U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

88–048 PDF 2014

EVALUATING THE ROLE OF FERC IN A CHANGING 

ENERGY LANDSCAPE 

HEARING 

BEFORE THE

SUBCOMMITTEE ON ENERGY AND POWER 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

DECEMBER 5, 2013 

Serial No. 113–106 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

RALPH M. HALL, Texas 

JOE BARTON, Texas 

Chairman Emeritus 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

Vice Chairman 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Ohio 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

HENRY A. WAXMAN, California 

Ranking Member 

JOHN D. DINGELL, Michigan 

FRANK PALLONE, JR., New Jersey 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

BRUCE L. BRALEY, Iowa 

PETER WELCH, Vermont 

BEN RAY LUJAN, New Mexico 

PAUL TONKO, New York 

JOHN A. YARMUTH, Kentucky 

SUBCOMMITTEE ON ENERGY AND POWER

ED WHITFIELD, Kentucky 

Chairman 

STEVE SCALISE, Louisiana 

Vice Chairman 

RALPH M. HALL, Texas 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

LEE TERRY, Nebraska 

MICHAEL C. BURGESS, Texas 

ROBERT E. LATTA, Ohio 

BILL CASSIDY, Louisiana 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

BOBBY L. RUSH, Illinois 

Ranking Member 

JERRY MCNERNEY, California 

PAUL TONKO, New York 

JOHN A. YARMUTH, Kentucky 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN D. DINGELL, Michigan (ex officio) 

HENRY A. WAXMAN, California (ex officio) 

(II) 

(III) 

C O N T E N T S 

Page 

Hon. Ed Whitfield, a Representative in Congress from the Commonwealth 

of Kentucky, opening statement ......................................................................... 1 

Prepared statement .......................................................................................... 3 

Hon. Jerry McNerney, a Representative in Congress from the State of California, opening statement .................................................................................... 3 

Hon. Gene Green, a Representative in Congress from the State of Texas, 

opening statement ................................................................................................ 4 

Hon. Fred Upton, a Representative in Congress from the State of Michigan, 

opening statement ................................................................................................ 5 

Prepared statement .......................................................................................... 6 

Hon. Henry A. Waxman, a Representative in Congress from the State of 

California, opening statement ............................................................................. 7 

WITNESSES

Cheryl A. LaFleur, Acting Chairman, Federal Energy Regulatory Commission ........................................................................................................................ 8 

Prepared statement .......................................................................................... 10 

Answers to submitted questions ...................................................................... 78 

Philip D. Moeller, Commissioner, Federal Energy Regulatory Commission ...... 15 

Prepared statement .......................................................................................... 17 

Answers to submitted questions ...................................................................... 114 

John R. Norris, Commissioner, Federal Energy Regulatory Commission .......... 22 

Prepared statement .......................................................................................... 24 

Answers to submitted questions ...................................................................... 125 

Tony Clark, Commissioner, Federal Energy Regulatory Commission ................ 34 

Prepared statement .......................................................................................... 36 

Answers to submitted questions ...................................................................... 134 

SUBMITTED MATERIAL

Statement, dated December 4, 2013, of the American Public Power Association, submitted by Mr. Whitfield ........................................................................ 74 

(1) 

EVALUATING THE ROLE OF FERC IN A 

CHANGING ENERGY LANDSCAPE 

THURSDAY, DECEMBER 5, 2013 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON ENERGY AND POWER, COMMITTEE ON ENERGY AND COMMERCE, Washington, DC. 

The subcommittee met, pursuant to call, at 9:34 a.m., in room 

2123, Rayburn House Office Building, Hon. Ed Whitfield (chairman 

of the subcommittee) presiding. 

Members present: Representatives Whitfield, Hall, Shimkus, 

Pitts, Terry, Burgess, Latta, Olson, McKinley, Gardner, Kinzinger, 

Griffith, Barton, Upton (ex officio), McNerney, Tonko, Engel, 

Green, Barrow, Matsui, Christensen, Castor, and Waxman (ex officio). 

Staff present: Nick Abraham, Legislative Clerk; Charlotte Baker, 

Press Secretary; Ray Baum, Senior Policy Advisor/Director of Coalitions; Sean Bonyun, Communications Director; Allison Busbee, Policy Coordinator, Energy and Power; Patrick Currier, Counsel, Energy and Power; Tom Hassenboehler, Chief Counsel, Energy and 

Power; Jason Knox, Counsel, Energy and Power; Ben Lieberman, 

Counsel, Energy and Power; Brandon Mooney, Professional Staff 

Member; Chris Sarley, Policy Coordinator, Environment and the 

Economy; Tom Wilbur, Digital Media Advisor; Jeff Baran, Democratic Senior Counsel; Greg Dotson, Democratic Staff Director, Energy and the Environment; Caitlin Haberman, Democratic Policy 

Analyst; Elizabeth Letter, Democratic Press Secretary. 

OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH OF KENTUCKY 

Mr. WHITFIELD. I would like to call the hearing to order this 

morning. We are going to be evaluating the role of FERC in a 

changing energy landscape. And I am delighted that the Commissioners of FERC are with us today. We appreciate very much your 

being here. I certainly initially would like to congratulate Cheryl 

LaFleur, who has been appointed the Acting Chair of FERC. 

And I enjoyed our meeting yesterday, Ms. LaFleur, and we look 

forward to working with you on the many issues facing our country 

as we adjust to this changing landscape that we all are very much 

involved in. 

I would say that I think the transcending issue that sort of encompasses everything that we are talking about today does relate 

to the changing landscape of energy in America. With this lowVerDate Aug 31 2005 11:39 May 30, 2014 Jkt 037690 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 F:\113-10~1\113-10~1 WAYNE
2 

priced natural gas we see a transformation from coal to natural 

gas. Many States, and this administration particularly, are being 

very aggressive in trying to increase the amount of electricity produced from renewables as they try to address climate change. 

And I would say that as we move forward, and I think you all 

particularly have to be sensitive to this, is that frequently many 

people in the administration and other groups point to Europe as 

a model for America. And yet in Europe 22 percent of electricity is 

now being produced from renewables. They have an overcapacity of 

electricity in Europe. And as a result they have very low wholesale 

prices, which is good, but their residential rates and their manufacturing rates are the highest in the world because of renewable surcharges. 

And so what is happening over there is they are trying to make 

this transition too quickly, in my view, and that is what people are 

trying to do in America as well. But what is happening over there 

is that the utilities, the baseload utilities have lost, like, $800 million in market valuation over the last 15 months or so. And so as 

you go to renewables and you have to place more emphasis on distribution at the local levels, there is not enough capital in the utility industry there to meet those needs. And so they have a real 

conflict in Europe right now. 

And interestingly enough, they have mothballed 30 gigawatts of 

plants producing electricity from natural gas in Europe because of 

the high cost of natural gas coming out of Russia, and we had our 

largest export market of coal last year in recent memory and the 

Europeans took 45 percent of that, because when Germany closed 

down their nuclear power plants, they realized—and other countries over there realized—they have to use some coal. 

And so this administration, who talks all the time about all-ofthe-above policy, is in effect in their greenhouse gas rules going to 

prohibit even the option of building a new coal-powered plant in 

the future. So if we are going to talk about an all-of-the-above policy and say that is our policy, then that should be the policy. 

And so we have introduced legislation. We don’t expect anybody 

to build a new coal-powered plant right now with natural gas 

prices this low, but in the future, like in Europe what they are discovering, it should be an option. And so I look forward to the testimony of the Commissioners today to get some of their views on the 

many challenges facing us. 

And I look forward to your comments, Mr. Norris. I know you 

made a comment recently in a smart grid conference in November 

about your personal view is we don’t really maybe need anymore 

infrastructure for natural gas and fossil fuels. I may be wrong, but 

I think you made that comment. And many of us would disagree 

with that, particularly with the additional fields that we have. And 

the Northeast talks to us all the time about not having the infrastructure to get the gas to where it needs to be. 

But we all recognize that we have a lot of challenges, and we 

can’t meet those challenges unless we work together to meet them. 

And we are going to continue to provide an alternative view to this 

administration, particularly in the area of energy, where we think 

that there are serious disagreements and with dire consequences 

that are possible. 

3 

[The prepared statement of Mr. Whitfield follows:] 

PREPARED STATEMENT OF HON. ED WHITFIELD

Today’s hearing is entitled, ‘‘Evaluating the Role of FERC in a Changing Energy 

Landscape.’’ Let me begin by first expressing my congratulations to the Honorable 

Cheryl LaFleur, who was recently named Acting FERC Chairman. Welcome Chairman LaFleur, and welcome to the other Commissioners. 

Today provides us the opportunity to consider the legal and regulatory authorities 

of the Federal Energy Regulatory Commission (FERC) and evaluate the manner in 

which FERC carries out its statutory duties under the Federal Power Act, the Natural Gas Act, and other authorities. FERC is tasked with regulating the interstate 

transmission of natural gas, oil, and electricity. FERC also is responsible for evaluating proposals to build LNG terminals and interstate natural gas pipelines, as well 

as the licensing of nonfederal hydropower projects. FERC also oversees the reliability of the electric grid. 

The reliability of the grid is of particular interest to me given the dramatic shift 

we are experiencing in the electric generation portfolio. Much of this shift has been 

driven by the vast amounts of natural gas that are being developed. But this shift 

also is being driven in large part by the EPA’s new and proposed regulations aimed 

at prohibiting the use of coal to produce electricity. So I have serious concerns regarding how the president’s policies directly aimed at trying to bankrupt the coal 

industry will impact grid reliability, fuel diversity, and electricity prices for families 

and businesses. Given FERC’s role in overseeing the reliability of the grid, I am 

very interested in understanding what impacts FERC believes will result from the 

elimination of a significant portion of affordable and reliable baseload generation. 

I am also concerned with FERC’s implementation of Order No. 1000—FERC’s rule 

on Federaltransmission planning and cost allocation. Some of FERC’s initial compliance orders conflict with FERC’s statements before this subcommittee that it would 

be flexible and respect regional differences while implementing Order 1000. And I 

continue to have concerns that Order 1000 will, to the detriment of ratepayers, 

allow for the broad socialization of costs to pay for transmission lines that will carry 

expensive wind energy to load centers, even when the economic or reliability benefits will be minimal. 

Finally, with respect to organized wholesale electricity markets, the committee 

stands ready to work with FERC as it continues to examine ways to improve the 

functioning of such markets to ensure consumers will continue to receive reliable 

electricity at affordable rates. 

The sectors and industries regulated by FERC comprise a substantial portion of 

the U.S. economy and infrastructure, so it is critical that FERC carry out its statutory duties independently and effectively, and do so in a manner that will help facilitate our new era of energy abundance. 

Mr. WHITFIELD. So with that, at this time I would like to recognize the gentleman from California, Mr. McNerney, for his 5- 

minute opening statement. 

OPENING STATEMENT OF HON. JERRY MCNERNEY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. MCNERNEY. I certainly thank the chairman for calling this 

hearing today, and it is an real opportunity for us to have all the 

Commissioners in front of us. So I want to thank you for coming 

out here today. This is an area that I have a lot of passion for and 

a good background in. 

As we know, FERC has broad jurisdiction over the electricity and 

natural gas markets, such as setting electricity and transmission 

rates, overseeing regional transition organizations, such as the one 

we have in California. It is now time to make some important decisions about our Nation’s energy infrastructure and FERC will be 

an essential component of that decision-making process. 

4 

Efforts to increase renewable energy production, growth of natural gas, and the need to ensure a secure grid will all be critical 

issues. In fact, there is no shortage of issues to discuss, including 

what defines the public interest with natural gas exports, licensing 

LNG export facilities, licensing natural gas pipelines, smart grid 

innovation, renewable energy, to name only a few. 

States such as California are implementing aggressive renewable 

portfolio standards, and there is a need to ensure grid stability. It 

is becoming increasingly important that we have an energy infrastructure that is capable of meeting these demands. 

Our energy infrastructure needs cyber and physical protections. 

Threats to our grid are real, and transitioning to smart grids presents both an opportunity and a threat to grid security. The Energy 

Policy Act of 2005 made significant progress, providing FERC with 

the authority to oversee power grid and to establish critical infrastructure protections. However, more needs to be done to protect 

the grid. The Energy Policy Act focused on bulk power systems, 

which can exclude some transmission local distribution and other 

grid facilities. 

I think it is worth exploring FERC’s role in the grid, an area of 

increasing innovation and technical developments. These are areas 

which we can improve upon, such as response during emergency 

situations and addressing potential improvements to critical grid 

infrastructure protection initiatives. 

FERC’s coordination with the North American Electric Reliability Corporation—a little bit of an mouthful there—or NERC, regarding standards and reliability, such as those related to 

cybersecurity, remain a high priority for me. 

Lastly, we must analyze these challenges in the context of climate change, a serious threat to our Nation on several levels that 

has been acknowledged by scientists as well as leaders at the Pentagon. Combined, these issues will dictate how we are able to manage and respond to rapidly changing energy technology, as well as 

managing supply and demand in the markets. 

At this point, I would like to yield to my colleague from Texas, 

Mr. Green. 

OPENING STATEMENT OF HON. GENE GREEN, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. GREEN. Thank you Mr. Chairman, and thank my ranking 

member for yielding to me and allowing me to speak. 

Today, our witnesses will discuss issues that face our country 

now and in the future, including grid security, gas-electric coordination, electricity transmission and infrastructure permitting. 

It is important to note that Texas is the face of the changing energy landscape. In Texas we have demand for energy that is growing exponentially. We have grid issues that threaten our economic 

growth, we have infrastructure needs for market delivery and 

power generation. We must coordinate and balance all these challenges with the resources necessary to overcome them. Wind power 

and natural gas offer Texas a way to clear all these obstacles. 

Additionally, our domestic supplies allow us to meet not only our 

challenges, but those of our neighbors. But this, too, must be addressed correctly. 

5 

Last month, we held a hearing on H.R. 3301, the North American Energy Infrastructure Act. At the hearing, FERC was concerned about H.R. 3301 with the effect of their ability to comply 

with section 3 and section 7 of the Natural Gas Act. I think after 

initial misreadings, we want to emphasize that FERC’s section 3 

and section 7 authority remain in place. In fact, H.R. 3301 provides 

FERC additional authority by eliminating the Presidential permit 

process, creating a regulatory structure within the Commission, 

and gives FERC the ability to approve the import or export of natural gas across national boundaries. 

I think many members of this subcommittee have confidence in 

FERC’s pipeline permitting ability, and H.R. 3301 is an example of 

that. And I look forward to discussing all these issues today at the 

hearing, and thank our witnesses for being here, and again thank 

my ranking member for yielding to me. I yield back my time. 

Mr. WHITFIELD. The gentleman yields back. 

