asked the opinion of—my opinion about the energy bill, but I shudder every time I hear the word ‘‘comprehensive,’’ because for me it

would be comprehensive if it had much more emphasis on economy

of energy, increasing CAFE standards. I think you would have

found a whole group of people supportive of the bill if we had seen

SUVs, minivans and trucks get more of the kind of mileage that

you see in automobiles. Then I think the word ‘‘comprehensive’’

could have been attached to this bill in a very fundamental way.

Mr. HALL. I think Mr. Dingell might take a dim view of that.

31

Mr. SHAYS. I know he would, but that is part of politics.

Mr. HALL. But I think it is good that you bring it up, because

we may have the makings of an energy bill if we all get together

and give a little.

Mr. SHAYS. If you had that, boy, I would fight for that.

Mr. HALL. You would be a real hero if you could get us the energy bill.

Mr. KING. I said at the beginning this was a bipartisan effort

from New York, and I neglected to thank Congressman Israel and

Congressman Bishop for the great job they have done along with

Governor Pataki. This is bipartisan. They have done wonderful

work.

Mr. HALL. Thank you.

Mr. Cox had three questions. Did you all want to answer any of

these?

Mr. SHAYS. Could you quickly just review them very quickly, because I basically concur that you have to have transmission from

one State to another. I took the position that this ultimately needed to happen. You need this cable, but do it according to the permitting process.

So I don’t want people to think that my objection to this was

based on not doing it. Sometimes we will give them energy; sometimes they will give us energy. You need that cross-connection. The

problem we had was we think that Cross-Sound Cable attempted

to build this cable knowing they couldn’t provide—live up to the

permit, but then having built it, possession would be nine-tenths

of the law. They thought they could just ram it through and ignore

the permit process, which was our problem.

Mr. HALL. Mr. King.

Mr. KING. If I could reply to that. My understanding is that

Cross-Sound Cable does want to go back in and rectify it, but

under the moratorium from Connecticut they are not allowed to.

Mr. HALL. It kind of leaves them in a dilemma.

I think Mr. Radanovich wants to ask a question.

Mr. SHAYS. We just don’t want it operated, though, until they

meet the permit process. We don’t want the process for them to be

operating it while this is in dispute.

Ms. DELAURO. I think it is important to note that Cross-Sound

has been required to perform an environmental study of the effects

of the cable operation. The company must repair the shelf beds adversely impacted by the installation of the cable. The company

agreed to take these steps as a condition of receiving the permits,

but has yet to complete any of the action. The permits were issued

at specific depths and specific requirements, and the company has

refused to do that. They just moved forward without doing it, so

that they agree to do some things, and then they don’t do it.

And a final comment, Mr. Chairman. I would like to say that we

need to deal with the energy problem. Long Island has a power

generation deficit. It will remain an electricity supporter for the

foreseeable future. It is difficult to foresee a situation in which

Long Island could become a very meaningful exporter to the State

of Connecticut, in my view. So I don’t believe that the small benefit

that Connecticut does receive, and we do get a very small benefit,

that the very serious commercial risks that the cable presents and

32

the environmental risks that the cable presents to our community

are not worth it.

Mr. HALL. Have each of you had an opportunity to express yourself? If so, thank you for your time. You have been great all three

of you.

Mr. Radanovich, I am sorry. Mr. Radanovich has asked to be——

Mr. RADANOVICH. If I could have just a brief clarification, Rosa.

You may be able to answer the question. I know this sounds like

environmentally this is caught up in the energy bill, but what environmental hazards would exist in the laying of the cable across the

sound?

Ms. DELAURO. I would just say to you that the way that this was

permitted by the Army Corps of Engineers, the State and the Federal permits, there were conditions that were outlined by these

bodies. The requirement that the cable be buried 6 feet below the

seabed in accordance with the Corps’ requirements for harbor navigation, the condition has not been met in several places. So that

is—so that is in effect.

So what happens if we bypass that, in taking the position here

over one State or another, is we are just going to abrogate what

was the law. They agreed to these conditions. And they were also

told by—as I said to the Chairman earlier, that there are people

who are generational, the fisherman, the harbor pilots, who have

come together, and the environmentalists and others, groups that

never come together around this, told them they were going to have

difficulty. They refused to go back and look at a different way in

which to deal with it. They laid it out, and, in fact, we hit bedrock

there. So they are not meeting the permitting requirements. That

is the problem that I have.

Mr. RADANOVICH. The main issue is the depth of the cable.

Ms. DELAURO. That is my view.

Mr. KING. That only includes 700 feet out of 24 miles. They want

to go back in; they want to correct it. This, by the way, is a survey

report which was completed just several months ago, which I assume we can make part of the record.

[The report follows:]

33

34

35

36

37

38

Mr. KING. Again, the conclusion was that there has been minimal impact to the living organisms in the Long Island Sound channel.

Mr. RADANOVICH. One more brief question. How deep is the

water there where the cable doesn’t meet the depth requirement?

Do you have any idea?

Ms. DELAURO. It was supposed to go down to 48 feet, leaving a

6-foot safety margin. If we wanted to and—the point I wanted to

make was that if New Haven—and New Haven is a port, understand that New Haven is a port. It is not the port of Seattle, and

it is not the port—but in terms of business and industry, it is second to Boston in the region. So if New Haven ever wanted to go

deeper and dredge, we would have to deal with the cable and removing the cable, et cetera, and significantly more damage to the

Long Island Sound and to the port of New Haven.

Mr. KING. Again, I would say this survey will show that there

is minimal impact at all on commercial navigation.

Mr. HALL. In fairness to Mr. Rogers and Mr. Otter, do you all

have any brief questions that you can’t submit for the record?

Mr. SHIMKUS. I don’t, Mr. Chairman, thank you.

Ms. DELAURO. Thank you, Mr. Chairman.

Mr. HALL. We thank you very much. We are ready for the second

panel.

Mr. HALL. All right. We have a very distinguished group here.

We first have the honorable Patrick Wood, Chairman of FERC,

longtime successful, generous giver to energy problems of his own

State and now to his Nation. We have Honorable Lee Otis, general

counsel for the Department of Energy; Richard Blumenthal, attorney general, State of Connecticut; William Museler, president and

CEO of New York ISO; Jeff Donahue, who built the project of

Cross-Sound Cable Company; Richard Kessel, chairman and CEO

of Long Island Power Authority. A very distinguished panel.

At this time we recognize Mr. Wood for 5 minutes. If you can,

sir, do it in 5 minutes. We won’t hold you to 5 minutes. If you can

do it in 4, it will be acceptable.

Mr. WOOD. I think I will try to beat that.

Mr. HALL. Yeah, and 2 minutes of those are gone.

STATEMENTS OF HON. PATRICK WOOD, III, CHAIRMAN, FEDERAL ENERGY REGULATORY COMMISSION; LEE OTIS, GENERAL COUNSEL, U.S. DEPARTMENT OF ENERGY; RICHARD

BLUMENTHAL, ATTORNEY GENERAL, STATE OF CONNECTICUT; WILLIAM J. MUSELER, PRESIDENT AND CEO,

NEW YORK ISO; JEFFREY A. DONAHUE, CHAIRMAN AND CEO,

CROSS-SOUND CABLE COMPANY, LLC; AND RICHARD

KESSEL, CHAIRMAN AND CEO, LONG ISLAND POWER AUTHORITY

Mr. WOOD. Considering the depth of expertise on the panel, I

would like to take a little bit more of a policy angle here, because

I do think that is what you all ask us at the Commission to do,

is to look at these things from a broader angle.

I have heard Mr. Pickering’s concerns about State versus State

issues, and, quite frankly, a number of those in a number of different arenas come to our Commission, whether they are on gas

39

issues or power issues or hydroelectric issues. We are often the arbiter, the Federal arbiter, when States can’t work things out. So we

do that for a job. It is not always the most enjoyable, but it tends

to work.

The statutes that govern this particular issue are a bit different

than the typical ones we deal with that have a much clearer line

of authority for our Commission. There have been amendments to

the Act in 1992, the most recent energy bill, to allow certain types

of interconnections. It is different than the authority under which

the Secretary of Energy used to energize on an emergency basis

this cable. But there are new authorities, one of which is the subject of a pending complaint, with a parallel line across the Long Island Sound between Connecticut and Long Island, which there

hasn’t been much discussion about today because it is pending before our Commission. I am going to avoid going into it, but some

of the other witnesses here today may do that with regard to what

are called the 1385 cables.

The New York region, from an electrical and from an energy

point of view, and greater New York I am including northern New

Jersey, Long Island and southwestern Connecticut, in addition to

the city, is the largest, if not the largest, load center in the entire

country. It spreads over three large grid operators, the New York

ISO, ISO New England and the PJM interconnection.

And the infrastructure needs of that area are so significant, they

have, quite frankly, dominated a lot on which we have focused. The

harder cases before our Commission on both gas pipeline infrastructure and on electricity deal with about a 70-mile radius from

downtown New York, and for that reason we at the Commission

are very interested in seeing this problem that is before the committee today be resolved.

I think certainly the encouraging signs we heard from the prior

panel might lead us to think that this could indeed be addressed

between and among the States. We hope that is the case. Nevertheless, there are Federal authority issues that may well be drawn

into play here.

As just a final thought I would like to say that this is an issue

that, unlike the natural gas pipeline issue, has an interesting interplay between State and Federal authorities. The gas pipeline side

of the Commission has relatively clear authority to do not only the

siting and environmental reviews for interstate gas pipelines, but

also does the permitting of the rates, terms, and conditions of the

pipes.

On the electricity side, by contrast, we can do the rates, terms

and conditions of the line, as we did in the year 2000 for this current project, but we do not have the front seat on the environmental and siting issues. That rests, as we have heard, with the

States. There is not under current law a Federal court of appeal

for that other than the regular State and Federal court process

from each of the individual permitting agencies.

The siting provisions in the proposed energy bill would change

this and would put the Commission, as it has with other issues, as

an arbiter where States do not agree or where Federal and broader

regional interests are not addressed. I want to flag that again for

the attention of the committee and observe that that is in the enVerDate 11-MAY-2000 08:15 Aug 10, 2004 Jkt 000000 PO 00000 Frm 00043 Fmt 6633 Sfmt 6602 93979.TXT HCOM1 PsN: HCOM1
40

ergy bill. I think it would address a number of these type issues

should they pop up in the future.

Thank you, and look forward to any questions, Mr. Chairman.

[The prepared statement of Hon. Patrick Wood, III, follows:]

PREPARED STATEMENT OF PAT WOOD, III, CHAIRMAN, FEDERAL ENERGY REGULATORY

COMMISSION

I. INTRODUCTION AND SUMMARY

Thank you for the opportunity to testify on the operation of the Cross-Sound

Cable (CSC or Cable). The CSC is an underwater direct current 330 megawatt cable

system under Long Island Sound. The CSC connects the New England Power Pool

(NEPOOL) regional transmission system in Connecticut to the New York Independent Transmission System Operator (NYISO) transmission system on Long Island, New York. Pursuant to orders by the U.S. Secretary of Energy, the CSC has

been used at times over the past two years to transmit power between these two

regions. However, the Cable is not in operation currently.

I have testified to this Subcommittee before about the critical role that sufficient

energy infrastructure plays in both reliability and in ensuring customer benefits.

(Failure of infrastructure development to keep up with customer demands certainly

played a central role in the California energy market price spike in 2000-2001). The

CSC project is the first operational example of entrepreneurial, risk-bearing transmission that the Federal Energy Regulatory Commission (Commission) has sought

to encourage in the post-Energy Policy Act of 1992 electric industry. ‘‘Merchant’’

transmission differs from traditional transmission in that its costs are not recovered

through regulated rates, but through negotiated arrangements between the transmission line owner and the customer. This is important because the risks of merchant transmission are borne by the project’s investors, and not captive ratepayers.

In 2000, our Commission ruled on the rates, terms and conditions for transmission

service over the Cable, and found that the Cable will enhance competition by expanding capacity and trading opportunities between the New England and New

York markets. The Commission also found that the Cable will provide economic benefits to electric customers and producers in both markets while imposing no risk or

cost on captive customers in any market. The Cable may also provide reliability benefits, particularly at times of electrical shortages. Today, four years after our Commission authorized rates, terms and conditions for the Cable, and after investors

and wholesale transmission customers have made the necessary investments to get

it built, the Cable is being taken out of operation.

The Cable provides a classic illustration of the interstate nature of the transmission grid. The planning, construction, and operation of the Cable affect both the

regional marketplace and regional reliability. Decisions regarding the operation of

the Cable underscore the importance of assessing economic and reliability issues

from a regional perspective. Building and operating a transmission line can have

economic and reliability consequences that go beyond any single State. Therefore,

questions about who should pay for those consequences must, of necessity, be considered in ways that fully protect customers and citizens of the affected States.

II. BACKGROUND

On June 1, 2000, the Commission approved the rates, terms and conditions for

transmission service over the Cable (June 1 Order). This was the first time the

Commission approved rates, terms and conditions for a merchant transmission

project. The June 1 Order contained the findings of economic benefits noted above.

The Commission imposed several conditions on its approval. For example, the application included a proposal to hold an ‘‘open season’’ to solicit customers for the

Cable, and the Commission imposed conditions to ensure that the open season process was nondiscriminatory, fair and transparent.

In June 2002, the Commission accepted, with modifications, NEPOOL’s amendment to its open access transmission tariff to integrate the CSC into the NEPOOL

regional transmission system operated and administered by ISO New England (ISONE). The Commission said it was ‘‘pleased that the parties worked together to meet

the challenges facing the development of a new type of entity into the energy market.’’

Despite the foregoing, and despite the fact that none of the costs of the CSC are

being included in captive Connecticut ratepayers’ rates, units of the Connecticut

government have opposed the operation of the Cable. As a result, the Cable has

been operated only when authorized by emergency order of the U.S. Secretary of EnVerDate 11-MAY-2000 08:15 Aug 10, 2004 Jkt 000000 PO 00000 Frm 00044 Fmt 6633 Sfmt 6621 93979.TXT HCOM1 PsN: HCOM1
41

ergy—from August 1, 2002 to October 1, 2002 (to alleviate the emergency supply

situation caused by a heat wave), and from August 14, 2003 to May 7, 2004 (to alleviate the post-Blackout disruptions in electric transmission service, as well as provide valuable voltage support and stabilization services for the electric transmission

systems in both New England and New York). The Secretary has issued these orders pursuant to section 202(c) of the Federal Power Act, 16 U.S.C. § 824a(c) (2000)

(FPA), and section 301(b) of the Department of Energy Organization Act, 42 U.S.C.

§ 7151(b) (2000).

I would note that Connecticut and Long Island are interconnected not only by the

Cross-Sound Cable but also by a set of electrical cables known as the ‘‘1385 Cables.’’

The 1385 Cables have been in use for over 30 years. In recent years, they have experienced increasing operational problems. A pending case before the Commission

involves a Connecticut utility’s request that the Commission use its authority under

section 210 of the FPA to order a New York utility to assist in replacing the 1385

Cables. Among other things, section 210 allows the Commission to issue an order

requiring the physical interconnection between two utilities, or such action as may

be necessary to make effective any physical interconnection, if, after certain procedures, the Commission determines that such an order is in the public interest and

would: ‘‘(A) encourage overall conservation of energy or capital, (B) optimize the efficiency of use of facilities and resources, or (C) improve the reliability of any electric

utility system—to which the order applies.’’ Since the case is pending, I cannot discuss its merits further at this time.

III. OPERATION OF THE CROSS-SOUND CABLE

Over the past decade, investment in the nation’s transmission infrastructure has

not kept pace with load growth or with customers’ desire for greater competition in

wholesale power markets. As a result, transmission congestion and energy price differentials between regions have increased. Construction of appropriate transmission

facilities and other measures that make more transmission capacity available to

market participants can yield significant benefits in increased competition and improved reliability. Stand-alone, or merchant, transmission companies have proposed

several projects to expand capacity between regions such as New England and New

York. The Commission has sought to encourage such projects.

In the case of the CSC, the Commission specifically found that the project would

provide economic benefits to customers. The U.S. Secretary of Energy has found

that, at least in certain circumstances, the operation of the Cable is needed for reliability purposes. This summer could be one of those circumstances. The Cable is

fully built and ready for use. Operation of the Cable is supported by one State and

opposed by another, each advocating its own parochial interests.

The authority granted to the U.S Secretary of Energy under FPA section 202(c)

has been an important tool for responding to emergency circumstances. Legislation

has been proposed that, essentially, would codify the Secretary’s most recent order

requiring operation of the Cable until Congress legislates otherwise. Operation of

the Cable would ensure that the regional benefits of the Cable will flow to customers.

Further, it might be a good time to consider expanding the application of section

202(c) to also include orders requiring the operation of existing facilities whenever

such operation is found to be in the public interest, not just in the event of an emergency. The view of one State should not be the sole determinant of whether a region’s electrical customers receive the economic and reliability benefits of facilities

that have already been built. In these narrow circumstances, the protection of interstate commerce may warrant a greater federal role.

This suggestion is related to, but separate from, the issue in the pending energy

bill of having a federal backstop for siting of significant new interstate power transmission projects. The same conflict that gave rise to that provision of the pending

legislation is present in the Cable case, i.e., while the interconnected electricity grid

is interstate in nature, each State has the jurisdictional authority to site new transmission lines needed for the region. Therefore, a federal arbiter is needed when

States cannot agree on such issues. The national public interest in reliable supplies

of energy for all customers at reasonable prices cannot be ignored.

There is also a bigger real-world issue here. The greater New York City electric

power marketplace, which also encompasses Long Island, northern New Jersey and

southwestern Connecticut, is among the largest load centers in the country. The

planning and operation of that regional power grid falls under the management of

three separate grid organizations—the NYISO, ISO-NE, and the PJM Interconnection. This split requires a continuous, rigorous coordination effort on many levels—

reliability, planning, markets, and fuels. To this end, the Commission is holding anVerDate 11-MAY-2000 08:15 Aug 10, 2004 Jkt 000000 PO 00000 Frm 00045 Fmt 6633 Sfmt 6621 93979.TXT HCOM1 PsN: HCOM1
42

other in its series of regional infrastructure conferences on June 3, 2004, to explore

the adequacy and development of electric, natural gas, and other energy infrastructure in the Northeast, including New York and New England. I expect that many

of the issues addressed in this hearing, plus others from the natural gas industry,

will be raised in the day-long conference, which my colleagues and I will lead. I will

report on what we hear to this Subcommittee shortly thereafter.

As always, my colleagues, I and our staff are always available to assist the Subcommittee in any way we can.

Mr. HALL. Thank you.