At this time I recognize the chairman of the full committee, Mr. 

Upton of Michigan, for 5 minutes. 

OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN 

Mr. UPTON. Well, thank you Mr. Chairman. 

America’s energy picture is rapidly changing and America’s energy regulators have got to keep pace. Long held beliefs in American energy scarcity have given way to a new era of energy abundance, especially in regards to oil and natural gas, but many policies and attitudes are still rooted in the outdated assumptions of 

shortages and rising imports, with the potential to obstruct the opportunities before us, and FERC is in the middle of many of those 

debates. 

For example, America’s new abundance of oil and natural gas requires new infrastructure to meet demands and keep prices affordable. And we have got to build this architecture of abundance 

quickly, given that America’s oil and gas output has been rising 

every year and is straining the existing infrastructure. 

But nearly every new project is met with stiff resistance at every 

step of the process. Opponents are enabled by an archaic Federal 

regulatory process that can be manipulated to cause years of delays 

for pipelines, power lines, LNG export projects, and in some cases 

can block them outright. And while the process at FERC generally 

works well, there is always room for improvement. 

Canada, Australia, and most EU nations have deadlines for their 

environmental regulatory agencies to act. Why shouldn’t the U.S. 

hold our agencies to a similar standard? 

Congress has been active to keep pace with the new energy landscape. The House recently passed H.R. 1900, a bipartisan bill that 

creates more accountability for the natural gas pipeline approval 

process. We will soon be considering other infrastructure projects 

as well, including a bill that I have coauthored with my friend 

Gene Green to bring more certainty to energy projects that cross 

our border with Canada or Mexico to help create a more robust and 

self-sufficient North American energy market. 

American energy holds tremendous potential for millions of jobs 

and for affordable energy prices for everyone from homeowners to 

6 

small businesses, certainly to manufacturers, too. And the U.S. is 

always the proud global leader in the safe and responsible development of our resources. The prospect of LNG exports not only means 

jobs in the U.S., but also means improved relations with our allies 

and trading partners and enhanced standing around the globe. But 

none of these benefits can be achieved if America’s energy is 

choked off by red tape, which is precisely why we are examining 

the uncertain FERC policies today. 

I look forward to working with the Acting Chair and all of the 

Commissioners before the committee. I look forward to a constructive and productive dialogue and process as we move into next year 

and the years beyond. 

And I would yield time—anyone to our side needing time? If not, 

I yield back the balance of my time. 

[The prepared statement of Mr. Upton follows:] 

PREPARED STATEMENT OF HON. FRED UPTON

America’s energy picture is rapidly changing, and America’s energy regulators 

must keep pace. Long-held beliefs in American energy scarcity have given way to 

a new era of energy abundance, especially in regards to oil and natural gas. But 

many policies and attitudes are still rooted in the outdated assumptions of shortages 

and rising imports, with the potential to obstruct the opportunities before us. And 

FERC is in the middle of many of these debates. 

For example, America’s new abundance of oil and natural gas requires new infrastructure to meet demands and keep prices affordable. And we must build this architecture of abundance quickly, given that America’s oil and gas output has been 

rising each year and is straining the existing infrastructure. 

But nearly every new project is met with stiff resistance at every step of the process. Opponents are enabled by an archaic Federal regulatory process that can be 

manipulated to cause years of delays for pipeline, power line, and LNG export 

projects, and in some cases can block them outright. While the process at FERC 

generally works well, there is room for improvement. Canada, Australia, and most 

European Union nations have deadlines for their environmental regulatory agencies 

to act; why shouldn’t the U.S. hold our agencies to a similar standard? 

Congress has been active to keep pace with the new energy landscape. The House 

recently passed H.R. 1900, a bipartisan bill that creates more accountability for the 

natural gas pipeline approval process. We will soon be considering other infrastructure measures as well, including a bill I have co-authored with Gene Green to bring 

more certainty to energy projects that cross our border with Canada or Mexico to 

help create a more robust and self-sufficient North American energy market. 

American energy holds tremendous potential—for millions of jobs and for affordable energy prices for everyone from homeowners to small businesses to manufacturers. The U.S. is also the proud global leader in the safe and responsible development of our resources. The prospect of LNG exports not only means jobs in the U.S., 

but it also means improved relations with our allies and trading partners and enhanced standing around the world. 

But none of these benefits can be achieved if America’s energy is choked off by 

red tape, which is precisely why we are examining certain FERC policies today. 

I look forward to working with the commission and welcome Acting Chairwoman 

LaFleur and all of the Commissioners before the committee. I look forward to a constructive dialogue and process as we move into 2014 and the years ahead. 

Mr. WHITFIELD. The chairman yields back the balance of his 

time. 

At this time, I recognize the gentleman from California, Mr. 

Waxman, for 5 minutes. 

7 

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. WAXMAN. Thank you very much, Mr. Chairman. 

I would like to thank each of the Commissioners for being here 

today, and I want to congratulate Ms. LaFleur on her new role as 

Acting Chairman. 

The Federal Energy Regulatory Commission has a broad range 

of important issues before it, from renewable energy integration 

and electric transmission modernization to hydropower licensing 

and enforcement actions to prevent energy market manipulation. 

But I want to focus on an issue that has not gotten enough attention during this Congress, and that is grid security. 

The Nation’s critical infrastructure and defense installations simply cannot function without electricity. Yet, it is clear that the electric grid is not adequately protected from physical or cyber attacks. 

And these are not theoretical concerns. Just this April, there was 

an actual attack on our electricity infrastructure. This was an unprecedented and sophisticated attack on an electric grid substation 

using military-style weapons for the attack. Communications were 

disrupted. The attack inflicted substantial damage. It took weeks 

to replace damaged parts. 

Under slightly different conditions, there could have been a serious power outage or worse, and the FBI and others are investigating this attack. So as not to harm any ongoing investigation, 

I won’t disclose details of the incident, but I have been in touch 

with the FBI, and they are willing to provide the members of this 

committee with a briefing on the very real threat that attacks like 

this pose to our critical infrastructure. And I hope the chairman 

will work with me to get that briefing scheduled quickly so that 

members can get the facts. 

The April attack is hardly the only threat facing the grid. A few 

months ago in Arkansas there were multiple attacks on power lines 

and grid infrastructure that led to millions of dollars in damage 

and brief power outages. Independent engineers also recently discovered a new cyber vulnerability in the software used by many 

electric grid control systems. 

We rely on an industry organization to develop reliability standards for the electric grid through a protracted, consensus-based 

process. FERC lacks authority to directly address these threats and 

vulnerabilities. And that is incredible. FERC lacks the authority to 

address these threats. Congress needs to fix this gap in regulatory 

authority. 

In 2010, the bipartisan GRID Act would have provided FERC 

with the necessary authority. There was a bipartisan consensus 

that national security required us to act. That bill was reported out 

of the Energy and Commerce Committee by a vote of 47–0, and 

then it passed the full House by voice vote. However, the Senate 

did not act on this legislation. 

Mr. Chairman, we have worked on this issue in a bipartisan way 

in the past and we should be able to do so again. We need to give 

FERC important new authorities like the authority to take action 

to protect the grid in emergencies. This is a national security issue 

8 

that deserves our attention. We should act now while there is still 

time to protect against successful attacks. 

Thank you, Mr. Chairman, for this chance to make the opening 

statement. I look forward to the testimony of the members of the 

Regulatory Commission and to an opportunity to engage them in 

questions. Yield back my time. Any other member on our side wishes me to yield a minute? No. Yield back. 

Mr. WHITFIELD. The gentleman yields back. So that concludes 

the opening statements. So at this time I would be recognizing each 

one of you for your 5-minute opening statement. And all of you are 

skilled witnesses and you know that our little lights, red, yellow, 

and green, what they mean. So the only reason I mention that is 

that we are expecting some votes on the floor sometime this morning, and I am hoping that we will have an opportunity to go way 

down the road before that happens. 

So, Ms. LaFleur, you are recognized for 5 minutes for an opening 

statement. Thank you. 

STATEMENTS OF CHERYL A. LAFLEUR, ACTING CHAIRMAN, 

FEDERAL ENERGY REGULATORY COMMISSION; PHILIP D. 

MOELLER, COMMISSIONER, FEDERAL ENERGY REGULATORY COMMISSION; JOHN R. NORRIS, COMMISSIONER, 

FEDERAL ENERGY REGULATORY COMMISSION; AND TONY 

CLARK, COMMISSIONER, FEDERAL ENERGY REGULATORY 

COMMISSION 

STATEMENT OF CHERYL A. LAFLEUR 

Ms. LAFLEUR. Well, thank you very much, Chairman Whitfield, 

Ranking Member McNerney, and members of the subcommittee. 

My name is Cheryl LaFleur. For 3–1/2 years I have had the privilege of serving as a Commissioner on the Federal Energy Regulatory Commission, and I have appeared before this subcommittee 

previously in that capacity. 

Today, I appear before you as the Commission’s Acting Chairman, an appointment I received just 10 days ago. Thank you for 

your good wishes, and I look forward to working with my colleagues and the wonderful employees at FERC in my new role. 

Thank you for holding this hearing today. My colleagues and I 

appreciate the attention you give to your oversight duties and the 

opportunity to share our work with you. I am honored to lead the 

Commission at a time when our Nation is making substantial 

changes in its power supply and its associated infrastructure to 

meet environmental challenges and improve reliability and security. 

In particular, as you noted, we are seeing significant growth in 

the use of natural gas for electric generation due to the increased 

availability and affordability of domestic natural gas, and to the 

relative environmental advantages and flexible operating characteristics of gasgeneration. And that is, I think, a significant advantage we have over Europe with the abundance of domestic natural 

gas to balance our renewable resources. 

The second driver of change is the tremendous growth of renewable and demand side resources, which is being fostered by developments in technology and by policy initiatives in 39 States and at 

9 

the Federal level. Finally, new environmental regulations are also 

contributing to changes in power supply. 

Although the drivers of power supply changes are largely outside 

the Commission’s jurisdiction, we must be aware of and adapt to 

these developments to carry out our responsibilities to ensure just 

and reasonable rates, a reliable power grid, and fair and efficient 

electric and gas markets. My colleagues will discuss several of the 

ways we are responding. We divided up these topics, and I want 

to focus the balance of my testimony on another critical aspect of 

our work, reliability and grid security. 

Ensuring reliability means that the Commission and NERC, our 

electric reliability organization, really take care of two things. One 

is the day-to-day, nuts-and-bolts activities, like trimming tress and 

setting relays to keep the lights on, emergency response. And the 

second is emerging issues, like cybersecurity. I believe we are making progress on both fronts. In the past 3 years, we voted out numerous orders on the day-to-day type standards of tree trimming, 

frequency response, planning criteria, and so forth, and we hear 

from NERC that they are seeing a reduction in transmission-related outages in the grid as opposed to previous years. Going forward, we very much have to build on that progress. 

The emerging issues are somewhat different because we have to 

try to set standards in an environment of incomplete information. 

We don’t have the benefit of decades of experience, and we know 

the challenges are evolving. But it is still incumbent on us to try 

to develop meaningful, cost-effective regulation that we can enforce 

in an environment of imperfect knowledge. 

Two weeks ago, the Commission approved Version 5 of the Critical Infrastructure Protection Standards that cover the bulk electric 

grid against cybersecurity incidents. They are not perfect. We did 

ask some questions as we approved them, things that we wanted 

modified, but they represent a substantial step forward from the 

protections that were in place before. 

We have also started a rulemaking to require standards to protect against geomagnetic disturbances that can be caused by solar 

storms and human actions, a real example of high-impact, low-frequency threats to reliability that we need to get ready for before 

they happen. 

Finally, I want to touch on the subject that Congressman Waxman raised, the physical security of the assets that make up the 

grid, protecting them from tampering, vandalism, and sabotage. In 

general, our approach in this area has been based on cooperative 

efforts with industry and with other government agencies—DHS, 

FBI, DOE, and so forth—to try to develop best practices and communicate with industry to make sure they are implementing those 

best practices. 

Thank you very much for the opportunity to be here today, and 

I look forward to your questions on any aspects of the Commission’s work. Thank you. 

[The prepared statement of Ms. LaFleur follows:] 

10 


88048.001
11 


88048.002
12 


88048.003
13 


88048.004
14 


88048.005
15 

Mr. WHITFIELD. Thank you, Ms. LaFleur. 

And, Mr. Moeller, you are recognized for 5 minutes. 

STATEMENT OF PHILIP D. MOELLER 

Mr. MOELLER. Well, thank you, Chairman Whitfield, Ranking 

Member McNerney, members of the committee. Thank you for having us back for this valuable oversight role that you undertake for 

the Federal Energy Regulatory Commission. 

I am Phil Moeller. I am a sitting Commissioner. And your staff 

asked us to focus on three areas in our testimony today and add 

additional items that we thought were relevant. So I will talk 

about the three items—Order 1000, pipeline siting, hydroelectric 

siting—and add a couple of more—gas-electric coordination and 

some reliability concerns on the electric grid. 

Related to Order 1000, I was generally supportive of Order 1000 

because I felt like it would add to the certainty to build needed additional electric transmission in this country. And for the most 

part, I think it has helped particularly with the transmission planning process. It has forced a more open and arguably more accountable process. 

There were a couple of areas that I disagreed with the majority 

on. The first was how we deal with the right-of-first-refusal 

projects. This is specific to reliability projects, not those economic 

projects that reduce congestion costs or the public policy projects 

that try and promote generally renewables through transmission, 

but rather when a utility is required because of NERC standards 

to build a project to enhance reliability. I would have preferred that 

we give a very limited time of right of first refusal to the incumbent utilities because I didn’t think the litigation risk was worth 

it. And we are seeing the litigation now on that issue. Hopefully 

that will be resolved soon. 

The second area had to do with the cost allocation methods in 

the rule and the concern that, because of the regional cost-sharing 

element of it, it would force utilities or give them the incentive to, 

instead of building more regional projects, just go to local projects. 

And I think particularly in the Midwest we have seen that happen. 

But for the most part, we have several more years of Order 1000 

compliance ahead of us, we have further iterations of the 

intraregional filing, and we haven’t even tackled the interregional 

filings yet and those are going to be very complex with some major 

policy issues. So Order 1000 will be with us for a while. 

Related to hydro siting and pipeline siting, we have a lot of similar issues, and I know members of the committee have been concerned about the length of time that that has taken. But simply 

put, we are dependent on State and Federal resource agencies in 

the process to deliver their part of the analysis. And if they delay 

that, it will delay our ability to act. And I know there has been legislation to consider moving this up. There are more extensive legislative concepts out there in terms of actually giving FERC the ability to decide whether some of these conditions are in the public interest. That would take a major legislative change. But if you are 

interested we can talk about that further. 

Related to gas-electric coordination, Acting Chair LaFleur referenced this, we have been working on this now for about 22 

16 

months at the Commission. We have had a series of seven technical 

conferences. The first five were regional in nature. Then we dug 

down to a series of issues, the first set on communication, whether 

people are comfortable talking to each other in this, when there is 

typically a weather-related supply squeeze. Then we talked about 

the timing mismatch of the gas trading day and the electric trading 

day. 

I am happy to report that as a commission we issued a final rule 

on the communication protocols just last month. And I want to 

thank OMB. I don’t know who it was, but they made an effort to 

make sure that we could have a 30-day turnaround on that rule 

so that it would be effective December 23rd, before we go into the 

really tight heating season this year. So they deserve some thanks 

for that. 

On electric reliability, we do have an impending issue related to 

the effectiveness of the MATS rule, and I just want the committee 

to be aware of the fact that we are looking at potentially some pretty tight situations in the Midwest, the footprint of the Mid-Continent Independent System Operator, perhaps as early as the summer of 2015, but certainly as soon as the summer of 2016. It is 

something that I really think deserves your attention. I know that 

the MISO is working heavily with the States to try and come up 

with a solution. We are happy to let them try and solve it. 

But the time is extremely tight. They can tell you more the numbers, but we are looking at some pretty small reserve margins for 

the footprint. And recall that under the MISO agreement, they all 

share the surplus, but they also share the deficits. So if there is 

a regional deficit, the pain will be shared in terms of, frankly, rolling blackouts if it comes to that. We can hope for a cool summer 

in the summer of 2016, but that is not necessarily a prudent approach. 

So with that, I am happy to answer any questions at the appropriate time. 

[The prepared statement of Mr. Moeller follows:] 

17 


88048.006
18 


88048.007
19 


88048.008
20 


88048.009
21 


88048.010
22 

Mr. WHITFIELD. Thank you Mr. Moeller. 

And our next witness is Mr. John Norris. 

And you are recognized for 5 minutes, Mr. Norris. 

STATEMENT OF JOHN R. NORRIS 

Mr. NORRIS. Good morning, Chairman Whitfield, Ranking Member McNerney, and members of the subcommittee. Thank you for 

holding this hearing and the opportunity to testify. 

As I acknowledge in my written testimony, there is significant 

change occurring on our energy landscape. The operation of our energy system in America has experienced, in my view, only modest, 

incremental change over the last many decades. Yet in recent 

years, the rapid development of new technologies is bringing much 

more rapid change to the system. That change can be disruptive. 

But I think embracing these changes will allow for a much more 

efficient utilization of our energy resources. 

The challenge before us, I believe, is to enable our system to be 

more efficient through the utilization of new technologies and foster the development of a diverse set of competitive energy resources, while at the same time ensure we have a reliable supply 

of power at just and reasonable rates for consumers. 

As a result of the development of fracking technology, we are experiencing an abundant supply of natural gas and resulting gas 

prices at their lowest since 2002. This new supply of gas is changing the economics of electric generation, resulting in the retirement 

of older and less efficient coal units and most recently some nuclear 

plants. 

The new generation being built to replace these units is primarily combined cycle gas plants, wind, and solar generation. This 

recent trend appears likely to continue. This change in our generation mix has been driven by a significant degree by the economics 

around low-priced gas and the development of more efficient and 

productive wind turbines and solar panels. The other drivers are 

little to no load growth, public policies such as renewable portfolio 

standards, compliance with EPA rules implementing clean air 

standards, and the development of demand side management technologies, like energy efficiency and demand response. 

At the same time change is occurring in our electric generation 

we are also experiencing significant developments in technology 

around grid operations. A large percentage of our existing transmission and distribution grid is quite old and only modest technology enhancements have been made in nearly a century of operations. That system is being replaced by a grid, most commonly referred to as the smart grid, that is opening up multiple opportunities for more efficient utilization of our energy resources and expanding the marketplace for electricity to a vast new supply of diverse energy resources. 

One of FERC’s recent focuses has been the adjustment of market 

rules and regulations to ensure that all resources, including new 

technologies, are able to compete in our energy market and our energy system. The continued investment in new technology and jobs 

in energy production and management of our energy consumption 

is critical for maintaining a competitive energy economy and efficient utilization of our resources. As our energy system changes, 

23 

providing stability, market access, and fair regulatory treatment is 

critical to maintaining continued investment in our energy infrastructure. 

My written testimony covers several recent actions that FERC 

has taken that reflect our efforts to make adjustments around 

these new technologies and resources. I will be happy to answer 

any questions you may have about these FERC actions, other 

FERC actions, and to help you in your oversight responsibilities of 

our agency. 

Thank you very much. 

[The prepared statement of Mr. Norris follows:] 

24 


88048.011
25 


88048.012
26 


88048.013
27 


88048.014
28 


88048.015
29 


88048.016
30 


88048.017
31 


88048.018
32 


88048.019
33 


88048.020
34 

Mr. WHITFIELD. Thank you, Mr. Norris. 

And our next witness, of course, is Mr. Clark. 

And, Mr. Clark, you are now recognized for 5 minutes. 

STATEMENT OF TONY CLARK 

Mr. CLARK. Thank you, Mr. Chairman, Mr. Ranking Member, 

and members of the committee. My name is Tony Clark. I am the 

newest member of FERC. I have had the opportunity to speak before you in a previous job, but this is my first opportunity as a 

member of the FERC. So thank you for the invitation to be here 

with you here today. 

In my opinion, and, Mr. Chairman, this is something you referenced, the biggest story in energy today is the revolution that is 

taking place in shale gas and shale oil, probably the biggest story 

in decades. And this flood of domestic gas has really upended utility planning models and market fundamentals. Gas at the sustained prices that we are seeing now today is dramatically impacting where utilities are putting their money in the build-out of the 

grid. 

As an example, in 1990 coal was responsible for about 53 percent 

of the electricity that was produced, with natural gas producing 

just 13 percent. EIA is projecting that by 2040, 35 percent of electricity will come from coal and 30 percent from natural gas. But 

I would note, however, that predicting these sorts of things is highly speculative. We know that there is some pending rulemakings 

by the EPA, and depending on how those come out it could have 

a dramatic impact on how these futures play out. 

Such nationwide projections also tend to gloss over the very highly regional nature of our energy and electricity grid. Some regions 

of the country, such as the central Appalachia, the South, are much 

more heavily dependent on coal than others, such as New England 

and the Northwest, and so the implications of fuel switch has a 

much different impact depending on where you live. 

The Commission is heavily engaged in the work of assessing 

these fuel mix changes and responding to the regional implications 

of it. For example, FERC has undergone significant efforts with regard to the implications of gas-electricity interdependency that 

Commissioner Moeller mentioned as more electricity generators simultaneously turn towards natural gas as a fuel source. This effort 

is important nationwide, but it is particularly crucial for a region 

like New England where a number of factors, including geography 

and State-level policy choices, have created an electricity delivery 

network that is very dependent on a constrained supply of natural 

gas. 

The analysis takes on a different shade in other regions of the 

country. For example, in my home region of the Midwest coal has 

traditionally been the primary source of electricity, but today a 

combination of affordable shale gas and impending EPA regulations is creating a situation where there are increasing concerns 

about reserve margins and supply adequacy, as Commissioner 

Moeller noted, especially as we get into that 2015, 2016 timeframe, 

and it is something we are paying close attention to and I know 

the committee is as well. Nonetheless, under any scenario, it is 

35 

clear that gas will play a much bigger role in the future than it 

has in the past. 

As you might expect, the shale revolution, in both liquids and 

natural gas production, is having a tremendous impact on the work 

of FERC itself. As the committee is aware, the FERC has broad 

oversight of both economic and siting regulation of the natural gas 

pipeline industry. In recent years, the Commission has seen a shift 

in this type of work as industry responds to the burgeoning shale 

plays. Shale gas basins have seen significant pipeline investment. 

Shale basin pipeline projects that are either in service or in some 

part of the permitting process at FERC total now over 3,400 miles 

of pipe, delivering over 31,000 MMcf per day of capacity with a 

total investment of over $18 billion. 

This large amount of natural gas in the U.S. is also creating an 

impetus for something that was nearly unimaginable 10 or 15 

years ago, which is LNG export applications as opposed to import 

terminals, and this is the area of significant increase for the Commission’s workload. Presently, the FERC has 13 proposed LNG export terminals and 3 LNG import terminals in some phase of the 

permitting process. And as you would expect, these are major investments and the reviews are quite extensive. 

Given the influx of natural gas siting work, I believe the FERC 

must continually assess our staffing levels and priorities to ensure 

that we task enough resources to process these projects in a timely 

and thorough manner. In addition, while the FERC has no control 

over other Federal agencies that inform our siting process, I would 

encourage them to help us by also doing what they can to be timely 

in their assessment work. 

Mr. Chairman, with that, I will conclude my testimony. And I 

touched on a few things, but of course I would be happy to answer 

any questions that you or the committee members may have. 

[The prepared statement of Mr. Clark follows:] 

36 


88048.021
37 


88048.022
38 


88048.023
39 


88048.024
40 


88048.025
41 


88048.026
42 


88048.027
43 

Mr. WHITFIELD. Thank you Mr. Clark. 

And thank all of you for your opening statements. And at this 

time, we would like the opportunity to ask you some questions, and 

I would like to recognize myself for 5 minutes to get started. 

Mr. Clark, you mentioned the difficulty in trying to forecast the 

future. And I might add that last year EPA projected that less than 

10 gigawatts of the Nation’s coal-fired generation would retire by 

2015 as a result of utility MACT. It is not quite 2014, and already 

announcements have been made to close 50 gigawatts of coal-fired 

plants because of these EPA regulations and low natural gas 

prices. 

One of your missions is reliability, and there has been a lot of 

discussion about EPA, whether or not they take that into consideration and the communication and dialogue between FERC and 

EPA on reliability issues. Do any of you have any concerns? These 

plants have been announced they are closing, 50 gigawatts, that is 

a lot, but they are not going to be closed for, you know, maybe another year or so. We will start with you, Mr. Clark, to address that 

issue briefly, and then I would like to just go down the line. 

Mr. CLARK. Sure. Mr. Chairman, the greatest concern, as we 

have indicated a couple of times already this morning, is probably 

in the Midwest, the Mid-Continent ISO, MISO, where they are projecting that by the 2016 timeframe they are likely to have a shortfall of somewhere in the neighborhood of 7.5 gigawatts of where 

they would like to be in terms of reserve capacity. That is a projected number. They are almost certain that there is going to be 

a shortage of at least a little over 2 gigawatts. So that is the concern in that region. There are concerns in other regions, but probably most acute in the Midwest. 

From my perspective, where I would like to see the FERC go is 

to maintain its independence as an independent regulatory agency, 

provide what information that we can through the resources that 

we have through our own modeling efforts to provide information 

to all of you, as well as the rest of the Federal Government, so they 

can understand the implications of different policy choices that 

may be made. 

Mr. WHITFIELD. Thank you. 

Mr. Norris, do you have a comment on that. 

Mr. NORRIS. Certainly, yes. I think Commissioner Clark, I share 

his concerns, the concerns that Mr. Moeller shared you with about 

MISO, particularly in the Midwest region. And it could be up to 7 

gigawatts, it could be 8.5. They could be in 2016 looking at an 8.5 

percent reserve margin. So absolutely I am concerned about that. 

Mr. WHITFIELD. Thank you. 

Mr. MOELLER. 

Mr. MOELLER. Well, I remain concerned. I testified before this 

committee on the same subject. Remember that MATS takes effect 

April 16, 2015. We will talk a lot about the fourth year, but the 

fourth year is only for those plants that are going to retrofit. So if 

you have got a marginal plant that can’t afford to retrofit, it is 

going to be shut down in roughly about 15 months. And so extremely concerned, mostly the Midwest, but we even had some 

issues in September in PJM. It was shoulder season. We are going 

44 

to have to be watching this very closely. And I think we are hoping 

that the EPA will be watching it with our help, as well. 

Mr. WHITFIELD. And Ms. LaFleur. 

Ms. LAFLEUR. Well, thank you. As you can tell, this is an issue 

we have been very engaged in. For the past 2 years Commissioner 

Moeller and I have cochaired a forum with the State regulators at 

NARUC on this very issue, and the EPA has come to every single 

one of our meetings and discussed some of the issues—how compliance is going, how supply chain issues are going and so forth. 

I would say over most of the country I think MATS compliance 

is well underway. A tremendous amount of construction work is 

going on right now. There is no question the most significant issues 

are in the Midwest due to a variety of factors. And in addition to 

relying on the Mid-Continent ISO and the States, we need to stay 

closely involved. 

Mr. WHITFIELD. Do you feel like EPA is actually listening to you 

on these reliability issues? 

Ms. LAFLEUR. I do because in 2011 when they put out their rule, 

they included a consultative role for FERC if somebody needs a 

fifth year. And I believe that includes not just a fifth year for the 

retrofit, and not just for retrofits, but also if they need a fifth year 

to bring transmission in before a plant can retire. And we voted out 

a policy statement of how we would handle those. We haven’t gotten them yet because it is not far enough along in the process. 

Mr. WHITFIELD. Well, they tell us they are listening to us a lot 

and sometimes we don’t think they are. But our views may be different. 

Ms. LAFLEUR. Well, I have been very grateful that they come to 

all the NARUC meetings and I have a commitment from them that 

they will continue. But it is something that needs close vigilance. 

Mr. WHITFIELD. All right. I was going to ask you about your priorities. I felt like Mr. Wellinghoff’s agenda at FERC was basically 

coinciding with the administration’s energy policy, but maybe we 

will have an opportunity to talk later about that. 

At this time, my time has expired, I would like to recognize the 

gentleman from California for 5 minutes, Mr. McNerney. 

Mr. MCNERNEY. Thank you, Mr. Chairman. 

One of the things I mentioned in my opening statement was 

cybersecurity, and I know that that is also an issue that is very important to Mr. Waxman. The thing is that smart grid gives us a 

tremendous opportunity to gather information so that we can become more reliable, so that we can predict grid behavior, and gives 

us an opportunity to deliver renewable energy reliably and so on. 

But it gives the utility companies a tremendous amount of information about individual users, it opens up grids, utility companies for 

cyberattacks, and so on. 

Ms. LaFleur, you said that just 2 weeks ago the Commission 

passed, I think you said cybersecurity standards? 

Ms. LAFLEUR. Yes. 

Mr. MCNERNEY. Could you talk about that a little bit? Are those 

mandatory standards? Are they voluntary? Let’s hear a little bit 

about that. 

Ms. LAFLEUR. Well, thank you very much, Mr. Congressman. 