Chair recognizes Ms. Otis for 5 minutes.

STATEMENT OF LEE OTIS

Ms. OTIS. Thank you, Mr. Chairman and distinguished members

of the committee. I would like to review very briefly the sequence

of events that led to the Secretary’s issuance of the various emergency orders under section 202 and his recent decision on May 7

to declare the emergency ended.

As everyone knows, on August 14, the Northeast United States

and Canada experienced the worst blackout that has ever occurred

in North America, and as a result of that, within hours of the

blackout, the Secretary of Energy issued his original order after

consultation with the various interested parties, energizing the

Cross-Sound Cable. On August 28, after reviewing the circumstances, he concluded that because the cause of the blackout

had not yet been ascertained, an emergency continued to exist,

and, therefore, that he would keep the cable operational until further order.

After the task force on the blackout, the multinational task force,

completed its investigation into the causes of the blackout and concluded in early April that the causes were not related to the absence of the cable or to its not being in operation. The Secretary

determined on May 7 that no emergency existed, and, therefore, he

ended his original order.

What that points to is the core of what the Secretary’s powers

are under section 202(c) of the Federal Power Act, which is that the

Federal Power Act authorizes the Secretary to act if he determines

that an emergency exists, and to require by order a temporary connection of facilities and delivery interchange or transmission of

electric energy as in his judgment will best meet the emergency

and serve the public interest. This authority reserves considerable

judgment to the Secretary, but is limited to situations in which the

Secretary has determined that an emergency exists. He cannot

order the activation or connection of a transmission facility in the

absence of an emergency even if he believes the line is important

to reliability.

On the other hand, the Act does not define exactly what an emergency is. It gives some examples, such as sudden increase in the

demand for electric energy or shortage of electric energy facilities

for the generation or transmission of electric energy, but it does not

define it.

As the Secretary stated in his May 7 order, the Department of

Energy believes that the Cross-Sound Cable is an important transmission asset, and that it contributes to the reliability of the electric transmission grid in New England and New York. However, as

I noted, his authority under section 202(c) is not a broad authority

43

to order operation of the cable whenever he thinks it will advance

reliability, but is limited to situations where he determines that an

emergency exists.

Finally, the Department of Energy has stated numerous times

that existing law is not sufficient to protect electric reliability and

to promote the construction and operation of needed electric transmission facilities. Therefore, the administration strongly supports

the electricity provisions in Title 12 of the H.R. 6 conference report.

In conclusion, the Secretary has not hesitated to use the section

202(c) authority when presented with information that warrants

the finding that an emergency exists. He has issued 202(c) orders

concerning the Cross-Sound Cable on several occasions in the past.

He stands ready to do so again in the future if, in his judgment,

it is shown that an emergency exists.

We will continue to monitor reliability and the transmission situation in the Northeast and elsewhere in the country. Any person

is invited to bring to the Department’s attention at any time data

or information that the person believes show that an emergency exists and that a 202(c) order would meet the emergency and be in

the public interest. Thank you for allowing me to testify.

[The prepared statement of Lee Otis follows:]

PREPARED STATEMENT OF LEE LIBERMAN OTIS, GENERAL COUNSEL, U.S.

DEPARTMENT OF ENERGY

Mr. Chairman and Members of the Subcommittee, thank you for inviting me to

testify concerning the Secretary of Energy’s recent orders concerning the CrossSound Cable and the effect of the Cable’s operation on reliability.

On May 7, 2004, Secretary Abraham issued Order No. 202-03-4, in which he determined that the emergency giving rise to his earlier orders authorizing use of the

Cable had ceased to exist, and that no other emergency had been demonstrated justifying continued authorization to use the Cable. The May 7 order briefly recounts

the events leading up to it, but I will summarize them here, and also will summarize the legal authority that the Secretary used to issue his Cross-Sound Cable orders.

Section 202(c) of the Federal Power Act gives the Secretary of Energy the authority to determine that an ‘‘emergency’’ exists, and ‘‘to require by order such temporary connection of facilities and such generation, delivery, interchange, or transmission of electric energy as in [the Secretary’s] judgment will best meet the emergency and serve the public interest.’’ It is this authority that Secretary Abraham

has used when he has directed operation of the Cross-Sound Cable.

By its terms, this section of the Federal Power Act is limited to situations in

which the Secretary has determined an ‘‘emergency’’ exists. However, neither the

Act nor DOE’s regulations define exactly what an ‘‘emergency’’ is. The Act does state

that an emergency can exist because of ‘‘a sudden increase in the demand for electric energy, or a shortage of electric energy or of facilities for the generation or

transmission of electric energy, or of fuel or water for generating facilities, or other

causes,’’ but it leaves to the Secretary’s judgment exactly what set of facts and circumstances might constitute an emergency, as well as the determination of whether

to issue an order under section 202(c) and what terms of such an order might ‘‘best

meet the emergency and serve the public interest.’’

On August 14, 2003, the United States and Canada experienced the largest electric transmission grid failure and blackout that has ever occurred in North America.

That same day, in order to alleviate the emergency situation presented by the blackout, the Secretary exercised his authority under Federal Power Act section 202(c)

and issued Order No. 202-03-1, which authorized operation of the Cross-Sound

Cable. The Secretary issued that order after DOE officials had consulted with the

independent system operators in both New England and New York, as well as officials at the North American Electric Reliability Council, electric utilities in both

Connecticut and New York, and the owner of the Cross-Sound Cable.

The next day, President Bush and Canadian Prime Minister Chretien announced

the creation of a bi-national task force to investigate the causes of the blackout and

44

why spread, as well as to formulate recommendations about what might be done to

prevent blackouts from occurring in the future.

The task force immediately commenced its investigative work, but because of the

immense amount of data and information that needed to be analyzed and the extensive investigative work that was necessary, it was not possible to reach an immediate conclusion as to what had caused the blackout or why it spread. Therefore,

on August 28, 2003, and even though electric service had been restored in the area

affected by the August 14 blackout, Secretary Abraham issued an order finding the

continued existence of an emergency, and determining that operation of the CrossSound Cable should continue to be authorized until such time as he issued an order

determining that the emergency had ended.

The next day, August 29, 2003, State officials from Connecticut filed papers with

DOE seeking rehearing of the August 28 order and asking that DOE stay the operation of the order pending judicial action. Several days later, the Secretary issued

an order calling for the submission of briefs and information with respect both to

the rehearing request and the stay request, and establishing a schedule for the submission of that information. His order identified a publicly-accessible DOE website

address at which all materials submitted to DOE would be made available.

In response, numerous persons, including Members of Congress, submitted letters,

data and information to DOE concerning the Cross-Sound Cable and its operation.

All of these submissions were made publicly available, and the public was given the

opportunity to comment on the submissions made by other persons.

At the same time, the work of the bi-national task force investigating the August

14 blackout was proceeding. The task force issued an interim report in November

2003 that set forth tentative conclusions concerning how the blackout began and

why it spread to certain parts of the United States and Canada. The interim report

called for public comment concerning all aspects of the report, and public meetings

were held in both the United States and Canada concerning the interim report. The

task force also invited the submission of written comments and recommendations,

which were made publicly available.

In early April 2004, the bi-national task force issued its final report. That report

identified the direct causes and contributing factors for the August 14 blackout. The

report states that the blackout began in Ohio, and describes in detail the sequence

of events leading up to the blackout, and that occurred as the blackout spread

across an area encompassing 50 million people.

The Cross-Sound Cable was not in operation on August 14, 2003, and the final

report did not identify any effect that the non-operation of the Cable had either on

the initiation of the blackout, or on its spread. The final report simply does not identify any particular role that the Cable would have played in preventing or stopping

the spread of the outage, had it been in service on August 14, 2003.

After issuance of that final report, DOE considered the contents of the report as

well as DOE’s earlier analysis of the data and information that had been submitted

in response to the Secretary’s call for information concerning the operation of the

Cable. DOE also made its own inquiries of the relevant Independent System Operators to assess the power supply and transmission situation in the vicinity of the

Cross-Sound Cable.

In light of the reasons for and the terms of the August 28 order, and the data

and information submitted to and developed by DOE, the Secretary determined that

the emergency identified in his August 28 order no longer existed. That order had

authorized continued operation of the Cable based on the finding that an emergency

continued to exist because ‘‘it has not yet been authoritatively determined what happened on August 14 to cause the transmission system to fail resulting in the power

outage, or why the system was not able to stop the spread of the outage.’’ Once

those facts were determined, as they were in the task force’s final report, and because that report did not point to any role the Cable did or could have played in

connection with the cause or the spread of the blackout, the Secretary determined

that the emergency he earlier had identified no longer existed. He furthermore concluded that the information that the public had submitted to him, as well as the

investigation conducted by DOE itself, did not demonstrate the existence of any

other present emergency warranting continued authorization to operate the Cable

under the authority of Federal Power Act section 202(c). Therefore, he found that

the emergency he had identified earlier ceased to exist, and he terminated the Federal Power Act section 202(c) authorization to operate the Cable.

As the Secretary stated in his May 7 order, DOE believes the Cross-Sound Cable

is an important transmission asset and contributes to the reliability of the electric

transmission grid in New England and New York. In fact, the Cable was mentioned

in the report of the National Energy Policy Development Group, in May 2001, as

an important transmission asset, the operation of which had been blocked because

45

the State of Connecticut did not recognize the importance of the facility to the interstate grid.

It is important to remember that under present law, however, section 202(c) does

not authorize DOE to direct operation of a transmission facility simply because the

facility is important to the grid, promotes commerce or improves reliability. Instead,

the law requires the Secretary to find that ‘‘an emergency exists’’ before he can invoke his authority to issue a 202(c) order. Therefore, this section of the law was not

intended to be a replacement for the resource adequacy and transmission facility

siting responsibilities carried out by other governmental and private bodies.

Because the Administration believes that existing law is not sufficient to adequately protect electric reliability and to promote the construction and operation of

needed electric transmission facilities, the Administration strongly supports the

electricity provisions contained in Title XII of the H.R. 6 Conference Report, which

the House approved several months ago. The bi-national blackout task force stated

that the single most important thing that could be done to prevent future blackouts

and reduce the scope of any that do occur is for Congress to enact the reliability

provisions in H.R. 6 and make compliance with reliability standards mandatory and

enforceable. The Administration also supports repeal of the Public Utility Holding

Company Act and supports last-resort Federal siting authority for high-priority

transmission lines—both of those provisions would encourage investment in needed

transmission and generation facilities.

Finally, I want to emphasize that although there are obvious limits to the circumstances in which the Secretary can issue an order under Federal Power Act section 202(c), Secretary Abraham has not hesitated to use that authority when presented with data and information that, in his judgment, warrant a finding that an

‘‘emergency’’ exists. He issued an order directing operation of the Cross-Sound Cable

only hours after the August 14, 2003 blackout occurred, and continued the directive

to operate the Cable until it had been determined what happened on August 14 to

cause the blackout and why the system was not able to stop the spread of the outage. He also issued an order on August 16, 2002, directing operation of the CrossSound Cable, because it had been demonstrated that an emergency existed as a result of imminent shortages of electric energy on Long Island.

The Department continues to monitor the reliability and transmission situation

in the Northeast and elsewhere in the country. Any person is invited to bring to

DOE’s attention, at any time, data or information that the person believes demonstrates an emergency exists and that the Secretary should exercise his section

202(c) authority. The Secretary stands ready to exercise that authority, with respect

to the Cross-Sound Cable or any other situation or facility, if presented with facts

that demonstrate an emergency exists, and that a 202(c) order would alleviate the

emergency and would be in the public interest.

Thank you again for inviting me to testify today. I would be glad to answer any

questions.

Mr. HALL. Mr. Blumenthal.

STATEMENT OF RICHARD BLUMENTHAL

Mr. BLUMENTHAL. Thank you, Mr. Chairman. And thank you for

this opportunity to be with you today, and I look forward to answering any questions you have. I would submit for the record the

full statement that I have prepared and simply very briefly, taking

to heart the admonition that you have given to other speakers, very

briefly.

Mr. HALL. Fine. All of your statements will be accepted and put

into the record. Without objection.

Mr. BLUMENTHAL. I want to make at the outset a very important

general point, which is that New York and Connecticut by and

large cooperate, in fact work very, very closely together, on law enforcement, energy needs. And this dispute, if I may characterize it

as such, is a real exception to that general pattern of cooperation.

I hope there will be regional cooperation, specific steps toward constructive discussions and consensus that will enable us to avoid the

continuing pattern of confrontation. But it must be the result of

consensus among the States, not confrontation or conflict or overVerDate 11-MAY-2000 08:15 Aug 10, 2004 Jkt 000000 PO 00000 Frm 00049 Fmt 6633 Sfmt 6602 93979.TXT HCOM1 PsN: HCOM1
46

riding and riding roughshod over legitimate States rights and sovereign concerns.

I just want to make the point that some have made this morning

that these two States should be given the opportunity to resolve

among themselves, without the Federal Government riding roughshod over their rights, the differences that they have now. And in

my view, there should be a streamlining of our energy system, not

steamrolling over States rights.

We have supported in Connecticut 1385 lines, upgrading and

even expanding them, which go between Norwalk and Northport.

We have expanded our 345 kV lines that provide for greater transmission in Connecticut. We built 2,000 megawatts of additional

generating power in Connecticut to fulfill our needs, and we have

done our job in fulfilling our responsibility.

This line is not economically neutral. It is skewed very unfairly

in favor of Long Island. The amount that Connecticut consumers

have to pay additionally is what Long Island officials have said

they will save. So there is rough agreement on what the economic

effect is. It is all skewed toward Long Island, as has been the flow

of power in the last 9 months when the emergency order operated

the cable; 99 percent of the power has flowed to Long Island. And

the voltage stabilization benefits that supposedly accrued to Connecticut could have been obtained through other sources. They

were not necessary as a result of this cable.

So, in my view, there are real fairness issues here, and those

fairness issues should be addressed in any system that transmits

power within a region and among States. And I think that is the

challenge for this committee and this Congress.

Now, I want to make one very stark, simple point: This cable is

illegal. My job as attorney general is to enforce the law. We have

very strong bipartisan, unified opposition to this cable in the State

of Connecticut on those consumer issues, environmental concerns,

but essentially my job is to make sure the law is followed. And this

cable is illegal because it is not buried according to conditions that

were set by the State of Connecticut and by two Federal agencies;

not just the United States Corps of Engineers, but also the United

States Marine Fisheries Agency. And there are real impacts to potentially violating the law in navigation and shipping into New

Haven, but there are also broader ramifications in rewarding

lawbreakers. And that is what this Congress may do if it creates

a special exception for this cable that circumvents permit conditions that were imposed by Federal and State agencies.

The letters that you have been given previously do not in any

way waive those permit conditions. In fact, the quotes were taken

selectively from the letters. If you read them in their entirety, you

will see that both State and Federal agencies continue to insist on

those permit conditions.

And I would just close by saying that we have a common challenge, and we ought to work together to meet that challenge in a

way that serves the interest of fairness and national security, but

preserves State sovereignty and rights to determine our own destinies, protect our consumers, our environment and navigation.

Thank you, Mr. Chairman.

[The prepared statement of Richard Blumenthal follows:]

47

PREPARED STATEMENT OF RICHARD BLUMENTHAL, CONNECTICUT ATTORNEY GENERAL

I appreciate the opportunity to speak on the topic of ‘‘Regional Energy Reliability

and Security: Department of Energy Authority to Energize the Cross Sound Cable.’’

The Subcommittee’s interest in the critical issues of energy reliability and security

is timely and appropriate.

The Cross-Sound Cable, along with a panoply of other proposed cables and pipelines, threatens to divide us and endanger vital common interests. These pet

projects of major energy companies, if spared careful long-range planning and vigorous scrutiny, may wreak havoc in Long Island Sound. We must seek regional cooperation—not confrontation and conflict. We share critical environmental and consumer values, much as we share Long Island Sound, a precious and precarious natural treasure.

Connecticut has been willing to assist Long Island in addressing its electricity

shortfalls. We have actively sought to upgrade the existing 1385 cable from Norwalk

to Northport in order to stop damaging pollution caused by the present damaged

oil-leaking cable. This upgrade will significantly increase the amount of electricity

available to Long Island from this cable line. We are also building a 345 KV transmission from Bethel, Connecticut on the border of New York to Norwalk, Connecticut, the site of the 1385 cable. Finally, the Connecticut Siting Council and the

Connecticut Department of Environmental Protection approved permits for the

Cross-Sound Cable, provided it met strict safety and environmental protection

standards.

This subcommittee should work to develop legislation that encourages public officials to build consensus and to jointly and fairly share the burdens and benefits of

siting efficient and environmentally-sound generating and transmission facilities. It

should not support hasty, ill-considered suggestions to jettison a carefully crafted

and well established state-federal permitting program that has worked effectively

for decades.

Regional cooperation and long-range planning to provide safe, efficient and reliable electric power is obviously a desirable goal, which I fully support. Three core

conditions are essential to any regional plan or system:

1. The plan must recognize that states are best positioned and equipped to evaluate and assess all of the environmental and economic impacts of specific projects.

2. Insofar as a plan imposes direct or indirect costs on ratepayers in one state

to help support reliability elsewhere, the benefits of the plan should be shared by

ratepayers in both states. The system must be totally transparent and accountable

to the states, not just federal regulators. Indeed state consent and advice must be

at its core. Consensus is a key precondition, achieved by state agreement and support, not federal edict or preemption.

3. Any plan must respect the fact that states own—indeed, actually hold legal title

to—the seabed of Long Island Sound in a public trust, as they have since the founding of the Republic. This public trust means that the federal and state governments

must seek to minimize or eliminate environmental disruption or damage.

The Cross Sound Cable, unfortunately, has so far failed to meet any of these three

core conditions. It poses real dangers to Long Island Sound and to economically critical shipping and navigation. It effectively robs Connecticut ratepayers to subsidize

Long Island’s failure to plan and meet its energy needs, and it attempts to wrest

legal control of the Connecticut seabed away from its protection as a ‘‘public trust’’

under state and federal law.

In fact, the Cross-Sound Cable, in its present state, suffers from numerous critical

flaws, including the following:

• It creates a serious and substantial hazard to economically critical shipping and

navigation.

• It poses a severe threat to the environment by the need to blast the seabed in

order to place the cable at the federally required depth.

• It is patently illegal.

• It costs Connecticut ratepayers millions of dollars to unfairly subsidize Long Island ratepayers and the cable owners.

• It undermines incentives for Long Island to meet its obvious and growing energy

needs, while Connecticut is taking the tough steps needed for safe and reliable

electric supply.

• It provides negligible reliability benefits to Connecticut.