45 

Yes, they are mandatory standards. All of the bulk power system, along with the nuclear plants, are really the only part of our 

critical infrastructure right now that have mandatory standards. 

And what is new about the critical infrastructure standards we 

adopted 2 weeks ago, or we proposed to approve—well, we did in 

a final rule approve 2 weeks ago, I am sorry—is that for the first 

time they cover not just the super-critical assets, but all elements 

of the bulk power system receive some level of protection because, 

as you indicated, with the increasing digitization of the grid, even 

smaller assets can potentially be a problem. 

Mr. MCNERNEY. So when do those standards take effect? 

Ms. LAFLEUR. They take effect in general in 2 years, because of 

the process of getting ready, but there are standards in place now. 

The earlier generation and the new generation becomes mandatory 

on top of those standards. But there are mandatory standards already in effect. 

Mr. MCNERNEY. Mr. Norris, you mentioned that the old grid 

technology was being replaced by smart grid. How do you feel that 

process is progressing of changing the old with the new, more secure grid technology? 

Mr. NORRIS. Well, I think it is progressing at the pace of great 

new technology being developed, and then the Smart Grid Interoperability Panel working to make sure that the platform is usable 

for all those new technologies. That is the critical piece right now 

I think, is to make sure that the investment in this new technology 

is useful, it provides great opportunity for efficiency, and the addition of the cybersecurity standards will, I think, enable that to be 

a secure system. 

Mr. MCNERNEY. Mr. Moeller, you mentioned that the FERC is 

dependent upon local entities to deliver information on some of the 

pipeline siting permits. How would Federal legislation that establishes firm timelines, how would that affect the process? Would the 

States be more responsive or would it just handcuff FERC even 

further? 

Mr. MOELLER. Well, it is largely Federal agencies as well. It depends on the project of course, resource agencies, whether it is Federal, State, sometimes even local. I think the key is you can put 

in statute perhaps timelines, you could also change the statute in 

terms of our responsibilities. A lot of the times it comes down to 

management and whether, particularly the local office head, makes 

it a priority to deal with these type of projects that we need the 

input on. And we have seen a wide range of responsiveness and a 

lack of responsiveness throughout at least the Federal agencies related to this. 

Mr. MCNERNEY. So you don’t think the legislation would change 

that? 

Mr. MOELLER. Well, the legislation in terms of timelines I think 

has some positive accountability aspects. But you also have to be 

careful, as I testified before this committee earlier, that you don’t 

force a timeline that results in a no, because they will say they 

don’t have enough time to analyze. So the timelines and how they 

are administered would matter. 

Mr. MCNERNEY. Thank you. 

46 

You know, in the wake of the Enron’s fraud and California energy crisis in the early 2000s, Congress passed the antimarket regulation authority in 2005. Recently FERC had an enforcement action against JPMorgan for market manipulations in California and 

the Midwest. Would you comment on how that turned out, Chairwoman. 

Ms. LAFLEUR. Well, thank you. That is a very important part of 

our work. You gave us additional authority in 2005, and FERC has 

geared up a very, I think, capable enforcement unit headed by a 

former U.S. Attorney. 

Recently, we have voted out a number of cases either ordering 

somebody to show cause why they didn’t manipulate the market or 

actually a settlement with them in which they acknowledged a manipulation, and JPMorgan is the most prominent. Most of them relate to people taking positions in the energy market to benefit 

something in the financial market that can cause harm to other 

people in the energy market. And I think we have to continue to 

make sure that we are very vigilant that the markets are fair. 

Mr. MCNERNEY. Thank you. 

My time has expired. 

Mr. WHITFIELD. The gentleman’s time has expired. 

At this time I recognize the gentleman from Texas, Mr. Barton, 

for 5 minutes. 

Mr. BARTON. Thank you, Mr. Chairman. 

And welcome to our newest FERC Chairman. It is good to have 

you here, ma’am, and the other three Commissioners. 

I listened with interest to all four of the opening statements, and 

I was struck at the breadth of regulatory authority that the FERC 

has. It is an agency that almost no one hears about, yet its impact 

on the U.S. economy, and to some extent the world economy, is extraordinary. So it is a very important position that you four people 

hold. 

I am going to focus my questions on LNG siting. Of all the stuff 

that you folks have responsibility over, there is probably no more 

important mission that you hold today in terms of the strategic interests of the United States than siting these LNG facilities. The 

Congress gave you the authority to make the final decision, or at 

least on the permits, back in the Energy Policy Act of 2005. At the 

time we did it, we felt you were going to be using that for LNG 

imports more than LNG exports. But the fact is that between you 

and the Department of Energy, you have the ability to affect strategic interests all over the world. 

I met last evening with some officials from the Russian energy 

sector, and they are very, very aware of the impact LNG exports 

from the United States will have in markets that right now the 

Russians dominate, just as an example. I have also met recently 

with Turkey, you know, Kazakhstan, some of these countries, 

Qatar. It is just stunning how our ability to produce natural gas 

with hydraulic fracturing and horizontal drilling at the prices we 

can do it that are competitive impacts our ability to affect strategic 

interests. 

So my first question is, under law FERC and DOE have joint authority. It is not real clear how that authority, if at all, is coordinated. Madam Chairwoman, is there any ad hoc protocol with the 

47 

Department of Energy on how you review the permit process and 

how DOE interviews the—just the fact that it is in the national interest to do the exports? 

Ms. LAFLEUR. Well, thank you for the question. It is a very important part of our work. And as Commissioner Clark said, we 

have 13 substantial applications pending. 

We primarily work in our own lane, which is to review the environment and safety issues of the facilities, and DOE reviews the 

actual national interests, national security issues with the export 

of the commodity. And so I think our staffs communicate so we understand what our mutual statuses are, but we don’t actually, to 

my knowledge, actually collaborate on the cases. We do our work 

and they do their work, to my knowledge. 

Mr. BARTON. Is there any interest at the Commission’s level with 

some congressional legislative guidance on how that process should 

be coordinated, if at all? 

Ms. LAFLEUR. Well, I guess at this moment I am not aware of 

any undue delays in our process, although we would always welcome Congressional guidance if we can do it better. I know that 

there is Representative Upton’s bill that would change the—I guess 

that is really for other natural gas—that would change some of the 

import/export, and I guess I hesitate to comment on anything that 

is directed at the DOE process because I really feel the DOE 

folks—— 

Mr. BARTON. My time is about to expire. I am not trying to be 

rude at all, I promise you that. But there is a recent decision that 

the Department of Energy rejected, at least partially, an application by Freeport on exporting from their terminal, and it was a 

partial acceptance, partial denial. But they stated that since the 

permit request at FERC was for one amount of volume of natural 

gas per day that was less than what they were asking at DOE, that 

they only approved the volume that was in the application pending 

for the permit at your agency. And since these volumes, depending 

on the level of the volume, impacts the ability to finance the 

project, it seemed pretty troubling. And according to at least my 

staff’s reading, the Department of Energy doesn’t have any statutory authority to even consider a FERC proceeding under the Natural Gas Act. 

Can you comment on that? That is why I am asking about what 

the coordination protocol, if any, is, because it is obvious that DOE 

based their decision in terms of volume approval, partially on what 

your agency was doing. 

Ms. LAFLEUR. I think we dealt with or are dealing with the application that is before us in the dimensions of what we were asked 

to approve, and without reference to the fact that the DOE application was apparently for a different amount. I would be happy to 

take it back and dig into it more. I guess the question is why the 

company put in two different amounts in the two different applications. 

Mr. BARTON. My time has expired. I am not casting aspersions. 

Strategically this permitting process is something that we need to 

get right. 

Mr. WHITFIELD. The gentleman’s time has expired. 

48 

At this time I recognize the gentleman from California, Mr. Waxman, for 5 minutes. 

Mr. WAXMAN. Thank you, Mr. Chairman. 

Chairman LaFleur, I know you have focused on electric reliability and grid security during your tenure on the Commission 

and I think you are right to make that a priority. In my opening 

statement I talked about an April attack on an electric grid substation in California, and my understanding is that this was a sophisticated attack using military-style weapons. And real damage 

was done, and the consequences could have been far worse. You 

and I discussed this incident when we met yesterday. 

Chairman LaFleur, do you agree this was a serious, sophisticated 

attack on the electric grid? 

Ms. LAFLEUR. Absolutely. 

Mr. WAXMAN. Do you share FBI’s concern about publicly discussing details of the attack? 

Ms. LAFLEUR. Yes, because of the potential for copycat attacks 

if too much is disclosed. 

Mr. WAXMAN. Well, without getting into details, has anything 

like this physical attack on the electric grid ever happened in the 

United States before? 

Ms. LAFLEUR. I am not aware of an incident with the same sophistication in all of the elements. There have certainly been sabotage-type incidents. You referred to the Arkansas one and people 

cutting down towers and things. I have heard of that. But this one 

seemed a little unique to me. 

Mr. WAXMAN. Before he stepped down as Chairman, Mr. 

Wellinghoff was personally briefing officials about this attack. The 

FBI has agreed to brief members of the committee. Would you be 

willing to have FERC staff brief committee members as well? 

Ms. LAFLEUR. Yes. 

Mr. WAXMAN. Chairman LaFleur, does FERC have authority to 

directly issue standards to protect the grid from physical and cyber 

attacks? 

Ms. LAFLEUR. I believe to an extent under the 215 because there 

are physical standards for data centers and some that are part of 

the cyber standards. So we have some authority. 

Mr. WAXMAN. Do you have authority to directly issue standards? 

Ms. LAFLEUR. Well, it would have to go through the same process you referred to. We can direct the development of a standard, 

then industry develops it and files it. 

Mr. WAXMAN. Well, does FERC even have the authority to issue 

orders to a utility in a grid security emergency? 

Ms. LAFLEUR. No. That is one of the things that I think a lot of 

the legislation that has been pending has given either FERC or 

DOE: emergency authority. It is lacking now in the legislation. 

Mr. WAXMAN. So you would think that it would be appropriate 

for Congress to address this gap in authority? 

Ms. LAFLEUR. Yes. 

Mr. WAXMAN. Let me ask the other Commissioners as well. Do 

each of you agree that Congress needs to address this gap in authority? Mr. Moeller? 

49 

Mr. MOELLER. Yes, my thinking has evolved. I think because of 

the emergent nature of some of these threats it is worth a good discussion in Congress. 

Mr. WAXMAN. Thank you. 

Mr. NORRIS. 

Mr. NORRIS. Yes, I agree. Someone has got to be in charge of 

making a decision if we are under threat. 

Mr. WAXMAN. Mr. Clark. 

Mr. CLARK. I concur. 

Mr. WAXMAN. I thank you. This committee should be working in 

a bipartisan basis to ensure that FERC has the authority it needs 

to protect the grid from physical and cyber attacks. And I hope, Mr. 

Chairman, we can rebuild the bipartisan consensus we had in 2010 

on the need for legislative action. 

And I yield back the balance of my time. 

Mr. WHITFIELD. The gentleman from California yields back. 

At this time I recognize the gentleman from Illinois, Mr. 

Shimkus, for 5 minutes. 

Mr. SHIMKUS. Thank you, Mr. Chairman. 

Thank you all for coming. A lot of issues. I am going to make a 

couple of statements, then I have got a line of questioning that is 

parochial to southern Illinois. 

But, you know, the first one is, and this is based upon your testimony and some of my colleagues, shame on us if we have rolling 

blackouts in the Midwest in 2016. I mean shame on us, because it 

turns us back to a Third World country based upon not balancing 

our portfolio properly. 

And the point being is, we are always going to need big baseload 

generation. And I deal in the nuclear side. I think there is attack 

on nuclear power. We know there is attack on coal. We have got 

renewables coming in, but they are not at the levels we need to 

maintain adequate supply. And that is why the discussions that 

the chairman did on the EPA and this discussion about reliability, 

we really need your help on this because we cannot go down that 

route. 

In fact, I think there has got to be a way, we have to start talking about incentivizing major baseload, 800-megawatt to 1,600- 

megawatt facilities to make sure that they are still here because 

of the pressure that is being placed on them because of natural gas 

and EPA rules and regs. I mean, it is just a reality and we all 

know that. That is my little statement. 

Also I am chair of the Board of Visitors at West Point and I want 

to follow up with MISO on a transmission grid issue. And I was 

trying to get some information, didn’t get that done in time. 

But for the sake of clarity of my constituents in southern Illinois, 

and I am just going to make this a general question and whoever 

is most apt to be able to answer that, that would be fine. There 

is a huge transmission line project that goes from the Missouri border to the Indiana border, it comes right across the State of Illinois. 

It is called the Illinois Rivers project. 

One of the major fights has been on the route, as you can imagine. And just for the record, it is my understanding that route approval is something done with the State, specifically the Illinois 

50 

Commerce Committee, and not a FERC matter. Is that correct? Everyone is shaking their head saying correct. Thank you. 

It is going to get a lot of my constituents off my back. That is 

why I am asking these questions. 

A second major concern has been over the return on equity provisions, rate and Amron will receive for the project. Some are questioning the 12.38 percent and want to know why they receive that 

percentage regardless of how the project is conducted. Am I correct 

that the return on equity is from the MISO transmission owners 

agreement that was approved by FERC in 2003? And I am seeing 

the—— 

Ms. LAFLEUR. Yes. We have jurisdiction over the return on equity. 

Mr. SHIMKUS. Thank you. And that the return of equity would 

be applicable to all transmission owners in the region and their 

projects, not unique to Illinois Rivers Project. Is that correct? 

Ms. LAFLEUR. Yes. MISO has a region-wide return on equity. 

Mr. SHIMKUS. Great. Thank you. Lastly, there was a proceeding 

pending before FERC to re-evaluate the return on equity where interested parties were able to submit comments on the 12.38 percent return on equity rate at FERC. Can you tell me where that 

stands and what the process is at FERC for reviewing and making 

a determination on that complaint? 

Ms. LAFLEUR. I am hesitant to comment on pending open dockets 

before us, but I think you have my commitment and I suspect those 

of my colleagues to give the ROE cases that are pending before us 

a very high priority, because we know they are important and in— 

there are several ROE transmission cases pending before us that, 

as you have referenced, are very important to the companies and 

the transmission grid. 

Mr. SHIMKUS. And the interesting thing about this transmission 

grid, it really—the citizens of southern Illinois are getting no benefit from this line. It is just a pass-through. So the personal disruption—and it is a pass-through because of renewable portfolio standards and States is trying to wield in green power. So that really 

needs to be part of the consideration to understand that as these 

fights go on in siting, there is no benefit to the folks in southern 

Illinois. 