Shipping and navigation in New Haven Harbor is critical to Connecticut’s economy. About 75% of our critical supplies of gasoline and fuel oil arrive by this route.

In 2002, the United States Army Corps of Engineers (Army Corps) approved the

first ever longitudinal laying of cable in a navigational channel—in the center of

New Haven Harbor’s federal navigation channel only after Cross-Sound agreed to

48

a number of conditions. The conditions were to mitigate the possibility that a ship

might accidentally drop an anchor onto the cable—such incidents have occurred

many times in Long Island Sound, some disastrously—or some other navigational

accident. The Army Corps, therefore, ordered the cable sunk a minimum of 6 feet

below the Long Island Sound seabed, a depth that Cross-Sound accepted as both

feasible and appropriate. This depth requirement is not arbitrary. It is needed to

ensure navigational safety in the most important energy supply port in the region.

In an emergency, a large tanker needs to quickly reduce speed by dropping its anchor, which drags on the seabed floor for several hundred yards. If the anchor snags

the cable, it may damage the tanker or alter its course, in addition to severing or

disabling the cable.

Following this determination of the Army Corps, the Connecticut Department of

Environmental Protection, acting under state and federal law, approved a permit allowing the construction of the cable as long as the construction was consistent with

the Army Corps six foot depth requirement.

Cross-Sound, after agreeing to meet this important safety condition, failed to do

so, claiming that unanticipated obstructions prevented its compliance with the permit requirement. These supposed unanticipated obstructions included bedrock

ledge—well and widely known for many years. In fact, in 2000, an Army Corps official had specifically warned that, ‘‘It’s also likely that the applicant would encounter

ledge just below certain reaches of the channel.’’ In other words, the supposed unanticipated obstructions were known and willfully disregarded.

Connecticut refused to issue a permit to operate the cable because it failed to

meet the federal safety standard. Connecticut’s Department of Environmental Protection has treated Cross-Sound Cable like any other applicant that fails to meet

permit conditions required to safeguard the environment and public safety. Despite

Cross-Sound’s efforts, the Army Corps has steadfastly refused to weaken the 6 foot

requirement.

Turning to the second problem—environmental damage—the company concedes

that the only way to bury the cable to a safe depth in the harbor would be by blasting the bed of the Sound, drilling holes in the bedrock, filling them with explosives

such as dynamite or ammonium nitrate fuel oil and detonating it. In addition, the

National Marine Fisheries Service has required as part of its permit for the CrossSound Cable that such cable be buried at least 4 feet below the sea floor in order

to minimize adverse impacts to essential fish habitat. The cable does not currently

meet this requirement.

As to the illegality of the cable, the violation is clear. The relevant Federal law

‘‘ section 404 of the Clean Water Act ‘‘ appropriately gives Connecticut the legal authority to protect its coastal waters by setting conditions before issuing permits for

cable construction. As I have explained, Cross-Sound agreed to and then failed to

meet a critical condition ‘‘ burial at least six feet under the seafloor.

Under the Federal Power Act, the Secretary of Energy has the legal authority to

override this law, but only in a genuine emergency. In the past, when the Secretary

has invoked this power briefly in a genuine emergency, I have not opposed it. Unfortunately, after the August, 2003 blackout ended, Secretary Abraham attempted to

use it as an excuse to order the indefinite routine operation of the Cross-Sound

Cable. He did so knowing that the cause of the blackout related to the Midwest

power grid, and that no evidence has ever existed that the presence or absence of

the Cross-Sound cable connection had anything to do with the blackout. Only after

I challenged his order in court, and only days before I was scheduled to seek a stay

of his order from the Second Circuit Court of Appeals, did Secretary Abraham rescind his illegal and unjustified order, effectively conceding its illegality.

The evidence is also painfully clear regarding the economic damage the CrossSound cable inflicts on Connecticut ratepayers. Routine commercial use of this cable

costs Connecticut consumers an estimated $36 million annually, due to the increase

in the clearing price of electricity delivered into Connecticut caused by the retransmission of electricity from Connecticut to Long Island over the Cross-Sound cable.

Long Island’s power generation costs are generally higher that those in Connecticut.

Electricity generally flows to the highest priced area. In this instance, cheaper Connecticut power will flow through the cable to Long Island, increasing demand and

pushing up the state’s electrical rates. As demand rises, power is sought from less

efficient plants, called peaking plants, that generate electricity only when the need

for power is at its height. Those plants are generally the most expensive to operate,

thereby accelerating the upward pressure on prices in Connecticut. Even worse,

some of the peaking plants are among the worst polluters, inflicting further damage

on Connecticut citizens. Our experience to date fully supports these concerns. While

the Cross-Sound Cable was operating, 99% of all transmitted electricity flowed from

49

Connecticut to Long Island. Future forecasts of energy needs show that this pattern

will continue.

The economic impact on Connecticut is even more unfair because Long Island’s

current power deficit is entirely of its own making. LIPA has failed to develop and

build new generating and transmission facilities—not one major plant in more than

10 years—or develop any long term plans. LIPA admitted that it seeks to increase

power transmission to Long Island in order to avoid building needed generators on

Long Island. LIPA looks to everyone else to site its power plants—a classic NIMBY

approach.

Astonishingly, as Connecticut seeks to upgrade the Norwalk to Northport cable

and thereby increase the amount of electricity available to Long Island on an emergency basis, LIPA has refused to pay for its share of the upgrade. As a condition

for payment, LIPA insists that this cable be used for routine electricity supply for

Long Island, exacerbating the reliability problems that already exist in southwestern Connecticut. Upgrading the Norwalk to Northport cable is essential to stop

its leaking of chemicals into the Sound and to repair its severed sections, assuring

that it can operate at full capacity when necessary. We have supported replacing

and upgrading this vital link. LIPA has shunned its responsibility to do the same.

In contrast to LIPA, the State of Connecticut has recently developed more than

2,000 megawatts of additional electrical power and is upgrading approximately one

hundred miles of transmission lines to more efficiently move electricity throughout

the state. The idea that Connecticut ratepayers should be effectively compelled to

subsidize LIPA’s arrogant improvidence is completely unacceptable, even outrageous.

Finally, in spite of all the sound and fury, the sad truth is that while use of the

cable would save money for New York at Connecticut’s expense, it would not significantly improve Connecticut’s power reliability. After months of careful study, the

Connecticut Siting Council found that it would enhance electricity reliability in Connecticut by less than two-tenths of one percent, an utterly negligible change. No one

has ever seriously contested this figure.

Recent claims that the cable has been repeatedly used to provide necessary ‘‘voltage stabilization’’ to Connecticut are also completely misleading. In fact, voltage stabilization is available to Connecticut from numerous generators and substations.

The Cross-Sound cable adds no appreciable reliability for voltage stabilization to

other presently existing sources in Connecticut. Voltage stabilization was amply

available before Cross-Sound and remains sufficient after its shut-down.

No one disputes the Secretary of Energy’s existing legal authority to act quickly

in a real emergency to prevent a blackout on Long Island. In fact, Cross Sound

seeks to operate the cable routinely, moving electric voltage to Long Island and

money to itself. It offers no answer to Long Island’s self-inflicted problems.

Congress should learn from our experience with the Cross-Sound Cable and enact

common-sense energy policies that would require public officials to build consensus

and jointly and fairly share the burdens and benefits of siting efficient and environmentally sound generating and transmission facilities.

Mr. HALL. Thank you, sir.

The Chair recognizes at this time Bill Museler, president and

CEO. Recognize you for 5 minutes, sir.

STATEMENT OF WILLIAM J. MUSELER

Mr. MUSELER. Thank you, Mr. Chairman. I am the president of

the New York Independent System Operator. Our job is to maintain the reliability of the power system in New York State and also

operate the electricity markets in New York State. In a prior life

I was vice president of electric operations of Long Island Lighting

Company, so I am very familiar with the electric system on Long

Island as well as the statewide New York system.

It is very appropriate for Congress to be taking up this matter.

As was discussed earlier, electric reliability legislation is before the

Congress in several forms. It is urgent that the Congress act on the

reliability portions of that legislation. Since 1985—excuse me, since

1965, the vast majority of blackouts in this country have been

caused by utilities not following voluntary liability rules. The single

50

most important action that is required from a reliability standpoint

nationally is making those rules mandatory with penalties for noncompliance.

With respect to the Cross-Sound Cable, I would like to mention

just a few of the things that make that cable extremely valuable.

No. 1, while the cable by itself would not have prevented the blackout of August 14 had that cable been in operation, since it is a DC

facility, it would have speeded up the restoration of power on Long

Island and presumably helped New York City come back faster as

well because that line would most likely have stayed energized.

In upstate New York, the Hydro Quebec DC line formed onethird of the capacity we needed to bring the State back and reenergize the transmission system.

Long Island, as Mr. Kessel will likely confirm, is right on the

edge this summer because of capacity. Its locality requirements for

electrical capacity are higher without the cable available for emergency transfers. It will very likely be shortened next year unless

they are able to get more capacity built very, very quickly.

The cable provides for emergency transfers of power in both directions. It also provides additional economic transactions, both

ways, benefiting consumers in both States, as does the AC system

that connects both States. It expands the Northeast markets. For

reliability and for economic reasons, the Cross-Sound Cable is a

two-way street.

Finally, the transmission infrastructure in the country is in dire

need of upgrading. If projects like the Cross-Sound Cable cannot be

sited and used, we are headed for lower reliability at a time when

our economy needs the exact opposite: better reliability.

Thank you very much for the opportunity to present these views

of the New York ISO.

[The prepared statement of William J. Museler follows:]

PREPARED STATEMENT OF WILLIAM J. MUSELER, PRESIDENT AND CEO, NEW YORK

INDEPENDENT SYSTEM OPERATOR

Good afternoon, ladies and gentlemen. My name is William J. Museler, and I am

the President and Chief Executive Officer of the New York Independent System Operator, or NYISO. I appreciate the opportunity to brief the Committee on our understanding of the impacts on New York State and Long Island of the Department of

Energy’s (‘‘DOE’s’’) rescission of its emergency order authorizing the operation of the

Cross-Sound Cable. In the short time available since that rescission, we have begun

to analyze those impacts and, in this testimony, I am happy to present our tentative

conclusions.

Immediately prior to coming to the NYISO, I was the Executive Vice President

of the Transmission/Power Supply Group of the Tennessee Valley Authority, which

in terms of megawatts (‘‘MW’’) served, is the size of New York. Prior to that, I was

Vice President of Electric Operations at Long Island Lighting Company. While serving as Vice President of Electric Operations at Long Island Lighting Company, I acquired familiarity with the electric system now operated by Long Island Power Authority (‘‘LIPA’’) and its contractor, Keyspan. I currently also serve as the Chairman

of the ISO/RTO Council, and have served on the North American Reliability Council

(‘‘NERC’’) Board of Trustees and as Chairman of the Southeast Electric Reliability

Council. I am a graduate of Pratt Institute in Brooklyn, New York and Worcester

Polytechnic Institute. I am a native New Yorker, born in Manhattan and raised in

College Point, Queens.

The NYISO was created to operate New York’s bulk transmission system and administer the State’s wholesale electricity markets. We are a New York not-for-profit

corporation that started operation in 1999. We are not a governmental entity, but

we are pervasively regulated by the Federal Energy Regulatory Commission

(‘‘FERC’’). With respect to certain financing authority, the Federal Power Act and

51

New York law provide that we are regulated by the New York State Public Service

Commission.

I will not address environmental or legal issues related to the operation of the

Cross-Sound Cable. Those issues are well beyond the appropriate scope of the

NYISO’s responsibility and beyond my own expertise. Before addressing the operational and reliability issues under consideration this morning, I would like to observe that it is entirely appropriate for Congress to focus immediate attention on

issues of electric reliability. Last summer, we suffered a major blackout that threatened the economies of the region and the health, safety and welfare of 50 million

people in the Northeast, the Midwest and parts of Canada. The international task

force that investigated the blackout determined that it was caused by a company

in the Midwest that ignored well accepted, but voluntary, reliability standards. Because the Country’s electric system is interconnected across state lines, only the federal government can address this problem effectively. There is legislation before you

in several forms that would make compliance with electric utility industry reliability

standards mandatory. I urge you to enact such legislation promptly, lest another

blackout provide still another object lesson for all of us.

I would now like to discuss the significance of the Cross-Sound Cable to New York

and New England. Southeastern New York State is among the most congested locations in the United States in terms of electric transmission. Long Island is a densely

populated area immediately to the east of New York City. Because it is an island,

it presents unusual obstacles to constructing additional electric transmission. Transmission paths to Long Island must either go through New York City, which presents

extraordinary technical difficulties and involves huge expense, or they must go

under the Atlantic Ocean or Long Island Sound.

The Cross-Sound Cable is one of only two underwater cables connecting Long Island to Connecticut. Two other cables connect Long Island to Westchester County.

The Cross-Sound Cable is a direct current, or DC, ‘‘merchant’’ transmission facility.

Rather than being owned by regulated electric utilities, merchant transmission facilities are owned by independent, lightly regulated, entrepreneurial companies. Unlike most transmission lines, the DC characteristics of the Cross-Sound Cable permit its operator to regulate the flow of electric energy over the Cable. When operational, the Cross-Sound Cable could provide up to 23% of Long Island’s summer

import capability. Its existence also provides Connecticut with access to ‘‘quick

start’’ combustion turbine capacity during reserve deficiency conditions. For both

New York and New England, the Cross-Sound Cable is a two way street with respect both to reliability and economics.

The adequacy of transmission capacity has both economic and reliability consequences for the areas affected. The most immediate issue, of course, is the reliability of electric supply. Insufficient transmission capacity can have reliability consequences for Long Island, Connecticut and the broader New York and New England regions.

In New York, the amount of generating and other resources necessary for the

State and its localities to maintain reliability must be calculated in accordance with

criteria imposed by the Northeast Power Coordinating Council and the New York

State Reliability Council. Prior to the DOE’s rescission of its Emergency Order, the

NYISO had determined that 5008 MW of generating capacity had to be physically

available on Long Island to satisfy reliability criteria.

The calculations assumed that the Cross-Sound Cable would be available immediately in the event of an emergency. If the Cable is not available this summer,

Long Island would require additional generating capacity physically located on the

Island in order to maintain the same level of reliability that existed when the CrossSound Cable was still in operation. Therefore, unless Long Island successfully procures additional generation for the summer, it will have a higher-than-expected risk

of outages without the Cross-Sound Cable. We understand that LIPA is trying to

do just that but, since LIPA is represented here today, it is more appropriate that

they be the ones to describe such efforts.

The Cross-Sound Cable is also available to assist Connecticut and New England

for reliability purposes under emergency conditions. While New England has added

more generating capacity in recent years than New York, it periodically requires imports from New York to serve its own electrical load. For example, at times last winter there was not enough natural gas available for some power plants in New England to operate. Fortunately, New England was able to draw upon generating capacity in New York to meet its needs through interties connecting the two regions. The

Cross-Sound Cable provides an additional path for imports from New York into New

England. In short, an important reason that regions are electrically interconnected

to begin with is to buttress one another’s reliability at lower cost than to achieve

equivalent reliability independently of one another.

52

For the NYISO, and other entities responsible for planning to meet accepted reliability requirements, the present uncertainty regarding the Cross-Sound Cable presents a serious problem. The Cable exists, but we don’t know whether to assume

that it can be operated. Absent Congressional action resolving the controversy over

the Cable’s operation, the New

York and New England regions will continue to face uncertainty about the availability of the cable’s transmission capacity for normal and emergency conditions.

This uncertainty is more than a mere inconvenience. It can cause needless expense

and inefficiency. Electric generation and transmission facilities take many years to

plan, finance, license and construct. Continued uncertainty can either result in deferral of such planning and implementation or, even worse, unnecessary construction, if the planners are unable to await a final resolution and then guess wrong

about the outcome of the controversy.

In the face of what we hope is only near term uncertainty, the NYISO is planning

to explore interim measures to gain access to the Cross Sound Cable’s capacity

under emergency conditions. The NYISO will confer with the DOE and ISO-NE to

attempt to develop a standby procedure that would permit immediate operation of

the cable in the event an emergency develops. While the DOE has been extremely

responsive in past emergencies, the problem is that emergencies can develop in a

matter of seconds or minutes, leaving insufficient time to contact DOE, explain the

situation, permit DOE to verify the problem and issue an order in time to make a

difference.

Because of the obviously pressing nature of the reliability concerns, I have not focused today on the economic benefits of inter-regional markets and the benefits of

additional transmission capacity to support cross boundary transactions. The ultimate purpose of the federal policy of restructuring the electric industry was and is

to provide electric consumers with the benefits of open market competition. I would

be remiss, therefore, in concluding without noting that FERC’s extensive efforts to

expand the regional and inter-regional scope of wholesale electricity markets is dependent on the adequacy of inter-regional transmission facilities such as the CrossSound Cable. We support FERC’s policies and believe that expanded regional electricity markets will maximize the benefits of electric restructuring for consumers.

Finally, I appreciate the attention the Congress has given to this matter. It relates to an essential element of interstate commerce and only the federal government can resolve these issues in an adequate and timely manner.

Mr. HALL. Thank you very much.

We recognize Mr. Donahue, 5 minutes.

STATEMENT OF JEFFREY A. DONAHUE

Mr. DONAHUE. Thank you, Mr. Chairman and members of the

subcommittee. Thank you for the opportunity to speak with you

today.

While the Cross-Sound Cable has been the subject of considerable controversy over the last couple years, one point cannot be disputed: the Cross-Sound Cable is the first major interstate electric

transmission project built in the Northeast in the last decade. For

better or worse, the Cross-Sound Cable has been used as a poster

child for many purposes: first, as the first market-based transmission link in the United States; as the first application in the

U.S. of advanced high-voltage, direct-current transmission technology and advanced underground cables; and, perhaps most widely, as a symbol of what is wrong with our Nation’s framework for

siting electric infrastructure.

My testimony today will seek to provide the subcommittee with

the facts regarding some important points that you have heard earlier today. Specifically, my testimony will focus on three key points:

the operation of the Cross-Sound Cable provides significant and

substantial benefits to Connecticut and New York both in the form

of improved reliability, as you heard from Mr. Museler, and in enhancing trade of energy between the New York and New England

regions.

53

Operation of the cable ‘‘as is where is’’ today provides absolutely

no impact to the environment or absolutely no impact to navigation

in the New Haven Harbor or elsewhere in Long Island Sound.

Finally, Cross-Sound Cable is currently in an unacceptable

Catch-22 situation created by the Connecticut authorities under

which Connecticut refuses to let us operate on the grounds that

certain permit conditions have not been met despite all the agencies in Connecticut and the national level acknowledging there are

no impacts, while at the same time refusing to consider our request

for either complying with the permits, which we want to do, or

waiving subject permit conditions.

First, the issue of the significant benefits to Connecticut and

New York Long Island. As you heard, the Cross-Sound Cable was

not energized during the August 14 blackout. At 11 that evening

on August 14, there was a conference call between the system operators, Cross-Sound Cable, LIPA, the Department of Energy, and we

were ordered to immediately activate the project. Within 12 hours

the project was activated, and we were transferring a significant

amount of energy to Long Island, helping consumers come back on

line and, very importantly, helping stabilize the grid.

During that first couple days of the recovery from the blackout,

the facilities were transferring not only energy to Long Island that

was severely needed, but also helped stabilize the voltage when

there was a severe lightning storm that came through the area and

disrupted transmission lines on Long Island.

Since that time, since August 14, the project has operated 18

times dynamically, automatically, when there have been equipment

failures or lightning strikes on the transmission grid. It is improving the reliability of the grid on both sides. Two-thirds of those 18

times occurred in Connecticut.

And, finally, since August 14, these facilities have provided significant voltage support in both Long Island and New York. It is

a service that must have some value because we are ordered on a

regular basis to provide it, and we do at the direction of the system

operators in Connecticut who have the responsibility of ensuring

that the grid operates reliably.

Also, the project has been used on several occasions to help the

wholesale markets in Connecticut and in Long Island. In fact,

when Connecticut’s energy supply was at dangerously low levels

during an extreme cold spell in January 2004, we were ordered by

the New England ISO to stop immediately any transfers to Long

Island, which, of course, we did immediately, and LIPO was ordered to make up to 200 megawatts of energy immediately available to export to Long Island because of the critical cold spell they

had. LIPO had significant and sufficient resources to do that, and

we were ready to supply the energy. Luckily for Connecticut, the

temperatures increased, the load was left low, and Long Island did

not have to ship the power in the end, but we were available to

provide that service. We also tempered wholesale prices during

that time. So the project does provide significant benefits.

There is no environmental impact of operating as is where is. All

State and Federal agencies with jurisdiction over the cable have reviewed operation of the cable as is where is. Specifically the Connecticut Department of Environmental Protection, the National

54

Marine Fisheries and the U.S. Army Corps of Engineers all have

determined that there is absolutely no environmental impact as of

operating as is where is and no threat to navigation or maintenance of the Federal channel.

The DEP has looked at this for quite some time. I think it is interesting to note a letter that they wrote on June 13, 2002, to Mr.

Blumenthal. In that letter they made it very clear that the published rhetoric of this project was eclipsing the facts. I would like

to quote from that letter, from Mr. Art Rocque, the Chairman of

the Department of Environmental Protection, to Mr. Blumenthal:

‘‘I would be remiss if I did not note my disappointment in your

characterization of the impacts associated with both the installation of the cable and the failure to attain greater depths in parts

of the Federal channel as serious, critical and devastating to the

environment. From an environmental perspective the cable project

pales in comparison with even maintenance dredging of the Federal navigational channel in New Haven. Published rhetoric has

eclipsed facts on this project at least from an environmental standpoint.’’

The Catch-22. We are not happy. I can say we spoke with all the

fishermen that we could find, with the harbor master, with the pilots, with the U.S. Army Corps of Engineers. We spent millions of

dollars surveying the route, working with the Connecticut Siting

Council, looking at the harbor. We were requested by the U.S.

Army Corps of Engineers would we consider a minus 48 burial

depth below mean water. After thorough investigation and consultation with our engineers and the Corps we agreed. We knew

about rock in the further reaches of the channel that Ms. DeLauro

spoke of earlier. We surveyed it completely, and we avoided it all.

Unfortunately we did find rock in an area that was not on any

charts or any logs that we had done or the Corps or anybody else

had done over the past 100 years, and we are now in this current

situation.

We have made five separate proposals to the Connecticut DEP to

either bury the cable to its permitted depth or operate the cable in

its current location with no environmental impact. Four of those

five proposals have been refused. The fifth is still pending. On January 6, 2003, the DEP wrote us, ‘‘While we may not have any environmental concerns with the operation of the cable in its current

conditions, we do have significant procedural concerns.’’

The substantial and economic benefits and improved reliability

that is available from our project come at no cost to Connecticut

and without any harm to the environment or threat to navigation

in New Haven Harbor or anywhere else on Long Island Sound. Instead of enjoying the Cross-Sound Cable benefits, Connecticut insists on maintaining this Catch-22 situation under which Connecticut precludes operation of the cable on the grounds that we

don’t meet permit conditions, yet will not allow the Connecticut

DEP to evaluate our request to make modifications.

I think this is wrong. I think public policy needs to be debated.

And I respectfully urge the subcommittee to approve necessary legislation to immediately reenergize and place into regular operation

the Cross-Sound Cable so that Connecticut, New York, and the reVerDate 11-MAY-2000 08:15 Aug 10, 2004 Jkt 000000 PO 00000 Frm 00058 Fmt 6633 Sfmt 6602 93979.TXT HCOM1 PsN: HCOM1
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gion can enjoy the substantial benefits of the project. We thank you

for your time.

[The prepared statement of Jeffrey A. Donahue follows:]

PREPARED STATEMENT OF JEFFREY A. DONAHUE, CHAIRMAN AND CEO, CROSS-SOUND

CABLE COMPANY, LLC

I. INTRODUCTION AND SUMMARY

Mr. Chairman and Members of the Subcommittee: Thank you for the opportunity

to speak today on the many benefits the Cross Sound Cable electric transmission

project provides to Connecticut, New York, and the Northeast. My name is Jeffrey

A. Donahue, and I am Chairman and Chief Executive Officer of Cross-Sound Cable

Company, LLC (‘‘CSC LLC’’). A summary of my experience and qualifications is attached as Exhibit JAD-1.

While the Cross Sound Cable (‘‘CSC’’ or ‘‘Project’’) has been the subject of considerable controversy over the last few years, one point is incontrovertible—the CSC

is the first major interstate electric transmission project to be built in the Northeast

in more than a decade. For better or worse, the CSC has been used as a ‘‘poster

child’’ for many purposes: as the first market-based transmission link in the U.S.;

as the first application in the U.S. of advanced high voltage direct current transmission technology and advanced underground cable installation techniques; and,

perhaps most widely, as a symbol of what is wrong with our Nation’s framework

for siting needed electric transmission infrastructure.

Rather than add to the political rhetoric you may have heard regarding the CSC,

my testimony today seeks to provide the Subcommittee with the facts regarding this

important infrastructure project. Specifically, my testimony makes the following

three key points:

1. Operation of the CSC provides significant and substantial benefits to Connecticut

and New York, both in the form of improved reliability to the electric grid and

enhanced trade of energy between New England and New York.

2. Operation of the CSC ‘‘as is where is’’ has absolutely NO impact on the environment of Long Island Sound, nor does it provide any impediment to navigation

in New Haven Harbor or elsewhere in Long Island Sound.

3. The CSC is currently in an unacceptable ‘‘Catch-22’’ situation created by Connecticut authorities, under which Connecticut refuses to let the CSC operate on

the grounds that certain permit conditions have not been met (despite acknowledging the lack of impacts from CSC operation) while at the same time refusing

to consider CSC LLC’s requests to either comply with or waive the subject permit conditions.

With this testimony, I intend to provide the Subcommittee with the facts and

background necessary to gain a better understanding of the CSC and the need for

its immediate re-energization and placement into regular commercial service

through the enactment of Federal legislation.

II. DESCRIPTION OF THE CROSS SOUND CABLE

The CSC is a 330 megawatt bi-directional, high voltage direct current and fiber

optic cable system that runs under Long Island Sound and can transmit electricity

in either direction between New Haven, Connecticut and Brookhaven, Long Island,

New York. CSC LLC commissioned the Project in August 2002. CSC LLC is a joint

venture between TransE ́ nergie U.S. Ltd., a wholly-owned subsidiary of HydroQue ́bec, and United Capital Investments, Inc., a non-regulated business unit of UIL

Holdings, Inc., which owns the United Illuminating Company, a regulated utility in

Connecticut.

III. HISTORY OF THE CROSS SOUND CABLE

My October 2003 affidavit to the Department of Energy, attached as Exhibit JAD2, provides a complete history of the permitting of the Project. For ease of reference,

I have summarized this history below.

On June 1, 2000, the Federal Energy Regulatory Commission (‘‘FERC’’) granted

the CSC project sponsors the first-of-its-kind authorization to make sales of electric

transmission capacity in interstate commerce at negotiated rates. TransE ́ nergie U.S.

Ltd., 91 FERC ¶ 61,230 (2000). FERC granted this authorization because the full financial risk for the project costs is borne by the developer (i.e., CSC LLC) rather

than captive ratepayers, and because the project ‘‘enhances competition and market

integration by expanding capacity and trading opportunities between the New England and New York markets.’’ Id. at 61,838. Pursuant to an ‘‘open season’’ auction

56

1The DEP permit requires compliance with the permit conditions within 3 years from the date

of issuance of the permit. The Army Corps has, by letter, authorized operation of the CSC for

an indefinite period of time while CSC works in good faith to address the permit depth requirements. 2 ISO-New England, Inc. has stated that the CSC ‘‘offers an overall benefit to New England’’

because the facility is a ‘‘valuable tool’’ in case the system faces any additional system instability. Blackout Fails to Subdue Connecticut’s Opposition to Activation of Cross Sound, Power

Daily Northeast, August 20, 2003.

process, the Long Island Power Authority (‘‘LIPA’’) subscribed to the full capacity

of the CSC.

CSC LLC then began the process to obtain the required state and federal permits.

The New York State Public Service Commission (‘‘NYPSC’’) granted a certificate of

environmental compatibility and public need on June 27, 2001, finding that the CSC

will ‘‘enhance regional and local competition in the electric power industry and []

improve system reliability.’’ (NYPSC Article VII approval at 12.) The Connecticut

Siting Council (‘‘Siting Council’’) followed suit on January 3, 2002, finding that ‘‘the

proposed project would enhance the inter-regional electric transmission infrastructure and improve the reliability and efficiencies of the electric system here in Connecticut as well as in New York.’’ (Siting Council Decision and Order at 1.) As the

Siting Council recognized, ‘‘recent events have demonstrated that preparedness and

cooperation [among the states] are in the best interest of the State, region, and the

nation.’’ Id.

Then, in March 2002, the U.S. Army Corps of Engineers (‘‘Army Corps’’) and Connecticut Department of Environmental Protection (‘‘DEP’’) issued the necessary permits for CSC LLC to install the Project. The permits each included an identical condition that, within the Federal Navigation Channel (‘‘Federal Channel’’) in New

Haven Harbor, the Project’s cable system must be buried to a depth no less than

the deeper of six feet below the seabed or 48 feet below mean lower low water. The

reason for this requirement was to accommodate the possible future deepening of

the Federal Channel by the Army Corps, although the Army Corps currently has

no plans to deepen the Federal Channel. Significantly, the DEP and Army Corps

permits each grant CSC LLC a period of years for the completion of all installation

work for the CSC, including meeting the burial depth requirement.1 For the areas

outside the Federal Channel, the Army Corps and DEP permits required cable system burial depths of at least 4 feet and 6 feet, respectively, below the seabed of the

Sound.

In May 2002, CSC LLC substantially finished installation of the cable system in

accordance with its permits. However, when burying the cable system, CSC LLC encountered previously undiscovered hard sediments and bedrock protrusions along

portions of the route within the Federal Channel. CSC LLC immediately notified

DEP and Army Corps that it was unable to achieve the permitted burial depth in

all locations. The CSC is buried to the permit depth along 98 percent of the entire

span, and over 90% of the route within the Federal Channel to an average of 50.7

feet below mean lower low water, well below the required level of minus 48 feet.

IV. OPERATION OF THE CSC PROVIDES SIGNIFICANT AND SUBSTANTIAL BENEFITS TO

CONNECTICUT, NEW YORK AND THE REGION

A. The CSC Significantly Improves the Reliability of the Connecticut and

New York Grids

Upon being energized pursuant to the Secretary of Energy’s orders in the wake

of the August 2003 blackout, the CSC assisted in restoring power to and stabilizing

the transmission system in the northeastern United States. The Secretary’s order

allowed the CSC to transmit and deliver power and to provide critical voltage support and stabilization services to the transmission systems in Connecticut and New

York.

1. Voltage Support for the Connecticut and Long Island Electric Grids

Since September 1, 2003, the CSC has been operating with excellent consistency

and has been recognized for its value in ensuring a reliable power supply in both

Connecticut and New York.2 ISO-New England (the independent operator of the

New England transmission system) directs the operators of the CSC when to transmit power over the CSC and when to provide (simultaneously or separately) voltage

support to the neighboring transmission systems. The inherent capability of the

high voltage direct current cable system allows it to act immediately and automatically to help smooth out the aftershocks of electric system spikes and other disturbVerDate 11-MAY-2000 08:15 Aug 10, 2004 Jkt 000000 PO 00000 Frm 00060 Fmt 6633 Sfmt 6621 93979.TXT HCOM1 PsN: HCOM1
57

3 In Connecticut, automatic CSC responses were on September 2, 15, 23; October 1, 10, 14,

17, 31 (twice); January 6, February 3 and March 5. In New York, automatic CSC responses were

on August 17, September 4, October 14, March 3 and 5, and May 3. 4This figure does not include the cost of emergency generating facilities that LIPA has announced will be required to replace the power transmitted by Cross Sound Cable this summer.

ances in Connecticut and New York, which in turn lowers the risk of other transmission lines switching off and magnifying a system problem.

While the CSC operated full time pursuant to the DOE order, CSC LLC responded to 108 requests by ISO-New England and 9 requests by the New York Independent System Operator (‘‘NYISO’’) to help maintain a steady operating voltage on

the Connecticut and New York transmission systems, respectively. Importantly, the

CSC’s capability to respond to these grid operators’ requests for voltage stabilization

not only provides reliability benefit, but also provides environmental benefit, as it

reduces the need to start up less efficient and dirtier power plants (including plants

in New Haven) that would otherwise be needed to provide the same level of service.

In addition to responding to requests by ISO-New England or NYISO to forestall

anticipated difficulties, the CSC also responds automatically to unanticipated system disturbances. During operation pursuant to the DOE order, the CSC responded

18 times to reduce system disturbances caused by lightning strikes, transformer

failures, transmission line faults and unknown events. Twelve of these responses

(two-thirds) were to disturbances on the Connecticut grid.3

2. The CSC Provides Another Critical Path for Emergency Energy and Reserves

In addition to stabilizing the regional transmission system, the CSC has been

used as an operating reserve in times of power scarcity. In fact, when Connecticut’s

energy supply was at dangerously low levels during an extreme cold spell in January 2004, the CSC was on standby at ISO-New England’s request to export 200

megawatts over the CSC from Long Island to Connecticut. During this period, the

CSC (while it did not ultimately have to export any power from New England to

New York) remained on standby in anticipation of an order to transmit power from

Long Island to Connecticut.

Southwest Connecticut has been widely identified as one of the most transmission-deficient and capacity-constrained areas in the U.S. transmission system.

Long Island has exported power to Southwest Connecticut many times in the past,

including during the July 2, 2002 heat wave, using the existing ‘‘1385’’ submarine

cable between Norwalk, Connecticut and Northport, New York. Last fall, ISO-New

England and NYISO coordinated a successful test that sent power from New England over the Cross Sound Cable to Long Island while simultaneously returning

power from Long Island over the 1385 cable to Connecticut.

Energy exports out of New England have no impact on the reliability of the New

England system. In fact, ISO-New England will not schedule any exports out of New

England if the transfer of such power would degrade the reliability of the New England system. Energy flows over the CSC are jointly controlled by the NYISO and

ISO-New England under the same reliability rules applied to all other interconnections between New York and New England. Under those rules, energy flows over

any transmission line will only occur if such flows do not jeopardize the electric system of the exporting region.

B. The CSC Provides Valuable Economic Benefits to Connecticut and New

York

Operation of the CSC benefits Connecticut electricity consumers. The affidavit

submitted to DOE by my colleague Dr. Raymond L. Coxe (attached as Exhibit JAD3) provides a full discussion of the CSC’s numerous economic and reliability benefits

to Connecticut.

Specifically, Dr. Coxe found that for the years of 2004 and 2005, the CSC is expected to provide reliability and economic benefits of approximately $40 million per

year to electricity market participants in New York and New England.4 Failing to

operate the CSC during this period would forego those benefits, thus unnecessarily

increasing costs to consumers in both regions. In any evaluation of the public interest regarding the operation of the CSC, the potential loss of these benefits must be

considered. Clearly, the public interest benefits of the continued operation of the

CSC are tangible and substantial.

Independent analyses of the impact of discontinuing operation of the CSC confirm

our internal analyses. On October 24, 2003, one of the world’s leading energy research and consulting firms, Cambridge Energy Research Associates (‘‘CERA’’) published an analysis on the impact of the CSC. This report, CERA Alert: Effect of the

Cross Sound Cable, describes CERA’s simulation of the operation of the electricity

58

markets in Connecticut and Long Island for 2004 and 2005, for the following two

cases:

• A Base Case which reflected the operation of the CSC during those years; and

• A Change Case in which the CSC was not available for operation.

In these simulations, CERA used the same base case assumptions that CERA is

using for its other work on transmission congestion and generation asset valuation.

The CERA Alert summarizes CERA’s analysis of wholesale electricity market

prices in Connecticut and on Long Island. The CERA Alert notes that failure to continue operation of the CSC would raise average annual wholesale spot electricity

prices on Long Island by between 4% and 5%, with no corresponding reduction in

average annual wholesale electricity prices in Connecticut.

Regulatory agencies with direct responsibility and jurisdiction over the CSC have

recognized the significant economic benefits to Connecticut provided by the CSC.

These independent agencies include the Connecticut Siting Council, the FERC, and

the NYPSC.

The Connecticut Siting Council, after a full consideration and review, unanimously concluded that the CSC would provide a public benefit to Connecticut. Specifically, the Siting Council found that ‘‘the wholesale price of electricity in New

England should not increase with the export of up to 330 MW of electricity from

Connecticut to Long Island.’’ (Findings of Fact No. 23). The Siting Council further

found that the CSC ‘‘could increase the competition and markets available to electric

generators in New England and Long Island’’ (Findings of Fact No. 15) and that ‘‘an

open competitive market for electricity, enhanced by the increased capability for

trade [provided by the CSC], will result in increased private investment in infrastructure, and lower electricity costs for the region.’’ (Siting Council Decision and

Order at 1.)