Let me end on the—I wanted to also end on this issue of LNG 

exports, because I deal also—an additional duty I do is democracy 

in eastern Europe, and these LNG exports are critical to our NATO 

allies, Poland, Lithuania, who want to stop the extortion by Russia 

and using energy as leverage and power. So I agree with Chairman 

Emeritus Barton. This is not just a critical issue for us; this is a 

critical issue for peace, democracy, freedom, rule of all, and our allies in NATO, and I hope you can keep that in consideration. 

Yield back my time. 

Mr. WHITFIELD. The gentleman’s time has expired. At this time 

I recognize the gentleman from Texas, Mr. Green, for 5 minutes. 

Mr. GREEN. Thank you, Mr. Chairman. 

And first of all, if you don’t tell by my accent, I am from Texas 

and I have a district in Houston, so—and I tell people I was born 

there, but I have never not lived near a pipeline easement in the 

Houston area, so, you know, crude oil, natural gas, liquids, you 

51 

name it. So I don’t have the big concern about it, because it is just 

part of the way of our life. And our committee has jurisdiction 

every few years to do pipeline safety. And we passed a good pipeline safety bill last Congress, and I can tell you in a few years we 

are going to find technology’s improved and how we can deal with 

it, and hopefully we will pass another reauthorization with additional standards that will make them even safer. 

Commissioner Clark, in your testimony, you state that approximately 75 percent of our daily consumption’s covered by North 

American resources. You also state that we are more secure than 

we have been in decades. Would a viable North America energy 

market further our security interests in? 

Mr. CLARK. Congressman, infrastructure generally helps forward 

our energy security future. With regard to the 75 percent figure, 

that was in reference to liquid products, crude oil. We have about 

75 percent covered from North American resources. On the natural 

gas side, it is off the charts. It is way over 90 percent. 

Mr. GREEN. Yes. OK. In a recent cross-border decision, FERC 

stated that an export of natural gas would promote national economic policy and stimulate the flow of goods and services. What experience or authority would allow FERC to make such a declaration? 

Mr. CLARK. Again, the bill you are referencing, is it the 3300? 

Mr. GREEN. No. This is just—FERC stated the export of natural 

gas would promote national economic policy and stimulate the flow 

of goods and services. I was just asking you what authority or experience does FERC have to show that—— 

Mr. CLARK. Sure. Yes. Absolutely. 

Mr. GREEN [continuing]. To make that statement? 

Mr. CLARK. I mean, FERC’s ability to—— 

Mr. GREEN. I will get to 3301 in a minute. 

Mr. CLARK. Yes. FERC’s ability to cite infrastructure is clearly 

critical to the Nation’s energy security future and to our national 

interests. 

Mr. GREEN. Would you agree that the statement that the promotion of strong national economic policy is within FERC’s decision-making purview? 

Mr. CLARK. To the degree it is authorized by statute, yes. 

Mr. GREEN. OK. To provide additional authority, do you believe 

that FERC has the necessary expertise to coordinate and make 

sound and reliable decisions relating to U.S. interests? 

Mr. CLARK. Generally speaking, I believe, yes. 

Mr. GREEN. Thank you. Well, in a side note, a number of us went 

to Mexico for an inter-parliamentary the Friday before Thanksgiving, and one of the things that was the highlight of our discussion with the Members of Congreso was the recent decision on the 

pipeline from Texas, natural gas pipeline to northern Mexico, because they don’t—obviously have a lot of resources but not enough 

production. And my concern is that—and that was no problem at 

all. We may be selling or providing natural gas to Mexico, but 20 

or 30 years from now we may need to be importing it from Mexico 

just because of our infrastructure that we are building up because 

our reasonable priced natural gas downstream, chemical, you name 

it, manufacturing. But that was a big win when we were—you 

52 

know, with our neighbors in Mexico. So I appreciate that on those 

cross-border pipelines, which brings me up to the H.R. 3301. 

The North American Energy Infrastructure Act, FERC staff 

raised concerns regarding confusion over whether the legislation 

would prohibit FERC from fully complying with Section 3 and Section 7 of the Natural Gas Act. If we were to amend the legislation 

to specifically state that nothing in H.R. 3301 would affect the need 

to fully comply with the Natural Gas Act, do you believe FERC 

would no longer have concerns with the legislation? And I guess I 

will ask Dr. LaFleur. 

Ms. LAFLEUR. I think you have identified the important concern 

with the legislation. I think with an amendment, which I have seen 

in the discussion draft, I think we would be comfortable, I would 

be comfortable operating under the new law with respect to natural 

gas imports and exports. 

The other parts of the Act, electricity and oil, are beyond us. 

Mr. GREEN. And other agencies are in that Act will be able to 

deal with those. 

Ms. LAFLEUR. Yes. 

Mr. GREEN. So I appreciate it. 

Commissioner Moeller, in your testimony, you state that FERC 

efficiency would be improved and that many delays are caused by 

a lack of timeliness from other State or Federal agencies. Could 

you provide a little more explanation on that? Obviously State 

agencies, we don’t have a whole lot of oversight on, but other Federal agencies, is that delaying FERC providing the typically 12 

months turnaround time? 

Mr. MOELLER. Yes. We can give you specific examples later if you 

want them—— 

Mr. GREEN. OK. 

Mr. MOELLER [continuing]. But it kind of depends. It goes back 

to the point I made earlier. There is a lot of regional differences. 

If the management regionally makes it a priority, it happens; if 

they don’t, they can drag their feet. 

Mr. GREEN. OK. Before I lose all the time, Chairwoman LaFleur, 

there is some concern in Texas about our reliability issues, and a 

number of us on this subcommittee have made attempts to resolve 

an issue, because Department of Energy says you can do something 

with a power plant, but EPA says no, and we are trying to correct 

that. I know our committee’s passed that H.R. 271, Revolving Environmental and Grid Reliability Conflicts Act. I would hope we 

would deal with that, because that would help us, at least in Texas, 

with some of our liability issues and I think it would help nationally. So thank you for your courtesy. 

Mr. WHITFIELD. The gentleman’s time has expired. The gentlemen from Pennsylvania, Mr. Pitts, is recognized for 5 minutes. 

Mr. PITTS. Thank you, Mr. Chairman. 

The concept of beneficiary pace is at the heart of the way our 

transmission system operates and assigns costs, and I am concerned that under Order 1000, FERC is defining benefits so broadly and spreading costs so widely that this simple axiom has no 

meaning anymore. 

Chairwoman LaFleur, please explain your idea of beneficiary 

pace, what that should mean. And keep in mind, I don’t want my 

53 

constituents paying for subsidized midwest wind into my market 

with no voice in the process. And I know you can’t address the merits of individual compliance filings under FERC’s Order 1000, but 

there is a legal point I would like to raise with you, I think stands 

on its own, to which I hope you will be able to respond. 

Ms. LAFLEUR. Well, thank you very much, Congressman Pitts. 

The Order 1000 required regions to plan cooperatively across the 

region, as the region encompassing Pennsylvania already does, and 

take into account three kinds of benefits: reliability benefits, which 

can be very hard to quantify but are very real; the meeting public 

policy requirements to connect resources that States require them 

to connect, which are normally identified by the States, such as 

Pennsylvania, which has a renewable portfolio standard; and thirdly, congestion benefits to reduce the cost of power by building more 

transmission. 

And the order required the regions to take those benefits into account in assigning the costs, and I think the region that Pennsylvania is a part of is a good example of coming up with a hybrid 

proposal that used different types of cost allocation together for different types of benefits that I think is a—that we have approved 

preliminarily in the first case. 

Mr. PITTS. Do you think FERC has authority under the Federal 

Power Act to allocate costs for new transmission to entities that 

don’t have a customer or contractual relationship to the builder of 

the line and don’t need the capacity provided by the line? 

Ms. LAFLEUR. I think that under the court decisions and our orders, there has to be a proportionality between benefits and costs, 

but not necessarily line-by-line. There can be a portfolio of projects 

that a region agrees to that some benefit one area, some benefit another. And if a region agrees to it, we assume they have negotiated, 

that they all get something. 

Mr. PITTS. Can you show me what section of the Federal Power 

Act gives FERC this authority to allocate costs in the absence of 

a contractual relationship? 

Ms. LAFLEUR. Yes. We are relying on the sections of the Act that 

require just and reasonable and non-discriminatory rates, thinking 

that a process where the States involved and the companies involved negotiate the costs will help ensure just and reasonable 

transition rates. 

Mr. PITTS. Commissioner Clark, in specific, FERC Order 1000 

compliance filing orders, you have raised some serious concerns 

about potential downsides of the Commission’s implementation of 

Order 1000. Can you elaborate on these concerns and particularly 

the implications for consumers? 

Mr. CLARK. Sure. To the degree that Order 1000, Congressman, 

deals with the need for perhaps greater regional planning, I am on 

board with that. I think it is just prudent for utilities to do so. To 

the degree that it is about trying to come to more accommodation 

with regard to cause or cost, payer cost payer allocation issues, I 

think that is helpful. 

Where I have disagreed with the majority of the Commission 

from time to time is with regard to how FERC has been understanding and allowing the ISO’s and RTO’s and utilities to take 

into consideration those State and local laws that they still have 

54 

to comply with because we have this Federal system where they 

still have substantial State and local compliance laws. And I have 

tended to argue that we need to give more latitude for those utilities that we regulate to continue to understand, to comply with and 

give them the flexibility to take into consideration those existing 

State and local laws, and not use Order 1000 as an attempt to sort 

of shake up the jurisdictional box, which I think just leads to greater litigation. 

Mr. PITTS. Under Order 1000, it is predicated on the—it is predicated on the idea, not the evidentiary record, that insufficient 

transmission is being built. How does the order solve this problem 

and how will we know when the proper amount of transmission is 

being built? Will the marketplace tell us? Will local utilities tell us? 

Will FERC tell us? What? Mr. Clark. 

Mr. CLARK. Mr. Chairman and Congressman, the way I understand it, it’ll be an iterative process, so it will take a little bit different shape in different regions. As I indicated, the grid is highly 

regional by nature. In some regions, like the midwest, you have renewables in parts of the region, you have renewal portfolio standards in other parts of the region, you have regional utilities and 

States coming together and talking about some of those issues. 

In other regions of the country, like the southeast, you have a 

much, much different situation. You have don’t have access to renewables, and you have a different regulatory structure in those 

States. 

I just believe that FERC has to be open to understanding each 

of those regional differences and accommodating those. 

Mr. PITTS. OK. 

Mr. WHITFIELD. The gentleman’s time has expired. At this time 

I recognize the gentleman from New York, Mr. Tonko, for 5 minutes. 

Mr. TONKO. Thank you, Mr. Chair. 

Commissioner LaFleur, in your testimony, you noted improvement between the years 2011 and 2012 in the number of nonweather-related bulk power system transmission related outages. 

As you know, we have several other related issues that can contribute to reliability problems, older transmission lines and grid 

equipment that needs to be upgraded or replaced and an increase 

in severe weather events that I have seen in my district and 

throughout New York that can cause outages. 

In addition, we have much more reliance on IT in general for everything from financial transactions, to research and manufacturing, things that require exceptionally reliable power delivery. 

How are these changes in the nature of the demand for power, 

the aging parts of the grid and the increased frequency and intensity of storm-related disruptions being considered in FERC’s reliability efforts? 

Ms. LAFLEUR. Well, thank you. That is a big question. I guess 

there are at least two different parts of it: one is the actual reliability standards to make sure that the transmission asset owners 

have the accountability for the refurbishment of their lines so that 

the lines operate properly in order to meet the standards, but secondly, is in—we were talking about Order 1000 transmission planning, a reference was made to transmission rates, that is all a part 

55 

of making sure that the structures are in place so that the companies can invest the money they need to replace aging infrastructure. And as you know, I am familiar with some of the aged resources in your region. They were—it was an early part of the 

country to electrify. 

Mr. TONKO. Thank you. Thank you very much. And FERC’s 

changes to the capacity market rules in both the PJM area and 

ISO New England threaten to continue the ability of load-serving 

entities to self-supply their own capacity resources to serve their 

own loads. This problem is particularly acute for publicly-owned 

and cooperatively-owned electric utilities, because it endangers 

their ability to finance new generation units needed to serve their 

customer base using their traditional business model, which relies 

on long-term contracts and lower cost debt. 

Do you anticipate that public power or cooperatively-owned utilities in these RTO’s would be able to successfully exercise buyer 

side market power and RTO capacity markets? 

Ms. LAFLEUR. Well, this is a question that is directly being 

looked at in our ongoing capacity marketing inquiry that is open 

right now with a very heavy participation of public power, but basically the capacity markets that are forward price of what reliability 

is worth that is used to assign what the generators, the existing 

fossil generators as well as new generators, will get paid for being 

there. And if people are allowed to bid in with a subsidized rate 

that doesn’t refer to the market, it can pull down the market rate 

and it could affect everyone’s reliability, but munis always have the 

right to prove that their costs are lower and show the ISO that 

they can self-supply because they can do it more cheaply. 

Mr. TONKO. Thank you. Thank you. Mr. Norris, your testimony 

describes the many changes that are simultaneously occurring 

throughout the country in the power production use and delivery 

landscape. I am particularly interested in the challenge that our 

successes with energy efficiency, demand management and renewables are presenting to the traditional economic models for utilities. 

The success of energy efficiency and demand management is a good 

story, but companies do not increase profits by figuring out how to 

sell less of their major product. 

So how are we going to provide continued incentives to seek more 

efficiencies and better management of demand if these goals further erode utilities’ ability to earn profits? 

Mr. NORRIS. Well, Congressman, a lot of those determinations 

are made at the State level, at the retail rate regulation. What we 

have been doing at FERC is trying to make sure that there is access to the markets for different new technologies that enable demand response in energy efficiency. Certainly you see it in the PJM 

market and the huge increase in demand response capability and 

that ability for that to bid into the marketplace, and PJM has fostered development of demand response in that region. 

Different regions of the country are also looking at ways to develop better demand response resources or more demand response 

resources. I presume it will be part of the package of solutions in 

MISO as they look at meeting their potential capacity shortfall in 

2016 and beyond. 

56 

So what we are doing is to make sure that there is—that demand 

response gets treated fairly in the marketplace, so as a reward for 

investors in that technology. 

Mr. TONKO. Do you see, like, a major restructuring of the power 

sector over time? 

Mr. NORRIS. Major restructuring of the? 

Mr. TONKO. Of the power sector over time. 

Mr. NORRIS. Yes. I think it is happening right now. I mean, I 

think you have got a lot more people engaged. Historically it has 

been central station power owned by the utility and delivered to 

the homes and businesses. Now you have got—consumers want to 

be involved and engaged in their own energy production and more 

engaged in their energy usage. The development of the technologies 

on the smart grid are enabling those consumers to do that. The traditional utility and power sectors having to respond to that change 

in customer demand, much like what happened in the telecom sector, but it is bringing great efficiencies to our utilization of energy. 