Further evidence of the CSC’s benefits to Connecticut is the FERC’s approval of

the CSC. In its order approving rates for the CSC, FERC stated that the CSC ‘‘enhances competition and market integration by expanding capacity and trading opportunities between the New England and New York markets.’’ (FERC order at 7.)

FERC further found that the CSC ‘‘will provide benefits to electric consumers and

producers in both markets while imposing no risk or cost on captive customers in

any market.’’ Id.

V. OPERATION OF THE CSC HAS NO ENVIRONMENTAL OR NAVIGATIONAL IMPACT

A. Agency Findings of No Harm to Operate Cable As Is

Both Federal and State agencies have confirmed that operation of the CSC ‘‘as

is where is’’ neither causes any harm to the environment nor poses any threat to

navigation. Specifically, neither the Army Corps nor the DEP have raised any environmental or substantive objection to operating the CSC at its current depth. DEP

itself describes its objection as procedural, driven by a concern about the scope of

Connecticut’s legislative moratorium on Long Island Sound energy projects, not by

environmental issues.

1. Army Corps Finding of No Harm to Environment or Navigation

The Army Corps has determined that operation of the cable as installed would

cause no environmental harm or interference with navigation. Accordingly, the

Army Corps has expressly authorized operation of the CSC while CSC LLC continues work toward attaining the required depth.

On December 30, 2002, the Army Corps issued a letter to CSC LLC confirming

that operation would not pose navigational or environmental harm and stating that

the Army Corps had no objection to present cable operation at the current depth

while CSC LLC sought to work with the DEP to obtain necessary approvals to reach

the authorized depth. The letter stated:

The Corps of Engineers, in consultation with National Marine Fisheries Service, has determined that there will be no undue short-term environmental harm

or interference with navigation with the cable in its present location until full

burial depth can be achieved. Since you are working in good faith to reach the

required burial depth, the Corps of Engineers has no objections to you operating

the cable at this time.

2. DEP Finding of No Threat to Fisheries Resources from Operation at Present Depth

The DEP made a similar determination of no environmental harm from operation

of the cable system as installed. Shortly after CSC LLC notified DEP that the cable

could not buried to the permitted depth in a few locations, DEP Commissioner Arthur J. Rocque responded in a June 13, 2002 letter to a letter from Richard

Blumenthal, Attorney General of Connecticut, by placing the environmental impacts

59

in appropriate perspective and expressing his concern about the ‘‘published rhetoric’’

about such impacts:

I would be remiss if I did not note my disappointment in your characterization of the impacts associated with both the installation of the cable and the

failure to attain greater depths in part of the federal channel as serious, critical

and devastating environmental impacts...From an environmental perspective,

this cable project pales in comparison to even maintenance dredging of the federal navigational channel in New Haven Harbor ...[P]ublished rhetoric has

eclipsed facts on this project, at least from an environmental impact standpoint.

However, in contrast to the Army Corps, the DEP stated that, as a matter of procedure, it would not permit operation of the CSC while CSC LLC was endeavoring

to meet the burial depth requirements. Nor would the DEP permit CSC LLC to

work to meet the burial depth requirement. According to the DEP, the Connecticut

legislative moratorium on agency consideration of proposed crossings of Long Island

Sound by utility projects (including interstate transmission lines) prevents DEP

from allowing CSC LLC (by permit modification or by new permit) either to continue working to meet the burial condition or to allow operation of the CSC in its

current location—effectively denying CSC LLC any recourse to the gradual loss of

its permit rights. The CSC had by this time become a highly politicized project in

Connecticut. As a result, while construction was completed and there remained no

substantive objections to operation of the CSC, the CSC had not operated for an entire year until directed to do so by DOE’s post-blackout orders.

3. Chronology of Correspondence with DEP and Specific DEP Findings

On July 22, 2002, the DEP wrote to CSC LLC stating that while cable system

operation was not specifically within its jurisdiction, the environmental impact of

operation was within its jurisdiction. The DEP therefore requested additional information about the environmental impact of operation as installed. The DEP also confirmed that the cable system’s current location did not constitute a permit violation

because the permit’s installation work period to achieve the authorized depth had

not yet expired (and does not expire until March 17, 2005). CSC LLC responded to

the DEP by letter dated July 24, 2002, with supporting documentation demonstrating that operation at the current depth would pose no adverse environmental

or navigational risks.

On November 18, 2002, CSC LLC submitted a request to DEP to further bury the

cable system to the required depth in the several locations within the Harbor where

the cable system did not rest on rock, by using alternate installation tools and methods. On December 23, 2002, the Director of the DEP Office of Long Island Sound

Programs (‘‘OLISP’’) denied CSC LLC’s request to further bury the cable system to

the permitted depth but responded to CSC LLC’s July 24, 2002 report of no impacts

from operation in the current location. In its response, DEP agreed with the demonstration in CSC LLC’s July 24, 2002 letter with respect to environmental impacts,

and specifically that the electromagnetic field (‘‘EMF’’) and temperature variations

associated with operation at the current depths ‘‘would not be expected to impact

fisheries resources.’’ The DEP stated that the permit depth requirement was specified by the Army Corps as the requisite depth to accommodate navigational concerns and deferred to the Army Corps regarding those concerns.

On January 6, 2003 DEP wrote to CSC LLC that: ‘‘[w]hile we may not have any

environmental concerns with the operation of the cable in its current condition, we

do have significant procedural concerns.’’ The DEP objected to operation during the

time required for the CSC to reach authorized depth in those limited areas where

the cable system requires further burial. The DEP’s objection is based on its interpretation of the depth requirement of its permit as prohibiting operation of the cable

system at any other depth, notwithstanding the absence of environmental harm

from operation. The DEP referred to this barrier to operation of the cable system

in its current location as a ‘‘procedural’’ obstacle to operation and has informed CSC

LLC that a new permit would be needed in order for CSC LLC to operate before

further burial work is performed. Furthermore, under Connecticut’s moratorium,

DEP is precluded from considering any new permits for energy projects crossing

Long Island Sound.

B. Post-Installation Monitoring Studies Indicate No Significant Impact

Pursuant to the conditions of state and federal permits for the CSC, a survey program was developed to monitor the sea bottom under New Haven Harbor and Long

Island Sound in connection with the cable system’s operation. Survey procedures

were developed in conjunction with the Army Corps, DEP, the National Marine

Fisheries Service, and the Connecticut Bureau of Aquaculture. The program consists

of four monitoring surveys, at 6 months, 12 months, 18 months and 30 months after

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5 ‘‘Cross-Sound Cable Effects Unclear’’, Hartford Courant Online (ctnow.com), November 22,

2003.

initial cable system installation in May 2002. The first two surveys, conducted in

fall 2002 and spring 2003, were reviewed by Charles H. Evans, the Director of

DEP’s Office of Long Island Sound Programs, who stated: ‘‘what we are seeing is

within the range we had expected, which are really very minor effects.’’ 5

The 18-month survey, conducted in November and December 2003, was the first

survey performed during cable system operation. The report with the results of this

survey is attached to my testimony as Exhibit JAD-4. This report concludes that the

installation and operation of the CSC has resulted in only minor and short-term effects on bottom-dwelling organisms. More specifically, the recently released report

includes scientific data and analysis demonstrating that:

• Cable system installation effects to living organisms within the Long Island

Sound seabed and floor of the New Haven Harbor Federal Navigation Channel

(‘‘benthic habitats’’) have been short-term and very minor; • Benthic habitats in many places within the cableway have returned to the same

conditions observed prior to cable system laying; • There are no significant differences between seabed images of benthic habitats located within and outside the cable system embedment area; • The six benthic habitats detected during the pre-installation surveys within the

five study areas continue to exist with no significant changes; • The single area of actively farmed shellfish beds traversed by the cable system

(for a length of 707 feet) continues to demonstrate high benthic quality; • The variation of measured magnetic fields with the CSC operating has remained

the same since the initial pre-installation monitoring survey; and • There is no evidence to suggest that the presence of the cable system will affect

commercial vessel navigation on the water surface since there has been no detectable change in the compass measurements collected.

A May 13, 2004 study released by the Bureau of Aquaculture of the Connecticut

Department of Agriculture summarizes their pre- and post-installation shellfish

analysis program within New Haven Harbor. The Bureau of Aquaculture report suggests that the cable system installation, among other possible sources during the

same time period such as effects from parasites or shellfish spawning processes, potentially affected some of the sampling population. Post-installation samples also indicate that these effects have since subsided. The report does not take into consideration, however, the significant effects of sediment dispersed by the first stage (Winter 2002-2003) of the major maintenance dredging project conducted by the Army

Corps that took place between the Bureau of Aquaculture’s sampling stages. This

Bureau of Aquaculture report, along with the benthic monitoring studies, further

confirms that the effects of the cable system installation have been minor and shortlived.

C. New Haven Harbor Maintenance Dredging Completed over Cable System

Further evidence of the CSC’s lack of impact on navigational needs in New Haven

Harbor is provided by the Army Corps’ recently completed maintenance dredging of

the Federal Channel, the first such dredging performed in over a decade. This

dredge project took place in stages over the past two winters and required the mechanical dredging of over 650,000 cubic yards of sediment from the Federal Channel

and its side slopes. At the same time, several facilities along the harbor coastline

are dredging out their berths to remove another 80,000 cubic yards of sediment.

CSC LLC worked very closely with the Army Corps while dredging activities were

accomplished near and directly above the cable system in several locations, including dredging over the section of cable resting atop unforeseen bedrock. At no time

did the cable system pose an obstacle to the dredging, or prevent authorized channel

depths from being restored. While this dredging took place, the CSC was fully available and continued to operate under the direction of ISO-New England. CSC LLC

appreciated the opportunity to contribute to this successful Army Corps dredge

project, and is pleased with the confirmation that the cable system poses no impediment to the maintenance of this important shipping lane.

According to the Army Corps permit application to the DEP, dredging the Federal

Channel affected approximately 157 acres of the harbor bottom. By way of comparison, that area is thirty-one times greater than the approximate 5 total acres affected

by installation of the cable system. In addition to the much smaller area of impact,

installation of the CSC’s cable system was performed by means of a minimally intrusive low-impact water jetting tool, which placed the cable system to an average

depth of over 10—feet beneath the channel seabed, rather than a mechanical dredge

using a large clamshell bucket.

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VI. CONNECTICUT’S ‘‘CATCH-22’’ EFFECTIVELY BLOCKS OPERATION OF THE CSC WITHOUT

REGARD TO THE PROJECT’S SUBSTANTIAL BENEFITS, LACK OF IMPACTS, AND CSC LLC’S

RIGHTS UNDER THE PROJECT’S PERMITS

A. CSC LLC Has Made Repeated Requests to DEP to Either Further Bury

or Operate the CSC

CSC LLC has submitted five (5) separate proposals to DEP to either bury the

cable to its permitted depth or operate the CSC in its current location with no environmental impact. Despite acknowledging the lack of environmental impacts from

operation, DEP has refused to let CSC LLC either bury the cable system deeper or

operate, thus creating the classic ‘‘Catch 22’’ situation in which CSC LLC finds

itself, as outlined below. Connecticut enacted legislation specifically targeted to prevent CSC from complying with its permits and block the Project from operating.

While preventing CSC LLC from complying with or seeking waiver from its permits,

Connecticut contemporaneously authorized a major dredging project in the same

harbor (New Haven) with exponentially larger environmental impacts, and supports

a plan to dump dredge spoils in Long Island Sound.

1. Connecticut’s Moratorium on Energy Projects Crossing Long Island Sound

In the spring of 2002, while the Connecticut Attorney General’s appeal of the

Siting Council approval of the CSC was pending (and ultimately dismissed), the

Connecticut legislature passed Public Act 02-7 (‘‘P.A. 02-7’’), which enacted a moratorium on the consideration of new applications for electric transmission cables and

gas pipelines crossing the Sound and, moreover, retroactively voided permits already

granted for electric transmission cables (but not gas pipelines) that had not yet been

installed—which was Cross Sound Cable’s situation at that time. The class of entities affected by the retroactive provision was a class of one: Cross Sound Cable. The

Governor of Connecticut vetoed P.A. 02-7 on April 19, 2002, recognizing in his formal veto message the grave constitutional infirmities of ‘‘unfairly penaliz[ing] a

company that has followed the [agency approval] process set up by the General Assembly.’’ (April 19, 2002 veto message at 2.) The legislature sustained the veto on

April 24, 2002.

The legislature then revised the vetoed act and passed a new bill, now Public Act

02-95 (‘‘P.A. 02-95’’ or the ‘‘Moratorium Law’’). The Governor signed P.A. 02-95 on

June 3, 2002, and the law went into effect on that date, after CSC LLC had obtained all necessary permits to install and operate the cable, and after its initial

burial of the cable was completed on May 28, 2002. The Moratorium Law forbade

state agencies from ‘‘consider[ing] or render[ing] a final decision for any applications

relating to electric power line crossings, gas pipeline crossings or telecommunications crossings of Long Island Sound’’ for one year from the effective date of the

statute, during which period a task force was to complete a comprehensive environmental assessment and plan. The law provided that after the task force completed

its work, ‘‘[a]ny application for an electric power line... crossing of Long Island

Sound that is considered by any state agency’’ is to be additionally evaluated based

on the results of the task force’s study. The task force released its report on June

3, 2003—the day the moratorium was set to expire.

On June 26, 2003, Connecticut enacted legislation that extended the original oneyear duration of the moratorium another full year to June 2004. In September 2003,

subsequent to the energization of the CSC pursuant to the Secretary of Energy’s orders after the August 14, 2003 blackout, Connecticut Governor Rowland called for

an evaluation of the impacts of operating the CSC in its present location. DEP responded on October 31, 2003 by issuing a request for proposals from consulting

firms to provide an evaluation of the impacts of operating the CSC in its present

location. The deadline for responses to this solicitation was December 2003; however, to our knowledge DEP has yet to select a consultant to perform this evaluation.

Finally, just this month (May 5), the Connecticut legislature again extended the

moratorium by another full year, to June 2005. The Connecticut legislature approved extension of the moratorium is spite of the opposition from both the DEP

and the Connecticut Department of Public Utility Control (‘‘DPUC’’). In testifying

on the effects of extending the moratorium on March 12, 2004, DEP Commissioner

Rocque indicated that as both Chairman of the Connecticut Energy Advisory Board

(‘‘CEAB’’) and DEP Commissioner, both DEP and CEAB opposed extension of the

moratorium. Chairman Downes of the DPUC further testified:

I’d like to stress to you in the strongest possible terms that a continuing moratorium here is—has very bad effects, it has immediately bad electrical effects,

it has immediately bad financial effects, and over the long term, we’ll lose any

opportunity at all to control these issues.

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(Transcript of March 12, 2004 public hearing before the Environment Committee of

the Connecticut General Assembly, page 16.)

2. CSC LLC’s Petitions to DEP

The permits issued by the DEP and the Army Corps grant CSC LLC a period of

time to complete installation work. CSC LLC has submitted a total of five separate

requests to either perform further burial work or operate the CSC in its present location. DEP has rejected four of these petitions, and has not acted on CSC LLC’s

fifth request for almost one year.

• REQUEST #1: On November 18, 2002, CSC LLC submitted a request to DEP to

bury the cable to the required depth in the several locations within the Federal

Channel where the cable system did not rest on bedrock, using installation techniques appropriate for those locations. In its letters dated December 23, 2002

and January 6, 2003, the DEP interpreted the Moratorium Law as prohibiting

the agency from issuing a decision on an application to modify the permit conditions. On January 6, 2003 DEP reiterated that ‘‘[w]hile we may not have any

environmental concerns with the operation of the cable in its current condition,

we do have significant procedural concerns.’’

• REQUEST #2: On January 15, 2003, CSC LLC filed a request with the DEP to

modify its DEP permit to allow operation of the cable in its current location

without any additional environmental impact from further construction or from

cable operation, while CSC LLC completed a work plan and obtained necessary

authorizations to reach the required burial depth during the life of the permit.

That modification would harmonize the permit with the position of the Army

Corps, which had stated no objection to operation in these circumstances. While

CSC LLC believed that the DEP could grant this request under the existing

permit terms, without applying for a certificate of permission (‘‘COP’’), CSC LLC

included with its request the forms to obtain a COP under Conn. Gen. Stat.

§ 22a-363b, which, among other things, allows the DEP to approve ‘‘minor alterations or amendments to permitted activities consistent with the original permit.’’ DEP again rejected CSC LLC’s request by issuing a letter on January 17,

2003 stating that a COP would be needed for CSC LLC to obtain the requested

permit modification but that the Moratorium Law prevented the DEP from considering or deciding the merits of an application for a COP relating to a utility

crossing of the Long Island Sound.

• REQUEST #3: On May 23, 2003, CSC LLC filed a new request with DEP to modify its permit to allow operation at the current burial depth while CSC LLC

worked with DEP and the Army Corps to address the permanent burial depth

requirements. On June 2, 2003, on the day before the first moratorium expired,

DEP notified CSC LLC that it could not consider this application, citing the

first Connecticut moratorium and imminent enactment of the second moratorium. On June 11, 2003, just after expiration of the first moratorium and before

enactment of the second moratorium, DEP denied this application on the

grounds that operation of the CSC as is, even without any further environmental impacts, could not be considered a ‘‘minor alteration’’ of the original permit.

• REQUEST #4: On June 10, 2003, upon expiration of the first Connecticut moratorium, CSC LLC filed a new request to DEP to modify its permit to allow operation of the CSC while CSC LLC continued to work with DEP and the Army

Corps regarding the burial depth issue. On June 13, 2003, just after expiration

of the first moratorium and before enactment of the second moratorium, DEP

denied this request on the grounds that operation of the CSC as is, without any

further environmental impacts, still could not be considered a ‘‘minor alteration’’

of the original permit—despite expiration of the first moratorium.

• REQUEST #5: Finally, on June 12, 2003, in response to DEP’s suggestions in its

rejection of CSC LLC’s May 23rd application (Request #3 above), CSC LLC filed

a new permit application with DEP to allow operation of the CSC until December 31, 2007, while CSC LLC continued to work with DEP and the Army Corps

regarding the burial depth issue. DEP has acknowledged receipt of this application but to date has taken no action, a period of almost one full year.

This continued pattern of rejection and delay by DEP demonstrates that CSC LLC

is simply not being afforded a fair opportunity to either further bury the cable system or demonstrate that a waiver of the burial condition, and allowing operation

‘‘as is where is,’’ creates no impact to the environment or navigation.

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VII. CONCLUSION

CSC LLC was surprised with Secretary Abraham’s decision to rescind his order

authorizing operation of the Cross Sound Cable. As a result, the CSC’s many benefits to Connecticut, New York, and the region are no longer being realized. The substantial economic benefits and improved reliability provided by the CSC come at no

cost to Connecticut and without any harm to the environment or threat to navigation in New Haven harbor or elsewhere in Long Island Sound. Instead of enjoying

the CSC’s benefits to Connecticut, Connecticut insists on maintaining a ‘‘Catch-22’’

under which Connecticut precludes operation of the CSC on the grounds that certain permit conditions have not been met (despite acknowledging the lack of impacts

from operation) while at the same time refusing to consider CSC LLC’s requests to

either comply with or waive the subject permit conditions. I respectfully urge the

Subcommittee to address this situation by approving legislation that allows the CSC

to resume full commercial operation and provide its substantial benefits to Connecticut, New York and the Northeast.

Mr. HALL. Thank you.

Mr. Kessel, purchaser of power, we recognize you for 5 minutes.

STATEMENT OF RICHARD KESSEL

Mr. KESSEL. Thank you, Mr. Chairman. And we thank you on behalf of not just Long Island Power Authority and our customers,

but also on behalf of Governor Pataki for taking the time to look

at an issue which I think we all recognize is an issue that is not

confined to New York and Connecticut, but a national issue.

It seems that we have all forgotten the blackout of last summer

when the Northeast and parts of Canada experienced the greatest

power failure in our history. And in an environment when we are

less than a year from that blackout, and an environment where terrorism has constantly reminded us about the infrastructure and

the vulnerability of the infrastructure, and threats against the electric grid is one of them, to allow a perfectly normal transmission

line to lie not used at the bottom of the Long Island Sound is absolutely preposterous and is really parochial politics and nothing

more. That is what this issue is all about.

And in listening to the testimony, I think it is important to make

some critical points here. No. 1, this is not about a cable being illegal. The opposition from my friend, the Attorney General

Blumenthal in Connecticut, and others appeared before the cable

was even built. This is not about the permitting conditions. This

is really about parochialism and false environmentalism. I think

there is no one who has a better record on environmental protection than our State, New York State, under the leadership of Governor Pataki.

I think it is important to just go through the arguments that

have been made by Attorney General Blumenthal and others in

Connecticut and point out the hypocrisy of some of them. The environmental argument—there is no environmental harm from that

cable. That cable has operated, thanks to the Department of Energy’s emergency order, since last August and was only recently shut

down. And I have challenged the State of Connecticut and the Attorney General to show what environmental or navigational harm

that cable has created in the 8 or 9 months that it has operated.

It hasn’t created any environmental harm whatsoever.

I thought, since we have been talking about it all morning, that

I would bring several sections of the cable, and I would like to

share this with the committee. If this could be put in the record,

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I think it should, because this is what we are talking about. So

maybe we can pass this up in some way, and you can take a look

at the cable yourself.

And I would also like to give a piece of the cable to my friend

Attorney General Blumenthal. I would like him——

Mr. BLUMENTHAL. I have received it before. So this kind of

gamesmanship is what it is.

Mr. KESSEL. It is not gamesmanship. This is the cable, Mr. Attorney General. I would like you to show us after my time period is

up, based upon the fact that this is solid in nature, can’t leak at

all, I would like you to show us with this piece of cable what the

environmental harm is as compared to the dumping of dredging

materials that you are silent about from the State of Connecticut.

When there is an environmental issue that impacts the State of

Connecticut you are strangely silent, but when it is an environmental issue regarding the Cross-Sound Cable, you lead the

charge.

As I indicated the other day, I challenge you to create the same

opposition to the dumping of sludge, which takes up approximately

41⁄2 square miles of the Long Island Sound as opposed to the .027

square miles that are impacted by the faults in the cable. Either

you love the Long Island Sound and you care for it, or you don’t.

Your silence, frankly, on the dumping of sludge in light of your opposition to the cable, frankly, to me is astonishing. There is no environmental damage to the sound. And that is not just something

that we are making up here, but it has been found not only by New

York and Connecticut, by the Army Corps of Engineers and everyone else. There are no environmental problems. There are no navigational problems.

Second of all, I constantly hear that Long Island hasn’t done anything. Well, that is not true. As the chairman of the Long Island

Power Authority, I can tell you that we have installed 50 new

small power plants across our service territory over the last 3

years, equating to 600 megawatts of new on-island generation. Additionally, we have spent between $35 and $40 million a year on

energy efficiency and demand-side reduction programs, and next

week we will be announcing a long-term energy plan to add 1,000

megawatts of new electricity for Long Island over the next 7 to 10

years.

I think it is important to note that when you look at what Connecticut has added and subtracted to its energy supply, it is less

than what we have done on Long Island in the last 10 years. In

fact, since 1994 through 2004, Connecticut, net—when I say net,

that is adding and subtracting, because they have decommissioned

a number of plants in Connecticut—the net added impact of

megawatts in the entire State of Connecticut is 621 megawatts.

Our additions on Long Island net 863 megawatts. So when you talk

about Long Island not doing anything for itself, the bottom line is

that Long Island has added more megawatts than the entire State

of Connecticut combined in the last 10 years.

Finally, the issue of rates going up is just a specious argument.

The fact is that the Cross-Sound Cable would not just benefit Long

Island, but would benefit Connecticut, and particularly southwest

Connecticut where there is a tremendous congestion problem.

65

We have already indicated, Mr. Chairman, that we could take

electricity from Connecticut, bring it down the Cross-Sound Cable,

across Long Island, and up the 1385 line that Attorney General

Blumenthal mentioned into southwest Connecticut. That would not

only help in the event of potential problems this summer, which everyone recognizes could occur, but also would reduce congestion

charges in that part of the State and ultimately, obviously, benefit

the people of Connecticut.

So let me conclude by urging this committee that you must get

involved. The Cross-Sound Cable is a symbol of what is wrong in

this country, with the reliability of the electric grid. It shouldn’t

have to take another blackout for us to remind ourselves of what

happened last summer and of what customers go through whether

they are in Connecticut, Long Island or California when the lights

go out. So I urge congressional action on this matter, quickly and

appropriately, in time for the summer season. Thank you.

[The prepared statement of Richard Kessel follows:]

PREPARED STATEMENT OF RICHARD KESSEL, CHAIRMAN AND CHIEF EXECUTIVE

OFFICER, LONG ISLAND POWER AUTHORITY

My name is Richard M. Kessel and I serve as Chairman of the Board and Chief

Executive Officer of Long Island Power Authority (LIPA) located on Long Island in

New York State. As an instrumentality of the State of New York and a public power

agency, the Authority and its operating subsidiary, provide electric service to nearly

1.1 million customers, representing approximately 2.8 million people in Nassau and

Suffolk counties, and the Rockaway Peninsula in the Borough of Queens, New York

City.

I am here today to deliver the message that electricity must flow freely on the

interconnected interstate transmission grid, not only to benefit Long Island and

New York, but Connecticut and New England as well. Every region of the country

needs to provide the resources required to meet the needs of our citizens for electric

energy. Those resources include generation from renewable and non-renewable resources, conservation and sustainable sources. However, no region of this country

can develop and sustain those resources and meet those needs in isolation. The

strength of our nation’s system has been the interconnected grid and the sharing

of resources for the common good of all. New York and greater New England believe

that we should be supporting each other as the hot summer weather approaches

and the Cross Sound Cable is an essential element of that support.

I want to thank Chairman Hall for calling this hearing and for providing me with

the opportunity to testify. I also would like to thank the Chairman of the full Committee, Chairman Barton, for his leadership on the issues facing our electric transmission system and overall reliability and his continuing interest in the Cross

Sound Cable.

THE BLACKOUT OF 2003—LIPA’S RESPONSE AND THE ENERGIZING OF THE CROSS SOUND

CABLE

Last summer LIPA and its customers were caught up in the Northeast power

blackout, which affected much of the Northeast United States and Southeastern

Canada. Through the cooperation of LIPA’s customers, who limited their demand,

and the committed work of the employees of LIPA and our service contractor,

KeySpan, over 80% of LIPA’s customers had their power restored by 8:30 A.M. on

August 15th, and all customers had electric service restored within 25 hours, 21

minutes of the blackout. That restoration was expedited by the energization of the

Cross Sound Cable on the night of August 14 and 15 pursuant to the emergency

order issued by the Department of Energy. Governor Pataki’s initiative in requesting that emergency order was met with immediate response by the Department of

Energy. The Cross Sound Cable not only provided for the delivery of electric power

to Long Island, it helped prevent the type of re-occurring rolling blackouts on August 15th that is often typical of restoration of service after a widespread outage.

It was unfortunate that the Cable was not in service on August 14, 2003, as it

might have helped ameliorate the extent of the outage on Long Island and played

in a role in restoring service even faster.

66

1 In his August 28 Order, the Secretary stated that ‘‘an emergency continues to exist in the

Northeast United States due to a shortage of electric energy, a shortage of facilities for the generation of electric energy, a shortage of facilities for the transmission of electric energy and

other causes.’’

In the aftermath of the Blackout and the uncertainty about its causes or possible

recurrence, the Secretary issued a second order on August 28, 2003 that recognized

that the emergency situation caused by shortages of power generation, transmission

and distribution facilities continued to exist, and directed the continued operation

of the Cross Sound Cable until such time the emergency was over.1 The benefits of

that order have been proven in the following nine months of operation, not only because of the electric energy transmitted between Long Island and Connecticut but

also because the Cable has been called upon more than one hundred times to meet

critical reliability needs. In fact, the Cable was called upon for stability purposes

more often in New England than in New York.

In short, there was a lack of necessary resources in the region that could ensure

the safe and reliable delivery of power in the northeast U.S. This was the underlying emergency addressed by the Secretary. From August 15, 2003 until May 7,

2004, the Cross Sound Cable operated under the Secretary’s emergency order. Unfortunately, on May 7th, the Secretary rescinded his emergency order without notice. This decision will have significant negative impacts on the reliability and supply of electricity on Long Island, in Connecticut and throughout the region. While

the blackout was a singular unprecedented event, the fact remains that our national

electric transmission system needs significant improvement, and that we need to

continue our efforts to enhance system reliability by expanding and improving the

transmission system capabilities and interconnections.

Despite the significant growth in resources over the last six years, the Cable is

an essential part of Long Island’s resource picture. LIPA is taking aggressive steps

to maintain and enhance the electrical system on Long Island. However, ultimately,

the answer is clear—we need the Cross Sound Cable operating today and in the future. Electricity is supposed to be a fungible interstate commodity. The electricity

grid does not recognize ‘‘Connecticut electrons’’ or ‘‘New York electrons.’’ Electricity

is supposed to flow over the interstate electric grid without regard to political

boundaries. That is not what is happening here and, as a result, this situation is

a poster child for federal intervention.

I refer you to my testimony of September 4, 2003 for a history of the development

of the Cross Sound Cable. Mr. Donahue’s testimony today also describes the Cable

in great detail, including the reliability benefits it provided during the term of the

recently expired emergency order. Needless to say, the short operating history of the

Cable during the Emergency Order more than justified LIPA’s vision when it commissioned a study of the project for benefits to both Long Island and New England.

Congress has recognized that the Cross Sound Cable is an essential component

in the Northeast transmission grid by including in H.R. 6, the Energy Policy Act

of 2003, a provision that would require the Cross Sound Cable to remain energized

until Congress determines that it should be shut down. While that legislation remains in an uncertain state in the Senate, we believe this is sound policy.

LIPA—PROVIDING RELIABLE ELECTRIC SERVICE AND INVESTING IN INFRASTRUCTURE

We at LIPA are committed to doing whatever we can to create more stability in

the transmission grid and provide reliable service to the people of the Northeast.

The Authority and its operating subsidiary, LIPA, own and operate the transmission

and distribution system on Long Island while also providing retail electric service

to customers on Long Island. LIPA was established in 1986 by the New York State

legislature to resolve a controversy over the Shoreham Nuclear Power Plant and to

achieve lower utility rates on Long Island. Created as a corporate municipal instrumentality of the State of New York, the Authority was authorized under its enabling

statute to acquire all or any part of the securities or assets of the Long Island Lighting Company (LILCO). In May 1998, thanks to the leadership of Governor Pataki,

the Authority acquired LILCO as an operating subsidiary. This acquisition resulted

in an average across-the board rate reduction of 20% to the LIPA’s customers in

Nassau and Suffolk counties, and the Rockaway Peninsula in Queens.

LIPA owns 1,344 miles of transmission and sub-transmission lines that deliver

power to 175 substations in its electric system. From these substations, 13,075 circuit miles of distribution lines deliver the power to nearly 1.1 million business and

residential customers, or a population base of nearly three million people.

On average, for the past several years, our peak demand has grown at a rate of

approximately 100 megawatts (MW) per year. On a per-household basis, average

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residential consumption has increased 14% over the last five years, despite LIPA’s

varied and aggressive conservation and energy efficiency programs. The 2004 peak

load forecast, approved by the NYISO for the Long Island Control Area (which includes both LIPA load and resources, load served by municipal utilities and generation resources not under contract to LIPA) is 5062 MW. The supply available to

Long Island from generating resources on the island and the Y-49 and Y-50 cables

is 5083 MW (measured in terms of installed capacity). The 5062 MW load forecast

assumes ‘‘normal’’ weather conditions. LIPA’s record summer peak, set on July 29,

2002, is 5059 MW. If the summer of 2004 proves to be as warm as 2002, the peak

load is forecast at 5219 MW, an increase in the peak of 160 MW over 2002. In fact,

if the extreme weather conditions (97°F and THI in excess of 83, fifth consecutive

day of heat) that occurred in early July 1999 were to occur during the summer of

2004, a peak of over 5700 MW is expected. While load reduction programs may reduce this number by 100 MW, at this load level, extreme emergency measures will

be required. It is informative to note that the actual July 1999 peak is no longer

among the 15 highest Long Island summer peaks. The conditions discussed above

would eliminate any reserve margin even assuming, unrealistically, that all equipment is available.

In order to maintain reliability and serve this growing market, LIPA has invested

heavily in transmission infrastructure over the past six years, and will continue to

do so. Since 1988, LIPA has invested $1.01 billion in our transmission and distribution (T&D) system. We have invested in a wide range of projects including new

transmission and distribution lines, upgrades of existing lines, new substations, and

improvements to existing substations. In addition, LIPA worked to establish a new

interconnection between New York and New England across Long Island Sound—

which ultimately became the Cross Sound Cable project. LIPA believed, and continues to believe, that development of this interconnection is essential to the reliability of Long Island and the inter-related region. I will not go in to greater detail

on all of LIPA’s investments and initiatives targeted at increasing reliability of the

electric transmission grid now, but will refer you to my testimony given to the full

House Energy and Commerce Committee on September 4, 2003.

To address future needs and growth of this area, LIPA has developed and issued

a Draft Energy Plan for Long Island. LIPA is recognized as a leader in conservation

and efficiency measures—promoting conservation, installing of new energy efficient

lighting and appliances, and using energy efficient technologies and renewables

such as geothermal heat pumps and photovoltaics—with the implementation of a

five-year, $170 million Clean Energy Initiative. However, even with all of these efforts, it is not possible to meet all of our load requirements without a key component

of our strategic plan—the Cross Sound Cable.

Officials in the State of Connecticut have argued that Long Island should develop

additional generation resources and not rely on the Cross Sound Cable to ‘‘import’’

the energy it needs. LIPA continues to explore the building of new generation and

has added 600 MW of new generation over the last three years. LIPA remains committed to installation of new generation resource, including renewables. However,

it bears noting that there are challenges to building new gas fired generation on

Long Island, due to constraints in the supply of natural gas to the region. Ironically,

the State of Connecticut has also stymied the development of a natural gas pipeline

across Long Island Sound which would address this issue and bring needed supplies

of natural gas to Long Island.

Moreover, new generating facilities cannot be simply purchased off the shelf and

installed overnight. LIPA has purchased mobile emergency generation for each of

the last three summers in an effort to meet our load requirements. This demonstrates the dire situation that exists on Long Island. LIPA has moved as quickly

as possible to secure new generation resources consistent with statutory and regulatory restrictions, its obligations for environmental protection and the needs of its

consumers. In May and June of this year, the LIPA Board is expected to act on the

results of several RFPs that will result in substantially more capacity over the next

few years. Despite LIPA’s best efforts, however, the reality is that LIPA is in functionally the same position as it has been over the few Summers. The Cross Sound

Cable has been an important part of LIPA’s resource plans. LIPA had planned and

contracted for the Cable to meet the projected summer 2002 load. Through the

Cross Sound Cable, LIPA anticipated purchasing the output from among the new

large and efficient generating facilities that have come on line in New England.

Conversely, LIPA assumed that the Cable would be available as well to meet electric demand needs in the high growth transmission constrained area of Southwest

Connecticut around New Haven.

Despite our best efforts, it has not been possible to obtain sufficient generation

or load reduction resources to meet the resources gap that DOE acknowledged in

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2002. LIPA again faces the prospect of razor-thin reserves during heavy load conditions this summer because of the unavailability of the 330 MW Cross Sound Cable.

As noted above, even with aggressive load reduction and conservation measures in

place, the demand on Long Island continues to grow. Our planning and growth forecasts have been built on the availability of this essential transmission line and it

is critical for the reliable service to the region. Any number of factors could severely

affect the ability to meet demand on Long Island this summer. Our generation is

aging and, in the summers of 2002 and 2003, we were fortunate to have 95% of the

capacity available. However, historically, one can only rely on 90% of that generation—at most. Without the ability to use the Cross Sound Cable, the outage of one

major generating unit could lead to blackout conditions. Weather is another unpredictable factor and if we were to have conditions similar to 1999, our peak load on

Long Island will be 13% higher than we are currently projecting. (Current projections for this summer are 4910 MW. Under conditions similar to 1999, our peak

would be 5551 MW). Without the Cross Sound Cable, there are very thin margins

for being able to meet our load without having to resort to load shedding.

EMERGENCY USE OF THE CROSS SOUND CABLE

The Cross-Sound Cable has been able to provide significant support for the Connecticut and Long Island regions through the emergency orders issued by DOE. The

summer of 2002 was consistently hotter than previous summers. In fact, LIPA experienced two all-time peaks in July 2002. Faced with extreme demands on the system

and Connecticut’s prevention of commercial operations the Cross Sound Cable, LIPA

took the initiative to request an emergency order from the Department of Energy

under Section 202(c) of the Federal Power Act. The Secretary of Energy has been

given authority, under Section 202(c) of the Federal Power Act, when an ‘‘emergency

exists by reason of a sudden increase in the demand for electric energy, or a shortage of electric energy or of facilities for the generation or transmission of electric

energy,’’ to ‘‘require by order such temporary connections of facilities and such generation, delivery, interchange, or transmission of electric energy as in its judgment

will best meet the emergency and serve the public interest.’’ The Department of Energy issued such order to energize the Cross-Sound Cable on August 16, 2002, allowing it to operate through October 1 (the end of the summer). Connecticut opposed

that action.