Mr. TONKO. Mr. Chair, I yield back. 

Mr. WHITFIELD. The gentleman’s time has expired. At this time 

I recognize the gentleman from Ohio, Mr. Latta, for 5 minutes. 

Mr. LATTA. Thank you, Mr. Chair. 

And I thank the Commissioners for being with us today. I appreciate your testimony. If I could start with Chairman LaFleur, just 

a series of questions, if I could. Under Former Chairman 

Wellinghoff, FERC’s top initiatives included the smart grid, demand response, integration of renewables, and Order 1000 transmission planning cost allocation. Do you see that you would be continuing on with the former chairman’s goals, or do you have other 

goals? Do you agree with those, disagree, or where do you see you 

directing the Commission? 

Ms. LAFLEUR. Well, it is a timely question, because I am just in 

the process of talking to each of my colleagues, since it has been 

about a week that I have been in the job, to really set consensus 

objectives going forward, but I see that reliability and security will 

continue to be a top priority, and that includes resource adequacy, 

because you need the resources to be reliable, which we have 

talked about a lot this morning. We have a lot more work to do on 

transmission, so Order 1000, as I believe Commissioner Moeller 

said, is going to be a big part of our work for a while, as well as 

transmission rates that was brought up. And I think making sure 

the markets are fair and that they work to attract the investment 

the country needs, and that the infrastructure is there, are clearly 

four priorities, but I think to be refined as we continue forward, 

but those are things that are ongoing. 

Mr. LATTA. Well, if I could, just a couple of areas, then. Where 

would you see that—like, natural gas pipeline permitting, where 

would that be on your priority list? 

Ms. LAFLEUR. Well, I think I referred to that in general in the 

term ‘‘infrastructure,’’ but I think that in general, I think our 

projects group does a good job handling the pipeline applications in 

a timely fashion. We are seeing a lot of them, especially spurs and 

compressor stations in the Marcellas, and we have to continue to 

handle them. We do about 92 percent in a year, and I think that 

we should continue to do so. 

57 

Mr. LATTA. Well, you know, especially on the pipeline permitting 

is very important across the midwest, especially, as you just said, 

on the Marcellas and Ohio, we have the Utica. And, you know, one 

of the great things we have is we have all the natural gas, but one 

of the problems we are having is we don’t have the ability to get 

that natural gas where it needs to be. The potential in Ohio where 

the chemical industry at the same time being able to have that gas 

cracked and then to be able to utilize it, again, all depends on that 

pipeline permitting, so that is very, very important. 

Also, what about on organized wholesale electricity markets? 

Where do you see you on that? 

Ms. LAFLEUR. I see that as the—all the things we have been 

talking about today, the power supply changing, we have seen a lot 

of changes in the markets to adapt to new resources and make sure 

the resources are there when the customers need them. Right now 

we are focusing in on the capacity markets, and I don’t think that 

that is going to change in terms of the level of cases or the amount 

of things we need to look at. 

Mr. LATTA. OK. Just one last question, if I could, with you, 

Madam Chair. What are the best measures to determine whether 

the restructured wholesale electricity markets operated by regional 

transmission organizations are benefiting consumers? 

Ms. LAFLEUR. Well, that is a big question. I think certainly reliability is a key one, but also looking at the costs over time. It is 

very difficult to compare the costs of the restructured markets with 

the places that didn’t restructure, because the places that restructured were the high cost places to begin with. That is why they restructured. But I think looking at the costs and reliability are two 

big ones. 

Mr. LATTA. OK. And Commissioner Moeller, does FERC plan to 

exert jurisdiction over the generation or transmission activities of 

the non-jurisdictional entities? 

Mr. MOELLER. Not that I am aware of. 

Mr. LATTA. OK. I want to make sure about that. 

And also, if I—my remaining 40 seconds, Commissioner Clark, in 

Title 7 of Dodd-Frank, Congress required the FERC and the CFTC 

to enter into a memorandum of understanding to establish procedures for resolving your jurisdictional conflicts over energy derivatives. 

What needs to be done in order to resolve the jurisdictional conflict between the agencies and provide industry the certainty it 

needs? 

Mr. CLARK. FERC’s position, Congressman, is that both agencies 

should be able to fully share in the information that we each have 

so that we can do what we believe Congress has intended us to do. 

For whatever reason, for reasons that predate my term on the 

Commission, that hasn’t happened. We have had now leadership 

changes in both commissions, and I am hopeful that there can be 

a way that FERC and CFTC can have a meeting of the minds and 

strike that MOU. 

Mr. LATTA. Thank you. 

Mr. Chair, my time’s expired and I yield back. 

Mr. WHITFIELD. The gentleman’s time has expired. At this time, 

I recognize the gentlelady from Florida, Ms. Castor, for 5 minutes. 

58 

Ms. CASTOR. Thank you, Mr. Chairman. 

And good morning. I think you all are serving on the Federal Energy Regulatory Commission at a very exciting time. I mean, this 

has been a remarkable time with the natural gas revolution that 

comes at an important time when we have got to—when we are 

seeing natural gas supplant coal at a—when we know that it is 

vital to reduce carbon pollution, and then add on top of that all of 

the innovation in the smart grid, demand management and renewables. So while all that change is occurring, your responsibilities 

remain very important to ensure that consumers are protected, 

that you are charged with enforcing laws that protect consumers 

and ensure fair competition in the electric and natural gas markets, you have got to maintain your important relationships with 

State and regional partners to ensure that necessary energy infrastructure gets constructed, but what Mr. Tonko was—Representative Tonko was talking about, it is almost outdated now, the old 

utility model of selling as many kilowatt hours as possible. 

Instead, with what we know about smart grids and energy efficiency, we have got to be able to do some things, and some States 

are doing it, to incentivize greater conservation while at the same 

time keeping an eye on our infrastructure and reliability. So I 

think what you all have been doing to ensure that renewables compete on a level playing field is very important, also that energy efficiency and demand side management are also treated fairly as they 

compete with traditional power generation. 

Now, FERC itself has said that they recognize demand response 

can help reduce electric price volatility, mitigate generation, market power and enhance reliability. You have issued a recent staff 

report, I know Mr. Norris was able to comment on it. Madam 

Chair, could you comment on that recent staff report, the findings, 

and what else FERC is going to be doing to channel this great innovation across the country? 

Ms. LAFLEUR. Well, thank you. Yes. The staff report is something that we do under the Energy Policy Act, and it looked at the 

level of demand response around the country. Our primary focus is 

on the wholesale markets. I think we have—under—2 years ago 

did a—had a significant case on how you compensate demand response in the energy markets. Right now there are a lot of issues 

pending with respect to how you compensate demand response in 

the capacity markets, and I think we will continue to confront 

those as a part of our capacity market inquiry. 

I do think, though, that a lot of the effort to unbundle rates and 

incentivize efficiency is at the State level. And I know your Commissioner is going to be the president of NARUC soon, and I think 

that is where a lot of the innovation is still coming in the retail 

markets. 

Ms. CASTOR. It just seems like some States are so far behind. I 

would say my State, we can do a much better job, and people are 

really waking up to the fact. Young people now, they expect to be 

able to use their smartphone to turn down their thermostat. 

And while, Commissioner Norris, you mentioned in your testimony that you have had conversations with a number of utility 

CEO’s about their electricity generation plans for the future, you 

said virtually all CEO’s you talked to said they were focused on inVerDate Aug 31 2005 11:39 May 30, 2014 Jkt 037690 PO 00000 Frm 00062 Fmt 6633 Sfmt 6633 F:\113-10~1\113-10~1 WAYNE
59 

creasing natural gas and renewable energy generation. Is that 

right? 

Mr. NORRIS. [No verbal response.] 

Ms. CASTOR. And what do you—why do you think they are recognizing, waking up to the fact that it is natural gas and renewables 

that are their future? 

Mr. NORRIS. A combination of low-priced natural gas and apparent abundant supply, incentives for renewables and meeting State 

renewable portfolio standards. But one of the biggest factors we 

haven’t talked about today is just the uncertainty, the uncertainty 

of an investment in coal-fired generation, because as I said in my 

written testimony, those CEO’s and people I have talked to in this 

industry, it is not just whether—it is not just when—it is either 

when legislation will occur or the likelihood it will occur at some 

point is really precluding financing of new coal generation in this 

country. 

Ms. CASTOR. And it is the science and the economics as well, the 

science that tells us we have got to reduce carbon pollution and the 

economics are telling us the exact same thing. Think about the 

State of Florida where now taxpayers are going to have to invest 

and they are already investing huge sums of money to begin to 

adapt to a changing climate. Think about the huge bills, the bills 

that come due every time we have an extreme weather event, 

whether it is drought or super storms. And I would think that the 

utility industry also sees the writing on the wall. They are looking 

for that certainty. And the more aggressive we are on moving away 

from carbon intensive energy generation, the better. Thank you 

very much. 

Mr. WHITFIELD. The gentlelady’s time has expired. At this time, 

I recognize the gentleman from West Virginia, Mr. McKinley, for 

5 minutes. 

Mr. MCKINLEY. Thank you, Mr. Chairman. 

Chairman LaFleur, perhaps you can give me some direction here 

a little bit on this. We have a growing problem in West Virginia 

with stranded gas and the production of the various constituents 

with NGO that we can’t use necessarily in the local market, it has 

to be shipped. Currently a lot of it is being flared or just wasted, 

which is a shame, and it doesn’t benefit the consumer and doesn’t 

help the environment any. 

So my question is, what I am hearing or sensing is there is—and 

I think it is not unique just to West Virginia with this exploration 

of the Utica and the Marcellas in a number of States, there seems 

to be a potential jurisdictional problem starting to flare up a little 

bit, and one of them is—so my question to you is should we be 

treating NGO’s as natural gas and thereby allowing the Federal 

Government, your group, to take care of that, or should we continue having the NGO’s handled at the State level and manage it 

that way? Do you have a position on that? 

Ms. LAFLEUR. I hadn’t thought of the jurisdictional question. It 

is a good thing for the committee to be looking at. There is a lot 

of stranded gas capacity as well as gas that is being flared because 

there is not sufficient take-away capacity for the liquids. We only 

do the pricing for the liquids pipelines under Interstate Commerce 

Act, but we don’t do the siting. I suspect some of the States that 

60 

think they do the siting very well would not welcome Federal 

siting. I think we could do it well, because we do it well with gas 

pipelines, but it might not be as popular with some of the States 

involved, but I think—— 

Mr. MCKINLEY. I think that is a fair statement. 

Ms. LAFLEUR [continuing]. We’ve done a good job with that. 

Mr. MCKINLEY. I’m just trying—whether or not you want—are 

you going to take a more passive and let the States continue to 

do—or are you going to try to assert a role that otherwise is not 

expected? 

Ms. LAFLEUR. I didn’t have a plan to redefine natural gas under 

the Natural Gas Act, but I think it is something to think about. 

Mr. MCKINLEY. OK. Could you provide us in writing, because 

with the time frame, we don’t—and especially since you said you 

weren’t prepared to discuss that necessarily, can you provide us 

some rationale for the Federal Government to be involved in this 

as compared to the States? 

Ms. LAFLEUR. Yes. We will certainly take that and think about 

it. Thanks for the opportunity to think more. 

Mr. MCKINLEY. OK. Thank you. Now, and the last is maybe 

more generic, but probably for over 10 years as an engineer in private practice prior, we were concerned about electromagnetic pulse, 

and it has been mentioned here again. I have been hearing about 

it for well over a decade, but certainly in the last 5 or 6 years. People have been talking even more here the last 3 years that I have 

been in Congress. Where are we with this? Or are we just waiting 

for some catastrophic event to happen, because there is just an 

awful lot of talk, but no action? 

Ms. LAFLEUR. Well, I think I mentioned in my written testimony 

and briefly in my verbal testimony that last year, the Commission 

voted out a rule requiring utilities to have operational plans and 

response plans for—— 

Mr. MCKINLEY. I guess more what I am saying, what is your expectation, not just your plan? 

Ms. LAFLEUR. I think that the geomagnetic disturbance standards that we will get, and we have one pending, will help somewhat with the electromagnetic pulse. Although there—I think 

there’s also voluntary efforts going on in the North American 

Transmission Forum to talk about other aspects of the EMP, but 

I think the GMD standards are probably the most tangible action 

that has going on in this area for a long time. 

Mr. MCKINLEY. Is there progress being made in Europe or elsewhere with EMP’s, but it is not unique to western—to the United 

States? 

Ms. LAFLEUR. I am sorry. I didn’t—— 

Mr. MCKINLEY. Is there progress being made with other countries in dealing with EMP’s? 

Ms. LAFLEUR. It is variable. A lot of progress is being made in 

Scandinavia, South Africa and the United Kingdom. A lot of other 

countries are taking a wait-and-see approach and looking—Israel. 

Israel is also doing a lot. Other countries are taking more of a waitand-see approach. 

Mr. MCKINLEY. Thank you. We will have further conversation, 

but thank very much. 

61 

Ms. LAFLEUR. Thank you. 

Mr. WHITFIELD. The gentleman yields back the balance of his 

time. At this time, I recognize the gentleman from Colorado, Mr. 

Gardner, for 5 minutes. 

Mr. GARDNER. Thank you, Mr. Chairman. 

And thank you to the members of the Commission for being here 

today, and congratulations to the acting chairman. I just wanted to 

follow up on a question, a brief conversation to Mr. Moeller that 

we touched on earlier, and it was an intriguing, I think, question 

raised. In Colorado, I think in—just a couple years ago, we had the 

Hyde Park fire, which became the State’s most devastating forest 

fire, followed a week later by the Waldo Canyon fire, which became 

the State’s most devastating natural disaster. This past year we 

have experienced the Black Forest fire. 

Do you believe that forest health threatens grid reliability? 

Mr. MOELLER. Well, I recall being involved in that issue, because 

I think we wrote the Forest Service—or I wrote the Forest Service 

after talking to Colorado officials, including, I think, a Democratic 

State senator who works for the Keystone Foundation, just very 

concerned about the amount of dead forest and its threat from a 

fire perspective on transmission lines. That was the Nexus defer. 

So, yes, forest health—I come from the State of Washington. Forest 

health is a big issue up there, and particularly with the pine beetle 

issue. Should we hope for 2 more weeks of really cold weather to 

kill those beetles? I guess that is a mixed question, but it would 

be nice—it would be nice if that threat to reliability can be removed. 

Mr. GARDNER. We would love to follow up with you a little bit 

more on that. 

And to Acting Chairman LaFleur or Commissioner Moeller, earlier this year we unanimously passed the Hydropower Regulatory 

Efficiency Act. This Act revised how FERC regulates small conduit 

hydro projects, required the Commission to investigate a 2-year licensing process for non powered dams, and closed-loop pump storage projects, and also conduct pilot projects. 

Could you give us an update on the Commission’s activities to 

date to implement these and what provisions of the law outline— 

you know, the other provisions of the law, and outline what steps 

the Commission will take in 2014 to implement the law? 

Ms. LAFLEUR. Yes, certainly. We have already received a large 

number of exemption applications for conduits, I believe 18, and 

they are all in some stage of the process. A couple of them have 

already been approved and others are close to approval. So that 

took effect immediately, and—— 

Mr. GARDNER. Would you mind giving us maybe an idea of those 

18 and which ones have been approved and where they are at? 

Ms. LAFLEUR. Certainly. We will take that as a written question 

and where they are in the process. 

Also, on, I believe it was October 22nd, we held a tech conference, a technical conference on what we can do to help speed up 

the process in the 2-year licensing requirement. I believe comments 

are outstanding right now, and the folks in the hydro section are 

working on that; they had a lot of the other agencies involved that 

contribute to the timing as well. 

62 

We have received fewer applications for some of the other parts 

of the law as of yet, you know, the 40-megawatt exemption and so 

forth. 

Mr. GARDNER. Do you believe that FERC will be able to implement the pilot projects in 2014? 

Ms. LAFLEUR. Yes. 

Mr. GARDNER. OK. You talked a little about the workshops, you 

talked about what you learned. Do you believe that we will be able 

to get through the intent of the legislation in the next 2 years, implement the intent of the legislation? 

Ms. LAFLEUR. You mean satisfy the intent of the legislation? 

Mr. GARDNER. Yes. Correct. 

Ms. LAFLEUR. I certainly think that is our job. 

Mr. GARDNER. OK. And the process for excluding small conduit 

hydro projects from FERC licensing, how is that working? 

Ms. LAFLEUR. I—we—it is working actually very well with your 

State, because of our Memorandum of Understanding, and we recently entered into one with California, I believe, just a couple 

weeks ago. It is variable in different regions, because some of the 

States don’t have the resources on hydro to have the same level of 

cooperation, but it is something we have put a lot of effort into. The 

hydro team has simplified the Web site, simplified the processes to 

try to process them as quickly as we can. 

Mr. GARDNER. And do you have a number on the determinations 

that have been sought? 

Ms. LAFLEUR. No, but I can get that and take it as a question 

for the record. 

Mr. GARDNER. That would be fantastic. If we could find out those 

granted and those denied, that would be great. And if you could 

provide some statistics on the length of time these proceedings 

have taken as well, that would be great. 

Ms. LAFLEUR. Yes. 

Mr. GARDNER. To Mr. Moeller, Commissioner Moeller, Commissioner Clark, a question for you, and I am running out of time 

here, should behind-the-meter generation be treated as a demand 

response resource or generation resource? 

Mr. MOELLER. Very timely. I have issues with behind-the-meter 

generation, because it is not dispatchable like other forms, and I 

will point you to a dissent that I wrote earlier this week on a particular order. 

Mr. GARDNER. And Commissioner Clark, quickly, then I am 

going to have to follow up on the record with some of these other 

questions and some FERC 1000 Order questions. 

Mr. CLARK. Sure. Congressman, to a great degree, I think it depends on the record in each of those individual cases. I would have 

a concern in some areas, and others, if measurement and 

verification can be proven, I believe they may be able to participate. There is a separate question with regard to compensation 

that should be given to those resources, and from time to time, I 

have disagreed with parts of the Commission’s orders on that issue. 

Mr. GARDNER. Thank you. Mr. Chairman, I will follow up with 

additional questions. 

63 

Mr. WHITFIELD. The gentleman’s time has expired. At this time 

I recognize the gentleman from Virginia, Mr. Griffith, for 5 minutes. 

Mr. GRIFFITH. Thank you, Mr. Chairman. Appreciate that. 

Mr. Norris, earlier you were speaking with Ms. Castor, and you 

started talking about that people were worried about building coalfired power plants because of legislation. Could you expand on that 

for me? 

Mr. NORRIS. I think there is a general concern that there will be 

at some point in time, a cost put on carbon. Because of the uncertainty of when that will happen and what that will be, combined 

with the other factors in place right now that I have talked about 

in my testimony, natural gas prices, EPA rules, State requirements, that it is just too risky for investment into coal-fired generation. And, frankly, nuclear is suffering some of the same problems 

strictly on the cost aspect. 

Mr. GRIFFITH. So while natural gas is a concern because the 

prices are lower right now, looking forward, natural gas and coal 

have competed over the decades and that would probably continue, 

but with already existing newly proposed EPA regulations and the 

fear that either legislation or additional EPA regulations are major 

causes as to why no one’s really looking at building a new coal-fired 

power plant. Is that correct? Is that a fair statement of generally 

what you said? 

Mr. NORRIS. Yes. I think some of the existing facilities are being 

retired because new—massive—— 

Mr. GRIFFITH. The new—right. 

Mr. NORRIS. But the primary concern that was expressed to me 

is that—the anticipation at some point, there will be a cost on carbon, and that makes the economics difficult to finance coal plants. 

Mr. GRIFFITH. All right. And then let me ask about, to anyone 

who wishes to answer, all of you, PJM and the other markets, have 

you all done any studies to determine whether or not those markets have actually lowered the costs of electricity coming to the 

consumer? 

Ms. LAFLEUR. Yes. We get regular reports from the markets and 

their market monitors and a—the years are running together, but 

within the recent past, we compiled a major set of metrics from the 

different RTO’s that included cost metrics over time, and there 

were, I know, within PJM and the other eastern markets cost reductions. Now, they are, in part, driven by the cost reductions in 

gas being used to generate the electricity, but we also looked at the 

transmission congestion and how that was coming down. So we 

could provide an update on that in written form as well. 

Mr. GRIFFITH. All right. That would be great, and I appreciate 

that. 

Have any of you had contact with the White House regarding the 

President’s climate action plan? 

Ms. LAFLEUR. Not me. 

Mr. MOELLER. No. 

Mr. NORRIS. I don’t believe so. 

Mr. CLARK. No. 

64 

Mr. GRIFFITH. Well, isn’t that interesting. So they didn’t talk to 

you all about that? I guess, if they didn’t talk to you about it, they 

just—nothing else you can say about it, I suppose. 

Ms. LAFLEUR. I mean, in my view, we function as an independent agency. They don’t give us policy guidance, at least never 

in my experience. They did call to make me acting chairman, which 

I very much appreciate, but didn’t say anything about how to vote 

on anything. 

Mr. GRIFFITH. Well, and I wasn’t really asking, you know, whether or not they had called you about how to vote on things, but I 

am just curious that they came out with this major plan and didn’t 

discuss with you, and what I am talking about, get advice or seek 

input or anything like that. So you didn’t have those conversations 

either? So maybe I wasn’t clear when I asked it the first time 

around. 

Ms. LAFLEUR. I do coordinate with the Department of Energy on 

the electricity advisory committee, but their efforts are more 

around transmission, storage, some other areas. I think the climate 

plan came from other parts of the administration. 

Mr. GRIFFITH. OK. So then I guess it would be fair to say that 

they didn’t seek any information from you-all on how this might affect electric prices for the average American family? 

Ms. LAFLEUR. The White House didn’t seek any information from 

me. 

Mr. MOELLER. Nor I. 

Mr. NORRIS. I am going to assume they didn’t contact me because 

we are an independent agency, not because they didn’t know we existed. 

Mr. CLARK. No, I wasn’t contacted. 

Mr. GRIFFITH. All right. Well, I don’t have any additional questions. Thank you very much for being here today. And, Mr. Chairman, with that, I yield back. 

Mr. WHITFIELD. The gentleman yields back. At this time I recognize the gentleman from Illinois, Mr. Kinzinger, for 5 minutes. 

Mr. KINZINGER. Thank you, Mr. Chairman. 

And thank you all for being here. Competitive markets tend to 

be the most efficient when a light regulatory approach towards 

rules and regulations are in place. Given that the process as put 

in place by FERC impacts tens of millions of consumers, it is my 

hope that your Commission will work with all parties to ensure 

that all aspects of industry are taken into account in order to ensure that current and future energy demands are able to be met. 

It is my understanding that FERC is in the process of evaluating 

market mechanisms in a holistic fashion in a subset of the capacity 

markets in which it regulates. I appreciate the Commission taking 

on this effort, but I have a few concerns that I would like to discuss 

in order to determine where this effort may lead and whether or 

not it may be unnecessarily limited. 

Chairman LaFleur, what does the Commission intend to do with 

the information it is currently gathering in this proceeding? 

Ms. LAFLEUR. I think on the capacity markets, that is very much 

a work in progress that is going on right now, but I think potentially, an illustrative example is what we have done on gas electric 

where we have looked at a large number of comments from around 

65 

the country and said, here is a large set of them that have to be 

handled regionally, and we will continue to deal with it with each 

region of the country, but here are a couple of cut-across issues we 

may look at across more than one region, and that may well be the 

future capacity markets, but I think I want to read the comments 

and talk to my colleagues. 

Mr. KINZINGER. Have you discussed the possibility of expanding 

this effort to include other wholesale capacity markets that the 

Commission regulates, and is there a specific reason for limiting 

the inquiry if, in fact, you have the capacity markets alone? 

Ms. LAFLEUR. There was a reason to limit the technical conference to the three markets: because they operate in largely parallel fashion, they are more mature. The Midwest ISO voluntary 

capacity market is considerably newer, and we thought it might be 

difficult to do them all in one day, but there is certainly no reason 

we won’t in the future be looking at other places as well if the need 

arises. 

Mr. KINZINGER. OK. Baseload electric generating assets have a 

life span of 40 to 60 years. The forward capacity markets and organized electricity markets typically operate 3 years ahead. Ms. LaFleur and Mr. Norris, let me ask you these questions. Do you agree 

that there is a fundamental mismatch between the investment recovery profile of electric generating assets and the way merchant 

markets are structured, and do you believe FERC has a role to play 

in addressing this problem? Mr. Norris first. 

Mr. NORRIS. By markets, you mean capacity markets? 

Mr. KINZINGER. Yes. 

Mr. NORRIS. Yes. There is a disconnect. The capacity markets are 

really designed to make sure there are adequate resources and the 

reserve margin will be met for the long-term future. I think some 

of our current capacity constructs were largely put in place to provide a revenue stream for generators that were spun off in a lot 

of the restructuring areas, and there has been a cushion of time 

there for that to play out. We are reaching into that cushion now. 

We have got to look at these capacity markets and play a role in 

structuring them so long-term supply is available for adequacy. 

Mr. KINZINGER. And, Chairman LaFleur, do you have any anything to add on that? 

Ms. LAFLEUR. Well, I think the reason we are looking at capacity 

markets is largely to see if they attract the investment we need, 

and that includes, you know, baseload, peaking, intermediate, demand response, all the things you need to run a grid, and that is 

what we will be looking at. 

Mr. KINZINGER. Does your Commission have plans to review and 

improve market rules so that wholesale markets are given the 

proper signals to allow for investment decisions to be made in the 

power sector? 

Ms. LAFLEUR. Well, that is the purpose of the wholesale market 

rules in part—to attract the investment for reliability—so I think 

that is very much within our responsibility. 

Mr. KINZINGER. And then finally, Mr. Clark, do you think the 

Federal Power Act authorizes FERC to subsidize long-distance 

transmission of remote wind power over potentially cheaper local 

renewables? 

66 

Mr. CLARK. I don’t think it authorizes, Congressman, the Commission to subsidize such lines. I think it charges the Commission 

with trying to make a reasonable attempt at allocating costs on a 

commensurate basis on a cost-causation beneficiary principle. I 

think the Seventh Circuit through the course of a couple of major 

cases has basically given us the goalposts in terms of what our responsibilities are in terms of assigning those costs. 

Mr. KINZINGER. OK. Thank you all for your time. 

Mr. Chairman, I will yield back 36 seconds. 

Mr. WHITFIELD. Thank you very much. At this time I will recognize the gentleman from Texas, Mr. Hall, for 5 minutes. 

Mr. HALL. Mr. Chairman, thank you. 

And Commissioners, I thank you for appearing here today. If I 

ask questions that have been touched on earlier, I have been another committee. We are all trying to pass everything we can before getting to go home for Christmas. 

I have been hearing about a new technology that is coming onto 

the market, and I am from Texas and, of course, have great interest in energy. Probably other than ‘‘prayer,’’ it is the most important word in the dictionary for young people. And they have no jobs 

today, and if we go on the way we are going now, there will be no 

employers in about a year, so you have a very important job. 

That new one, manufacture the solution out of gas liquids to 

make it easy to transport to a customer, who then treats it and 

then uses it as a fuel or feed stock or electric generation, whatever 

they want, and I am told that it is a new technology that can be 

used relatively small, simple equipment that is often modular and 

can be moved from site to site in an oil field, which is important 

to them, to capture stranded gas that Mr. McKinley had an interest in, or they can be installed within existing port facilities. 

I hope FERC can ensure new beneficial technologies like this are 

not subjected to the same time-consuming and expensive review 

process as the major projects, say, such as LNG. Some of these new 

technologies don’t always fit the rules that you have, they are all 

forced to fit into a category, but just because you are supposed to 

regulate and you feel that you have to regulate them, the new businesses are going to be stifled or it will never get off the ground. 

I hope you won’t feel that you have that conjure up ways to regulate something if you haven’t been told to regulate it by an act of 

Congress. And that is kind of a question that is not meant to be 

insulting in any way, because I admire you. 

And do you have any short statement you want to make to what 

I have said so far? 

Ms. LAFLEUR. Well, I believe we have to stay in our jurisdiction. 

As has been observed several times today, we have been given 

quite a lot of it. We are not short of things to do. And that is what 

we try to do, is follow the law. 

Mr. HALL. And I expect you to do that. 

Mr. CLARK. Yes. Congressman, I would just add, I agree with 

Chairman LaFleur. Coming from North Dakota as I do, where we 

have a significant concern with flared gas, and I understand—— 

Mr. HALL. You have a role to play there. 

Mr. CLARK. Yes. I understand the technology that you are talking about, and I am intrigued by it, but I would share your concern 

67 

that anything that we can do to advance technologies that allow us 

to capture and utilize valuable resources is something we should 

do. 

Mr. HALL. Well, we go back some 20, 25 years that some of us 

have been up here. And if you remember, we passed Clean Air Acts 

and Clean Water Acts, and took several sessions to do them. And 

we breathed life into the EPA in those. I remember that. Even 

though I was a Texan and believed in energy, and energy paid 55 

or 60 percent of the taxes that were paid in Texas, we felt that it 

was very important. And we breathed life into the EPA by giving 

them a role in that act. 