At the beginning of Summer 2003, the Cross Sound Cable again was rendered inactive due to the Connecticut moratorium and the Connecticut DEP’s actions. However, on August 15, 2003, as a result of the evident emergency facing the Northeast

due the Northeast blackout, LIPA received notice from the Department of Energy

that Secretary Abraham, acting upon a request from New York’s Governor George

Pataki, had issued an emergency order immediately directing the operation of the

Cross-Sound Cable pursuant to Section 202(c) of the Federal Power Act. Once active,

the Cross Sound Cable provided essential electricity to Long Island and helped stabilize voltage on both Long Island and in Connecticut. The Cross Sound Cable transmitted 15,000 megawatt-hours of electricity over the critical three-day restoration

period following August 14, enough to repower approximately 300,000 homes on

Long Island.

That order was, initially, of a two-week duration. However, on August 28th, the

Secretary of Energy issued an order determining that emergency conditions continue to exist ‘‘due to a shortage of electric energy, a shortage of facilities for the

generation of electric energy, a shortage of facilities for the transmission of electric

energy and other causes.’’ Accordingly, the August 28th Order directed that the

Cross Sound Cable remain energized to facilitate transfer of power between New

York and New England (in both directions) and to provide voltage support and stabilization facilities.

THE NEED FOR THE CROSS SOUND CABLE

The recent final report of the U.S.-Canada Task Force on the Blackout confirms

the need for the Cross Sound Cable. The blackout report concludes that ‘‘[r]eactive

power problems were a significant factor in the August 14 outage, and they were

also important elements in several of the earlier outages . . .’’ During the August 14

blackout, the Cross Sound Cable provided critical reactive power to Long Island and

Connecticut to help stabilize the system.

Moreover, it is incontrovertible that in the time since the August 28 Order, an

operational Cross-Sound Cable has helped ‘‘prevent a breakdown in electric supply’’

in a region where a shortage of transmission and generation facilities persists. The

Cross Sound Cable is frequently called upon to provide critical reactive power voltage support in order to maintain operating voltages on the Connecticut transmission

69

2The Task Force Report at p. 160.

3 Id.

4 August 28 Order at second paragraph.

system at the request of the New England Independent System Operator. The Task

Force Report highlights the importance of this service stating that ‘‘Reactive power

problems were a significant factor in the August 14 outage, and they were also important elements in several of the earlier outages . . .’’ 2 It went on to recommend the

strengthening of ‘‘reactive power and voltage control practices in all NERC [North

American Reliability Council] regions.’’ 3 The Cross Sound Cable is currently the

only operating cable system in Connecticut and Long Island capable of providing dynamic reactive power support during sensitive energy demand periods.

Since last August, the Cross Sound Cable has responded to 84 requests from Connecticut to maintain a steady operating voltage and 8 similar requests from New

York. The cable has also responded 17 times to reduce system disturbances caused

by lightening strikes, transformer failures, line faults, and unknown events. Nearly

80% of these disturbances were on the Connecticut grid. As vividly demonstrated

by its reliable operation, the Cross Sound Cable not only provides important reliability benefits to Long Island residents, but also contributes directly to system reliability in Connecticut.

The high voltage, direct current, Cross Sound Cable can provide valuable assistance in efforts to stem system disturbances similar to those that occurred last August 14th and that caused blacked outs in New York and on Long Island. Further,

while we recognize the Cross Sound Cable’s contribution to removing emergency

conditions, the facility also should be placed into full commercial operation so it can

fully support and enhance the reliability of the adjoining New England and New

York control areas. LIPA’s nearly 1.1 million customers (serving nearly three million

people), as well as the customers of utilities in Connecticut benefit from the increased protection against contingencies and outages afforded by the Cross Sound

Cable. As the August 28 Order noted, in the aftermath of the August 14th blackout,

the Cross Sound Cable not only helped deliver substantial amounts of energy to

Long Island, but also provided ‘‘valuable voltage support and stabilization services

for the electric transmission systems in both New England and New York.’’ 4 These

grid stabilization services not only helped the system in the region to recover from

the blackout, but also prevented rolling blackouts in the aftermath of the restoration

of service, and increased the overall reliability of the system.

We are grateful for the efforts of the New York Congressional delegation and Governor Pataki. Legislation has been introduced in both the House and in the Senate

designed to keep the Cross Sound Cable energized. LIPA strongly urges Congress

to ensure the optimization and full utilization of existing regional transmission assets such as the Cross Sound Cable.

Again, I thank the Committee for this opportunity to testify and for your interest

in the Cross Sound Cable. LIPA looks forward to working with Chairman Hall and

all members of this subcommittee on creating a solution that will enhance the reliability of our electric transmission and distribution systems and ensure the continued operation of the Cross Sound Cable.

Mr. HALL. All right. Thank you very much Mr. Kessel.

I would like to—I am kind of in a dilemma. Attorney general

says this cable is illegal. Officials in Connecticut have determined

that they are not going to authorize the use of the cable unless it

is buried deeper in a few locations. Rock and other barriers are obstructing a deeper depth, I guess.

However, right at that time, Mr. Kessel, when they hit the

rock—I am building a swimming pool at home. I am repairing an

old swimming pool, and I had to go redo it to go to city plumbing.

I had to dig a ditch. I got the cheapest ditch digger I could get, and

he dug a ditch as deep as he could get it, and it was not deep

enough because he hit rock. I live in a place called Rock Wall, and

there is a rock wall around the—rock wall around the city. Manmade or whatever, nobody has ever decided, but we hit rock. I had

to get heavier equipment.

70

Was there any heavier equipment that could have dug this to

that depth and not have this dilemma of the rock that precluded

that? Mr. Donahue.

Mr. DONAHUE. I would like to answer that. Yes, if we knew the

rock that was there——

Mr. HALL. I am not criticizing that you didn’t—apparently you

didn’t think——

Mr. DONAHUE. There was equipment and technology that can dig

through the rock. I would like to mention, too, we hear a lot about

the rock, this rock, this rock that the Corps didn’t know about either, by the way. And we have heard a lot about the expansion of

the channel. There are ways to remove the rock. If we have to get

our cable down and remove the rock, we will. It is about 4,000

square feet of area would have to be cleared.

If in the future the Federal navigational channel is ever expanded, if it is, they are going to have to remove all the rock

around us, over 130,000 square feet of rock, also in the future. We

have agreed that if the channel is ever expanded, we will move the

cable. There is technology out there. It will have to be used. If we

have to lower our cable, it will have to be used if the channel is

expanded.

We think it is smart to leave the cable as is, whereas only have

the environmental impact of doing that actually once. When and if

the future channel is expanded——

Mr. HALL. Well, so there could be more construction is what you

are saying.

Mr. DONAHUE. Oh, yeah. Yeah, absolutely.

Mr. HALL. You get another situation here where the same officials from Connecticut have created a moratorium on the construction. So——

Mr. BLUMENTHAL. May I respond to that? Let me just explain

about the moratorium. The moratorium dates from 2002, and it

was adopted because of the plethora of lines, not just this cable,

but literally a spaghetti of lines, pipelines for natural gas, cable

lines for electricity, that were proposed. And what Connecticut said

in effect was let’s stop the construction so that we can plan intelligently.

Mr. HALL. You all had that discussion.

Mr. BLUMENTHAL. Now, the moratorium which has been extended to 2005 has a procedure which Cross-Sound could use to receive approval to go ahead. There is a waiver procedure. The moratorium is a red herring, if you will. A red herring, by the way, is

not indigenous to the Sound. The dredge disposal issue is a red

herring. I have said, and I will say again here, if it is illegal, I will

fight it. That has been a matter of public record.

Mr. HALL. You say it is illegal. Your statement was it is not

legal.

Mr. BLUMENTHAL. No, we are talking about the dredge disposal

that Mr. Kessel mentioned and——

Mr. HALL. I understood you to say that the cable is not legal.

Mr. BLUMENTHAL. The cable is illegal in its present form.

Mr. HALL. If it is illegal, it is not legal.

Mr. BLUMENTHAL. That is right.

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Mr. HALL. As the attorney for the State, what are you doing to

make it legal?

Mr. BLUMENTHAL. Well, I can’t make it legal, if you please, Mr.

Chairman. With all due respect, they have——

Mr. HALL. What of the moratorium? Does the moratorium preclude that?

Mr. BLUMENTHAL. No. The moratorium provides for an approval

procedure, an application procedure that they may avail themselves to do, and it also would enable them to do, if they could do,

what has to be done to make the cable legal, but only by blasting

the bottom of the sound. And that is in violation of their permit

conditions which they have accepted. And so the moratorium isn’t

the problem. It is their disregard for what they knew was at the

bottom of the sound.

The Army Corps of Engineers, contrary to what Mr. Donahue is

saying, had indications and information about this ledge. There are

memos in the Army Corps of Engineer’s files, October 2000, that

indicate this ledge is a problem, that rock is at the bottom of the

harbor.

We are not dealing with some exotic remote part of the world

that is unknown to us. New Haven Harbor has been well navigated

and known for a long time, and the existence of a ledge there

should have been no surprise through a substantial part of the harbor.

Mr. KESSEL. Mr. Chairman.

Mr. HALL. Mr. Kessel.

Mr. KESSEL. I have to correct some things here. First of all, it

just surprises me that the issue on the sludge issue, and it is not

a red herring, it is a significant issue, it is not just a legal issue,

it is an environmental issue. The Attorney General and others in

Connecticut have used the environmental issue for years in objecting to the cable. And whether the sludge is dumping of sludge in

the Long Island Sound is legal or not, what about the environment?

You are the Attorney General that speaks up for the environment all the time, and I am frankly surprised that you won’t stand

up with the same veracity and strength that you have used against

the Cross-Sound Cable to say that as a protector of the environment, that I am not going to sit idly by and allow that sludge to

be dumped.

Second of all—let me finish. And second of all, there is a—the

moratorium. There were three moratoriums that were enacted. The

last one was just recently enacted by the legislature this year. All

of the moratoriums up to this year gave no opportunity for CrossSound Cable Transenergy to make those repairs. The current moratorium does allow for certain waivers and exceptions, but you

have to go through such a gauntlet that it is highly unlikely that

could ever occur. So while on the one hand the State of Connecticut

says, you know, it is not buried to the depth requirement—by the

way, in no areas of the Long Island Sound does that occur at all,

in these seven or eight small areas, and so it is illegal. Transenergy

cannot make the repairs even if they wanted to, because the moratorium brings it to a time where no work can be done in the Long

Island Sound during the summer months.

72

So for all intents and purposes, if we were to follow the Attorney

General’s reasoning here, we would not be able to use the CrossSound Cable until at the very least the summer of 2006, and that

just makes no sense to me. It is a Catch 22 of the highest order.

Mr. HALL. I think my time is up. I recognize the gentleman from

Virginia.

Mr. BOUCHER. Well, thank you very much, Mr. Chairman. And

I want to thank all of the witnesses for their informative and spirited testimony here this morning.

Mr. Wood, I have several questions for you. You reference in your

testimony that there is a class of cables that crosses the sound that

have been in place for something on the order of 30 years, and that

there have been some problems in terms of perhaps anchors from

barges contacting these cables with the release of chemicals that

were a part of the cable. I think benzene perhaps was released. Do

you know if this particular cable that we are discussing today, this

Cross-Sound Cable, is potentially subject to that kind of problem?

Mr. WOOD. I don’t know the engineering of it. I see the cross-section as you do, and it doesn’t look like there is a liquid surrounder

there, but I am not aware of the full influence of that cable.

Mr. BOUCHER. Would other members of this panel care to comment just very briefly on this, because we have some other questions.

Mr. DONAHUE. Thank you, sir. I will comment briefly. The 1385

cable, as it is commonly known, the old cable, is using a technology

that uses oil fluids to help cool the cable. The Cross-Sound Cable,

as Mr. Kessel indicated, uses solid dielectric, solid plastic, so there

is no oil on this cable.

Second, the 1385 cable was not buried along its entire length,

and in the areas where it was buried, it was only buried to a couple

of feet. So it has experienced significant problems over the years.

Mr. BOUCHER. Mr. Blumenthal, do you have a contrary opinion

to that?

Mr. BLUMENTHAL. I do not. Our objection environmentally to this

cable is based on its effect on the aquatic life and the ecosystems

of the Sound, and on the fact that substantial blasting, detonation

in the seabed of the Sound would be necessary to lay it at the proper depth.

Mr. BOUCHER. So the experience with the 1385 cables is really

not what gives rise to Connecticut’s environmental concerns at this

point.

Mr. BLUMENTHAL. It is not. In fact, on the contrary, sir, the State

of Connecticut has favored upgrading the 1385 line to eliminate

that problem so that there could be better transmission. And, in

fact, the 345 kV line would assist in that transmission if necessary

and appropriate from New York to Connecticut or vice versa.

Mr. BOUCHER. Thank you very much.

Mr. Wood, let me return to you. In your testimony you suggest

that the Congress might want to consider a change in the Department of Energy’s authorities under section 202 that currently enable the Department to order that certain facilities be operated in

the event of an emergency. And your proposal, as I understand it,

is that this DOE authority could be exercised not just in emergencies, but when it is deemed to be in the national interest to

73

have certain facilities be operated. Is that a Commission position

that are you adopting? Is that a formal recommendation you are

making to us? Do you have legislation to recommend to us along

those lines?

Mr. WOOD. It is my own recommendation in preparation for this

hearing, and reviewing the Secretary’s order, the limitations, as

General Counsel Otis has pointed out, relate to a specific factual

finding of an emergency, and while that is not defined, I think it

is a significantly high standard that would not include issues such

as general reliability, preparatory actions to take perhaps in advance of a high-electricity useage summer. And so I think that the

standards should be made a little bit broader so that the Secretary

would have broader authority, but it is my own analysis of the situation, my experience with the Federal Power Act, not that of our

Commission nor of the Secretary.

Mr. BOUCHER. Thank you.

Ms. Otis, does the Department of Energy have any comment on

this proposal?

Ms. OTIS. Well, I feel as if I should at least return the favor. I

guess what I would point the subcommittee to are the siting provisions in H.R. 6 currently, which actually would give this override

authority to the FERC in circumstances—in appropriate circumstances, and I do think actually that the circumstance that we

have here is a potential candidate for the use of that authority. Obviously no one would want to prejudge whether it would, in fact,

be appropriate to use it here, but I think that this is a tool that

might assist in resolving disputes like this.

Mr. BOUCHER. Well, thank you very much. I will have to confess

that in 22 years here, I have never seen two agencies try to hand

each other authority quite the way that you have today. Typically

it is the reverse of that. But thank you for your comments.

Well, let me ask you this, Mr. Wood. If Congress were to adopt

this recommendation and enable DOE to exercise this authority

when it is deemed to be in the public interest and not necessarily

in emergency situations, would I be correct in interpreting the proposal to say that DOE’s authority would then be preemptive of both

State and Federal environmental laws, and that the operation of

the facility could go forward if DOE orders it, even though the

Army Corps of Engineers, for example, had found that permit conditions had not been met?

Mr. WOOD. I think that the standard and the public interest

would have to govern, and I think that would be up to the Secretary and/or the Commission, whoever has that authority, to balance those very important determinations as to whether the public

interest requires those State and Federal environmental laws to be

overridden.

Mr. BOUCHER. Okay. Thank you.

One final question of you. I wonder if the operation of this cable

falls under the reliability guidelines that have been published by

the North American Reliability Council.

Mr. WOOD. Are they subject to the——

Mr. BOUCHER. Are they subject to the reliability guidelines published by NERC?

74

Mr. WOOD. They should be. I think Mr. Museler might be probably a better person to handle that one.

Mr. BOUCHER. Mr. Museler.

Mr. MUSELER. Yes, sir, they would be, and they are in the—on

the New York side that cable is—was included in the reliability

analysis for the summer of 2004 in accordance with those guidelines, and I believe the same is true of the New England Independent System Operator.

Mr. BOUCHER. Under current law those guidelines are voluntary.

They are not enforceable. We have provisions in H.R. 6 that would

make these guidelines of a mandatory nature, and enforceable.

Mr. Wood, let me ask you this. Do you believe that in order to

enhance system reliability—and I believe you have said that the

operation of this particular cable would, in fact, enhance transmission reliability—do you think it would be appropriate for the

Congress to enact freestanding, at this point, legislation that would

subject this particular cable to the reliability standards published

by the NERC?

Mr. WOOD. I think in light of what I heard this morning, H.R.

6, isn’t dead and buried. It sounds like it has come back to life. So

I would say no.

Mr. BOUCHER. I think that might be an optimistic view.

Mr. WOOD. Well, I sat here and listened. Maybe I am a bit naive,

but there is so much in that bill, as you know, and I testified to

that last week when we talked about the Alaska natural gas pipeline, one of the other kind of tier 1 issues for me, that really it is

just more than making something mandatory. It is a whole panoply

of issues that relate to the energy picture. So I would hope that the

Congress and particularly the other Chamber could get the full

package out like the House did.

Mr. BOUCHER. Let me ask you just a broader question finally.

Let’s suppose we get to September, and the situation is unchanged

with H.R. 6. We don’t see any real forward movement. The agreement on a special fund for MTBE programs has not come together,

and it really looks like H.R. 6 is going to die for this Congress.

Would you, at that point, think that we would be well advised to

pass on a freestanding basis that provision of H.R. 6 that would

make the NERC rules both mandatory and enforceable?

Mr. WOOD. This is uncharacteristic for me, but can you ask me

then. If indeed it is dead, ask me then.

Mr. BOUCHER. Ask you then, if it is dead. We will give you 5

months to consider your answer. That is fine.

Well, thank you all very much, and, Mr. Chairman, thank you.

Mr. HALL. Yes. I think because we have no other members, they

have gone to other meetings, and we—without objection, we will

have the right to submit questions to you in writing and ask that

you answer them within 2 weeks, if you can, of the time you receive them, and they will go into the record here.

And all of you are very important. You are very important to the

people that you report to. Your time here is important. The time

you took to prepare for this is important, and we recognize we have

one terrific panel here.

And, Pat, we will have you back on Oil for Food on Iraq probably

next week, so don’t get too comfortable over there, wherever you

75

are. But thank you for your contribution to this subcommittee, to

this Congress and to the Nation. Thank you very much.

[Whereupon, at 12:10 p.m., the subcommittee was adjourned.]

[Additional material submitted for the record follows:]

PREPARED STATEMENT OF HON. HILLARY RODHAM CLINTON, A U.S. SENATOR FROM

THE STATE OF NEW YORK

I want to thank Chairman Hall and Ranking Member Boucher for holding this

hearing on an issue of importance to the people of New York. Today’s hearing will

provide an opportunity for everyone to provide their perspective on what I believe

has become an unnecessarily controversial issue.

It is my hope that an airing of the facts at today’s hearing will propel us towards

what I believe to be the only sensible outcome—reenergizing the Cross Sound Cable.

As everyone knows, the Secretary of Energy, Spencer Abraham, issued an order

on May 7 that resulted in the shutdown of the cable on May 19.

I believe this decision is shortsighted, and I am extremely concerned that it will

put Long Island at risk of power failures as we enter the summer peak demand

months.

The Cross Sound Cable has provided proven reliability benefits at a time when

a shortage of generation and transmission facilities continues to exist on Long Island and in Southern New England. The Cross Sound Cable transmitted 300 MW

of power over the Blackout weekend, enough to turn on the power in about 300,000

homes on Long Island. Since beginning full-time operation on September 1, 2003,

the Cross Sound Cable has transmitted nearly one half million megawatt-hours of

electricity to help provide sufficient power to prevent more blackouts or brownouts

on the island.

Additionally, the extra power from the Cable makes more power available on Long

Island to export over another submarine cable into Southwestern Connecticut when

needed, thereby making the regional power grid more resilient. The independent

grid operators have successfully tested sending power over the Cross Sound Cable

to Long Island and then simultaneously sending power from Western Long Island

over another submarine cable to Southwest Connecticut. During a severe cold spell

in January, Long Island Power Authority was prepared to send 200 megawatts of

power over Cross Sound Cable to help Connecticut if needed. Over the short to longterm, the Cable thus allows excess New York-generated power to be transmitted to

Connecticut to help prevent blackouts and brownouts.

The cable also provided voltage support for Connecticut when it was operating.

In fact, ISO New England, the independent operator of the New England transmission system, made 108 requests to the Cross Sound Cable for help maintaining

a steady operating voltage on the Connecticut side during the period when the cable

was on.

So it is clear that the Cross Sound Cable helps both Long Island and Connecticut.

But so far, Connecticut has blocked the cable. Environmental impacts are cited

as a major factor in Connecticut’s opposition. But the fact is that studies of the cable

have concluded that it has minimal impacts. The most recent study was conducted

last winter while the cable was on. It showed that there were not lasting impacts

from when the cable was put in place. And it also showed that operation of the cable

did not have any significant environmental impact. So while I take the issue seriously, I just don’t think there’s much there.

What I find particularly puzzling about this issue is that Connecticut has put the

Cross Sound Cable in a bureaucratic bind. Everyone acknowledges that the cable

is not currently buried to the depth required in its permits in seven places. That

is the basis for Connecticut’s charge that the cable is illegal. But at the same time,

Connecticut has denied requests from the owners of the Cross Sound Cable to allow

them to bury the cable to the proper depth. It hardly seems fair that the company

is willing to fix the problem, and Connecticut won’t allow them to do it.

And it’s hurting New Yorkers. That’s why I have introduced legislation in the

Senate that would turn the cable back on, and Congressman Bishop has introduced

that legislation in the House. I hope that after this hearing, we will be able to move

that bill or find some other way to make progress on this issue.

PREPARED STATEMENT OF HON. GARY L. ACKERMAN, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF NEW YORK

Good morning Chairman Hall, Ranking Member Boucher, Members of the Subcommittee on Energy and Air Quality. Thank you for holding a hearing on this imVerDate 11-MAY-2000 08:15 Aug 10, 2004 Jkt 000000 PO 00000 Frm 00079 Fmt 6633 Sfmt 6621 93979.TXT HCOM1 PsN: HCOM1
76

portant topic, and allowing me to express my strong support for the Cross Sound

Cable. The operation of this cable is imperative to provide energy security and reliability to the Northeast.

In the wake of the August 14th blackout, we have discovered that our electricity

transmission system is not as reliable as we once believed. The Cross Sound Cable

provides reliability benefits to both New York and Connecticut. The cable can allow

for electricity to flow in either direction and has been an important tool in stabilizing the region’s energy grid. Since it was activated on August 28th, it has been

utilized over 100 times to provide stabilization for the electric transmission systems

in both states.

The decision to shut down the Cross Sound Cable reduces the supply of electricity

to Long Island just as energy prices and the thermometers are spiking.

The State of Connecticut is opposing the operation of the line based on environmental concerns. However, as a result of Secretary Abraham’s emergency order to

activate the cable, we have seen that the operation of the cable has caused no adverse environmental impacts. In addition, Connecticut opposes operation of the

cable because it does not comply with the permit issued by the Army Corps of Engineers. However, the State of Connecticut refuses to allow repairs to be made to ensure compliance or to grant a waiver for the project.

The Secretary of Energy has stated that he will re-energize the cable in the event

of an emergency. I am sorry to say that will be too little, too late. The idea that

the cable should lay dormant until an emergency occurs, when the operation of the

cable may be able to prevent an emergency, is shortsighted and dangerous. New

York suffered serious economic losses from the last summer’s blackout and our region cannot afford another power failure.

I would like to thank the Subcommittee for its work on this important subject and

encourage action on this issue before the lights go out... again.

PREPARED STATEMENT OF HON. ROB SIMMONS, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF CONNECTICUT

Mr. Chairman, Mr. Boucher, and other members of the Committee, thank you for

holding this hearing, and for allowing members from Connecticut to testify on behalf

of our home state. This is an issue of great importance to our state.

Mr. Chairman, the 24-mile Cross Sound Cable, operated by Islander East, LLC,

extends between New Haven, Connecticut and the former Shoreham nuclear power

plant on eastern Long Island, New York. The cable has been a contentious issue

in Connecticut for several years beginning with its application to the Connecticut

Siting Council.

Connecticut is home to four nuclear power plants—two decommissioned and two

operating—as well as numerous coal, gas and electric plants. Connecticut has taken

many of the necessary steps to diversify its fuel mix in an effort to provide the resources necessary to try to meet our demand.

That said, there is certainly room for improvement to our system. Southwest Connecticut is in need of an upgrade to its transmission system, as its demand often

exceeds supply. Unfortunately the Cross Sound Cable, while delivering energy to

Long Island, does nothing to help with the congestion facing Southwest Connecticut.

To add insult to injury, the cable was laid improperly and as a result does not meet

the depth requirements set by the Connecticut Department of Environmental Protection.

Recognizing the Sound is a treasure to residents of both Connecticut and New

York, the members of the Connecticut delegation voiced environmental concerns

with respect to the laying of the cable throughout the permitting process. These concerns included the heat emitted from the cable, the electromagnetic field it generates and the disturbing of the sediments contaminated by chemicals and industrial waste. We continue to harbor these concerns today, in addition to those associated with the impact of the cable’s failure to meet depth requirements.

U.S. Secretary of Energy, Spence Abraham, energized the cable following the

blackout last August that plunged thousands into the dark. The order to energize

a cable that did not meet Connecticut permitting requirements overrode a decision

by the state—effectively wrestling legal authority from Connecticut.

The cable remained energized until last week when the Secretary issued a finding

that it would have no impact on preventing another blackout. Sadly, the good news

was short-lived, and now we are holding this hearing and fighting legislation intended to activate the cable indefinitely.

Mr. Chairman, we have a serious situation. Energizing the Cross Sound Cable undermines the sovereignty of the State of Connecticut. As elected representatives, we

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have a duty to protect our citizens and the environment in which they live and rely

on for their livelihood. The right of the state must be considered in this process.

Thank you for considering my statement. I look forward to working with you on

this issue.

PREPARED STATEMENT OF HON. CAROLYN MCCARTHY, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF NEW YORK

Mr. Chairman, I welcome this opportunity to offer my testimony on an issue that

is critically important to Long Island: the cross-Sound cable. I am in strong opposition to Secretary Abraham’s decision to shut down the operation of the cross-Sound

cable and I would urge you to allow permanent use of the cable.

The loss of the cable, and the 330 megawatts of power that it carries, will have

severe economic consequences for our region. In addition, without the use of the

cable our power on Long Island is simply less dependable.

Power companies are already moving to purchase replacement power and have

said that the loss of the cable will result in as much as $38 million dollars in additional costs this year. Most of these new costs will be passed onto consumers. On

the Island we already have close to the highest electric prices in the country. With

two-dollar gallons of gas and four-dollar gallons of milk, how can we ask Long Islanders to shell out even more cash for rising electricity rates? Long Islanders simply cannot afford this extra cost.

Summer is approaching and this is peak usage season for electricity. Without the

use of the cross-Sound cable Long Island power companies will be short critical

amounts of power. The loss of the cable will eliminate the flexibility power companies need to respond to the increase in usage during the summer months or during

an emergency. This could result in many power outages and brownouts across Long

Island this summer as well as a slower response times if an emergency should

occur. This cable is insurance and a type of safety valve when it comes to dependable and reliable power on Long Island.

The Dept of Energy has said it was not able to conclude that the blackout, which

hit the northeast, would have been prevented on Long Island if the cable were open

and running. That may or may not be the case, but what we DO know is that keeping the cable open permanently will certainly prevent other types of blackouts, as

well as help prevent sharp spikes in energy prices that will occur should this cable

stay off. After living through last summer’s blackout why would anyone want to

make it harder for any region in the country to get power when it’s needed?

Connecticut authorities have argued that the cable causes environmental damage.

This is simply not the case. The truth of the matter is—when the cable line was

built it caused minor and temporary damage to shellfish habitat. Today the damage

has naturally been repaired and the actual running of the cable does not cause any

type of environmental damage. The State and jurisdictional agencies involved with

this issue have determined that the use of this cable will not have any adverse environmental impact.

Environmental groups on Long Island are not exactly silent when they see something harmful being done to the environment and yet no group has come out against

the use of this cable. However, environmental groups have spoken out against the

EPA’s proposed dredge spoils dumping in the Long Island Sound, which Connecticut

supports. These dredge spoils will create an ecological hazard far worse than any

threat from the cable and if Connecticut officials truly cared about the environment

or the health of the Sound then they would be against this dredge dumping proposal.

Another argument of Connecticut authorities against the use of this cable is that

the it presents a navigational hazard because it is not buried deep enough at seven

locations. The reason for this is that when the cable was being laid it was found

that in some places, going a few feet deeper would cause environmental damage.

There has not been one cited navigational problem from these few areas where it

is a small number of feet short of being buried to regulation. Connecticut officials

are demanding the cable be idle until those areas are buried deep enough but they

have banned repairs that would make the cable meet the requirements.

I urge quick and immediate action to keep the cross-Sound cable open permanently so that every time there is an emergency or depletion in supply we do not

have to wait for a bureaucratic process to pan out before we see relief. Allowing a

perfectly good cable to lie on the bottom of the Long Island Sound unused is absolutely preposterous when it could greatly benefit many people in our region. Long

Islanders deserve reliable energy at reasonable prices and allowing the permanent

opening of this cable will provide this.

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1Final Report on the August 14, 2003 Blackout in the United States and Canada: Causes and

Recommendations at 75-77. 2 Rebecca Smith, ‘‘Blackout Could Have Been Avoided,’’ The Wall Street Journal, April 6, 2004,

at A6; see also Rebecca Smith, ‘‘Faults Still Plague Electric System as Peak Summertime Use

Nears,’’ The Wall Street Journal, April 13, 2004, at A1 (‘‘As the summer months approach, North

America’s electricity system remains frail and many of the shortcomings that contributed to a

massive failure eight months ago have yet to be fixed.’’)

Thank you, Mr. Chairman for holding this hearing today and for giving me the

opportunity to submit testimony.

PREPARED STATEMENT OF ELIOT SPITZER, NEW YORK STATE ATTORNEY GENERAL

It is now nine months since the August, 2003 blackout demonstrated the vulnerability of the Northeast’s electric grid. As thermometers throughout the Northeast

begin to move past the 80 degree mark, last summer’s outage is on all of our minds.

For decades, the nation’s power generators, high voltage bulk transmission lines

and distribution systems have been cobbled together into a patchwork network. The

August 2003 blackout revealed that the electric grid is fragile at its seams. It also

showed us the vast number of people and businesses who rely upon the system—

within New York’s borders, throughout the Northeast and across the border in Canada. It highlighted our responsibility to strengthen the grid, to ensure that we do

not have another massive power outage.

To that end, I support continued operation of the Cross Sound cable between Long

Island and Connecticut.

In order to prevent future outages, on August 28, 2003, the Secretary of Energy

appropriately and lawfully ordered the cable into operation. To strengthen the electric grid immediately, the Secretary should order the continued operation of the

cable.

THE CONTINUING VULNERABILITY OF THE BULK POWER TRANSMISSION GRID IS AN

EMERGENCY REQUIRING ACTION BY THE SECRETARY OF ENERGY

Electricity is supplied in North America through large interconnected networks,

extending in a grid across the United States and Canada. This grid is not only more

efficient than independent generator-consumer transmission systems, but is also

generally more stable and reliable, since the system as a whole can absorb disturbances that would otherwise cause local power outages. The sina qua non of the

grid’s functioning, however, is adequate transmission capacity.

Because the Cross Sound cable is one of only six power links connecting Long Island to the mainland, it is critical to ensure adequate transmission capacity and reliable power on Long Island. Sufficient power supply is important not only for the

well-being of Long Island residents, but, since the effects of severe local deficits ripple through the network, for the region as a whole. An interconnected system can

spread the effects of disturbances over a wide area, quickly restoring balance in the

region where the problem originates without compromising the system as a whole.

This can only work, however, when there is sufficient transmission capacity.

The August 14, 2003, blackout is illustrative. The Report of the U.S.-Canada

Power System Outage Task Force emphasizes the importance of transmission capacity in explaining why that blackout did not cascade further. ‘‘Higher voltage lines

and more densely networked lines... are better able to absorb voltage and current

swings and thus serve as a barrier to the spreading of a cascade. As seen in the

[August 14, 2003 blackout... where]...there were fewer lines, each absorbed more

of the power and voltage surges and was more vulnerable to tripping.1

Of course, no two power crises are exactly alike. We do not know whether there

will be a repeat of last summer’s cascading blackout, much less when or where a

transformer might fail, a line might short or lightening might strike. As the Wall

Street Journal summarized, the Task Force’s Final Report ‘‘offers little reason to believe the electric system is hardier today’’ than it was on August 13, 2003.2 Given

that the grid is not demonstrably more robust than it was on August 14, 2003, we

must do what we can to ensure that this summer does not bring another massive

blackout. Maintaining the operation of the Cross Sound cable provides a means of

mitigating the risk of another such outage.

THE SECRETARY OF ENERGY HAS THE AUTHORITY TO ORDER CONTINUED OPERATION OF

THE CABLE

The Secretary’s authority under the Power Act applies both when the emergency

is an immediate threat to the power supply and where the power supply is in an

extended period of insufficiency. Clearly, such an insufficiency exists. Our electric

transmission grid is as vulnerable to another such crisis as it was on August 14,

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3 Id.

4 42 U.S.C.A. § 7151(b). 5 16 U.S.C.A. § 824a(c). 6 10 C.F.R. § 205.371. 7Department of Energy Order No. 202-03-4, May 7, 2004.

8 Id.

9 16 U.S.C.A. § 824a(c). 10 Cross-Sound Cable Company, LLC application for a Certificate of Environmental Compatibility and Public Need, Docket No. 208 (Connecticut Siting Council, January 3, 2002), available

at http://www.ct.gov/csc/ lib/csc/Fof208.doc.

2003. This vulnerability constitutes an emergency from which the grid will not be

relieved until the causes are rectified, and the only way to accomplish this is

through the addition of robust transmission capacity.

The Federal Power Act authorizes the Secretary of Energy to act to protect the

power supply during an emergency threatening or disrupting the adequate operation

of the electric grid.3 The Act also transferred to the Secretary the authority previously vested in the Federal Power [now Federal Energy Regulatory] Commission 4

by § 824a(c), which provides in pertinent part, ‘‘whenever the Commission determines that an emergency exits...the Commission shall have authority . . . to require

by order such temporary connection of facilities and such generation, delivery, interchange, or transmission of electric energy as in its judgment will best meet the

emergency and serve the public interest.’’ 5

The Department of Energy regulations implementing § 824a(c) set out several

definitions of ‘‘emergency,’’ among them ‘‘extended periods of insufficient power supply’’ or ‘‘a regulatory action which prohibits the use of certain electric power supply

facilities.’’ 6 Given the fragile nature of the Northeastern electric transmission grid

and the regulatory obstacles that are keeping the Cross Sound cable from operating,

the Secretary of Energy clearly has authority to apply § 824a(c) to order the cable

into operation. Moreover, the environmental issues raised in connection with the operation of the cable are without merit.

On August 14, 2003, the Cross Sound cable had been physically complete for over

a year but was not in operation due to permitting issues. Within hours of the August 2003 blackout, the Honorable Spencer Abraham, United States Secretary of

Energy, ordered the immediate activation of the cable to alleviate the power supply

emergency in both New York and Connecticut. While the original order was scheduled to expire on August 31, 2003, on August 28, 2003, Secretary Abraham again

invoked his authority and directed that the Cross Sound cable continue operating

until the he makes a formal determination that the current emergency has passed.

Just a week and a half ago, on May 7, 2004, citing the findings in the U.S.-Canada Power System Outage Task Force Report, Secretary Abraham allowed the Cross

Sound cable to be shut down.7 I do not agree with this outcome.

While, as the Secretary of Energy stated in his May 7 order, the Task Force Report did not ‘‘identify any particular role that the Cross Sound Cable would have

played in stopping the spread of the outage,’’ the Report also did not identify any

reason to believe that the grid is any less vulnerable than it was last August.8 This

continuing vulnerability of the Northeast’s transmission grid to disruptions and

even blackouts is an emergency that the Secretary of Energy may and should address under the Federal Power Act.9

CONCLUSION

In the words of the Connecticut Siting Council, operation of the Cross Sound cable

can be expected to ‘‘enhance the inter-regional electric transmission infrastructure . . .[and] improve the reliability and efficiencies of [the interconnected] systems

by providing generation resources that can be drawn upon in the event of changes

in electricity demand or supply.’’ 10 The system degradation that results from even

temporarily blocking the flow of electricity through the Cross Sound cable is a substantial harm to the people of New York and the Northeast and is contrary to the

public interest.

Congress should act quickly to ensure that the Secretary of Energy orders the

Cross Sound cable back into operation.

Æ