I am kind of sorry now that we did, because they acted well then 

and we were pleased with what they did, and we thought, even 

though we were energy oriented, that the energy people needed 

some supervision, but they also needed some help that the Federal 

Government can give. So they now hurt us by overregulation, and 

that is what I was asking you about, I guess. 

And, Acting Chairwoman, a key goal in FERC’s strategic plan 

2009 to 2014 calls for safe, reliable and efficient infrastructure development to integrate these resources. Are you supportive of 

FERC’s—have you been there 3 weeks, you say? 

Ms. LAFLEUR. No. I—— 

Mr. HALL. Golly, you—— 

Ms. LAFLEUR. I have been 3–1/2 years, so I—— 

Mr. HALL. I would hate to cross-examine you—— 

Ms. LAFLEUR. I have only been in this job 2 weeks. 

Mr. HALL. All right. Well, you are doing very well, and I thank 

you for that, because you have given—are you supportive of 

FERC’s goal for infrastructure development included in this plan? 

Ms. LAFLEUR. Yes, I am. I think it is an important part of what 

we do. 

Mr. HALL. And what kind of enhancements or changes would you 

consider on this goal? 

Ms. LAFLEUR. Excuse me? 

Mr. HALL. Do you have any changes you’d make? Maybe you 

haven’t had time. Maybe the other gentlemen might. 

Ms. LAFLEUR. When I looked most recently at the strategic plan, 

it is written at a very high level, and I think most of it is things 

like just and reasonable rates and a robust infrastructure, which 

I do not think there would be any need to change. 

I think, as I said, as we look at the current situation of where 

the country is, I want to meet with my colleagues and figure out 

are there things that we need to give more priority to. And I think 

I will be very accountable for that, but I want to do a little bit of 

work before I answer, if possible. 

Mr. HALL. Commissioner Moeller, Mr. Clark, if the administration continues down this part of taking fuel-of-choice decisions 

away from the electric industry, as I am told that they do, and reducing fuel diversity, what negative consequences would you expect? 

Mr. MOELLER. Well, we just have to watch reliability very, very 

closely. A number of us have made references to the midwest, but 

it is just not the midwest. In the next few years and the next few 

68 

summers, very concerned about making sure that we have resource 

adequacy. 

Mr. HALL. And to the acting—my time up? 

Mr. WHITFIELD. I am sorry, Mr. Hall. 

Mr. HALL. Well, I guess I will yield back, then. 

Mr. WHITFIELD. We were all so mesmerized by your comments 

that I forgot the time, too. 

But at this time I would like to recognize the gentleman from 

Nebraska, Mr. Terry, for 5 minutes 

Mr. TERRY. Thank you, Mr. Chairman. And I am your favorite 

witness, the last. 

So, Mr. Norris, I want to follow up with you because part of the 

discussion today has been about a carbon price being built in that 

the carbon price is based on the uncertainty of what is going to 

happen regarding carbon. That intrigues me, what you were talking about, because yesterday I was hit up by a reporter that asked 

me a similar question about energy companies already starting to 

build in a carbon price. And of course the question then from the 

reporter is, what are you guys doing in Congress about a carbon 

price? And I said, nothing, we aren’t trying to artificially inflate, 

at least legislatively, energy prices, nor overtly through a tax. 

So it begs the question, since there is a lot of discussion about 

now building in a carbon price, is there discussions in FERC that 

you have been involved with or know about as an overt attempt to 

either raise prices based on carbon or any other thing that would, 

in essence, increase cost based on carbon? 

Mr. NORRIS. In short, no. The reason for my comments in my testimony here today is to make you aware I think that is a major 

factor in some of the change happening in our energy landscape 

right now, is the uncertainty about when or if there will be a price 

on carbon. 

Mr. TERRY. Well, and I think there is some merit to the ‘‘if,’’ because there are a lot of people that are pushing that. There is no 

legislative attempt. But it also begs the next level of question, with 

natural gas in particular, and you just had some discussions about 

flaring in North Dakota. I have pictures on my iPhone of that when 

our subcommittee took a little trip up there. 

So we are burning it off, we have got an ample supply. But I 

think there is some uncertainty in that area as well based on some 

environmental groups and even some people on this committee that 

would like us to stop using the technology of hydrofracturing. 

Have any of you had discussions in there about any policy impacts on hydrofracturing, how that could impact the reliability and 

affordability of electrical generation in the United States? And let’s 

start with the Acting Chairwoman. 

And congratulations. That is a good call from the White House. 

I am just looking for any call from the White House on any of the 

issues I have asked them to talk to me about. But that is a issue 

for a different day. 

Ms. LAFLEUR. We don’t regulate hydraulic fracturing. We have 

been asked in some of our gas pipeline cases to evaluate the environmental impacts upstream and downstream, and we have taken 

a pretty strong line under the National Environmental Policy Act 

to just look at the impact of the project we are certificating. 

69 

I think as part of the discussion of fuel diversity and gas-electric 

there has been general discussion of should the rules change at any 

time on natural gas, you know, we have to be alert to that because 

that could affect reliability, but no direct impact on it. 

Mr. TERRY. Well, let’s take that, because one of the discussions 

we have had with FERC in the past has been the coordination with 

FERC, particularly on natural gas with the other entities, EPA for 

example, reliability. How is that work going of everyone trying to 

get on the same page in regard to natural gas? 

Chairwoman. 

Ms. LAFLEUR. Most of the discussions I have been present with 

on the EPA have been about specific suites of regulations that we 

have discussed, MATS and so forth. I stay alert to discussion of 

regulation of natural gas, but I have not been part of the discussion 

of fracking. 

Mr. TERRY. Well, no, this is just on natural gas in general, and 

reliability, because there is going to be an issue, as some of these 

plants are unable to use coal because of the new standards that are 

being produced, and there will be a time when they either shut 

down or move to natural gas. That is going to affect reliability. And 

I assume those discussions are occurring with the EPA and other 

agencies so that you that you know that this is going to happen 

and how you are going to deal with it. 

Ms. LAFLEUR. Well, should there be a time when I have any reason to believe the natural gas supply is going to be interrupted, I 

would certainly take part in those discussions. Everything we are 

seeing—— 

Mr. TERRY. Well, this will be more about the down time of 

plants, to either shut down or the shutdown to retrofit. Because 

you can’t gut a coal-fired plant and have it still running while you 

are putting in a whole new system. 

Ms. LAFLEUR. Well, on that we have had discussions, and I think 

that is one of the reasons that the EPA gave us, among others, a 

consultative role if a plant needs more time to retrofit under the 

MATS standard. 

Mr. TERRY. Well, even if you give them more time to retrofit it 

is going to be down time during the retrofit. So we are going to 

have issues of electrical generation not existing in certain areas. 

Mr. WHITFIELD. The gentleman’s time has expired. I am very 

sorry to say you are not going to be the last person to ask questions, Lee. 

Mr. HALL. Mr. Chairman, can I make an inquiry of you? I didn’t 

get to ask everything I wanted to, but I didn’t know what had already been asked. Would you ask to leave the record open for a 

couple of weeks if we mail a direct question to them—— 

Mr. WHITFIELD. Absolutely. 

Mr. HALL. We have had problems about the natural gas sector 

and the electricity sector. Thank you, Mr. Chairman. 

Mr. WHITFIELD. Yes. We will have it open for 10 days and work 

with you to get the questions to the Commissioners. 

So at this time I recognize the gentleman from New York, Mr. 

Engel, for 5 minutes. 

Mr. ENGEL. Thank you, Mr. Chairman. And I won’t take 5 minutes. I was here before and I had to run out. 

70 

I just really have one question. I would like to focus on the 

Champlain Hudson Power Express. I am sure you are aware that 

I and others have spent many years speaking out in favor of closing the Indian Point nuclear power plant in New York. I am not 

opposed to nuclear power, and I never spoke a word about closing 

the plant until after September 11th, when I learned that one of 

the planes that hit the towers flew right over this power plant, 

which is probably about 10 miles out of my district. 

I believe, and so does our governor and all the elected officials 

in the surrounding area, Members of Congress who represent the 

area in Westchester County, we think it presents one of the most 

serious safety and environmental threats facing the New York metropolitan region. 

But New Yorkers no longer really need to face this threat because the Champlain Hudson Power Express would deliver 1,000 

megawatts of power to the New York metropolitan region. And 

with the implementation of the Champlain Hudson Power Express, 

security of New York’s electric grid would be increased and New 

Yorkers would no longer have to live with the dangers of Indian 

Point in their own backyard. 

It is obviously a benefit to New York, and the safety of New 

Yorkers is obviously all of our concerns. And given the great benefits of the project, I really believe that it is important that it is implemented in a timely manner. 

So my only question is really in our effort to plan for a post-Indian Point New York, I am sure that we have to make sure that 

we have sufficiently reliable, safe energy to replace the nuclear facility because when some of us said that it should be closed, people 

came back with, well, what are you going to do to replace it? So 

I believe the Champlain Hudson line provides a portion of that energy. And I would like to hear from any of you regarding the status 

of the project. 

Madam Chair. 

Ms. LAFLEUR. Thank you, Mr. Congressman. I believe about a 

year ago, within the past year, FERC issued an order approving 

market-based rates for the Champlain Hudson line. No one sought 

rehearing of that order, so it is final, so we did the rate making. 

I believe the siting of the line is being done in New York State, and 

so I don’t think we have any anything open on the line right now. 

But we got out the order that they needed for their rates. 

Mr. ENGEL. Thank you. 

Anybody else have anything to add. 

Mr. MOELLER. Congressman, I think it points to the fact that 

transmission is such a good technology because it can solve a multitude of challenges going forward. And so I again want to stay 

positive on the need for more transmission investment. This is a 

local example that has regional benefits. We can duplicate that in 

many areas of the country. 

Mr. NORRIS. Thank for the question. Yes, I echo my colleagues’ 

comments, we have dealt with that line, given it negotiated rate 

authority as a merchant transmission line. I think it is a great example of the wealth or abundance of hydroelectric facilities, of possibilities coming down from Canada that could meet a lot of our 

71 

long-term needs with low emissions, or no emissions, but also 

transmission will be key to making it happen. 

The second point would be, as you talk about your nuclear facility, I am very sensitive to the decisions of New Yorkers about that 

plant. We are also facing a close down of the San Onofre plant in 

California. Just a heads-up: Replacing those large facilities in huge 

urban centers is going to require some other infrastructure to replace it. So we are going to need support, and developers are going 

to need support for building that infrastructure to replace those 

generation facilities. That is not easy to do in today’s environment. 

Mr. CLARK. I would concur with my colleagues and don’t have 

anything to add. 

Mr. ENGEL. OK. Thank you all very much. I appreciate the answers. 

Thank you, Mr. Chairman. 

Mr. WHITFIELD. I will make one just comment on this. You referred to the closing of the nuclear plant down in southern California, and California has the 33 percent renewable mandate. And 

I was talking to one of the CEOs of one of the majority utilities out 

there. And as they build new transmission lines to bring in renewable power to where they need it, they are getting in some instances specific instructions relating to going underground on the 

transmission lines, which raises a lot of technical issues. And this 

CEO informed me that the mileage that they are going underground is costing his utility $100 million a mile. So we are talking 

about some costly situations in some cases. 

At this time, I recognize the gentleman from Texas, Mr. Olson, 

for 5 minutes. 

Mr. OLSON. I thank the chair. And I thank you, sir, for your patience. I can assure you that I will take only a maximum of 4 minutes and 59 seconds of my time. 

Welcome to the witnesses. Chairwoman LaFleur, Commissioner 

Moeller, Commissioner Norris, Commissioner Clark, welcome. 

Happy holidays. 

I have one question, and it is about the production tax credit. I 

will start with you, Commissioner Moeller. 

As you know, for the next 10 years some wind turbine owners 

will get tax credits for every hour they run. This tax credit was designed to kick start renewables. And yet it lives on despite wind 

being a major part of the grid, at least 12 percent in my home 

State of Texas capacity coming from wind. But some markets have 

seen, quote/unquote, prices as low as negative $41 per megawatt 

hour as operators get the credit and run whether the power is 

needed or not. 

Now granted, that is an extreme example, but they can suffer a 

loss and taxpayers make them whole. That moves markets. Back 

home, our lack of new power construction in Texas, our public utility commissioner Chairwoman Nelson has said, and this is a quote, 

the market distortions caused by renewable energy incentives are 

one of the primary causes. This distortion makes it difficult for 

other generation types to recovery their costs and discourages investment in new generation. And while the PTC isn’t the only driver of market distortions, it is a significant force. 

72 

So starting with you, Commissioner Moeller, do you agree that 

incentives for renewables distort energy markets? 

Mr. MOELLER. Congressman, I think all subsidies distort markets. 

Mr. OLSON. Chairwoman LaFleur, any comment, ma’am? 

Ms. LAFLEUR. In a pure market there would be no tax subsidies, 

but many of the resources that fit into the market have tax subsidies of one sort or another that are not taken into account in the 

market price. 

Mr. OLSON. Commissioner Norris, you are up, sir. 

Mr. NORRIS. I echo my colleagues’ comments. I agree any tax implication is going to affect an open marketplace. Having said that, 

I am concerned that some of the nuclear facilities that have been 

closing or looking at retiring because of negative nighttime pricing 

is a concern for me because I think of the long-term stability of 

those as baseload fuel, and baseload plants in our system is important. 

Mr. OLSON. Yes, we need those. Yes, sir. 

And, Commissioner Clark, you are our last hitter, sir. Clark. 

Mr. CLARK. I would agree and for the reasons that you have 

identified. Obviously it is a decision for Congress to make whether 

there will be a PTC or not, it is not FERC’s, but clearly it does has 

a market-distorting impact, especially in very wind-rich parts of 

the country and at certain times of day and at certain times of the 

year. 

Mr. OLSON. And one final question, it is a yes-or-no answer, and 

following up on my colleague Mr. Green’s questions about our grid 

liability bill we passed here in Congress. Yes or no, does everyone 

out there still agree that it is bad policy to trap companies between 

two different regulators with different goals during power crisis? 

Chairwoman LaFleur. 

Ms. LAFLEUR. Yes. I think it is bad policy and I supported—you 

are talking the Hobson’s choice bill? 

Mr. OLSON. Yes, ma’am, our grid bill. 

Ms. LAFLEUR. I supported the basic principle that if the DOE orders you to run, you should not face sanctions for that in that limited instance. 

Mr. MOELLER. I strongly, strongly support the concept, especially 

with what we are hearing about in the Midwest and to some extent 

Texas. 

Mr. OLSON. Yes, sir. 

Commissioner NORRIS. 

Mr. NORRIS. I think it puts people in an unfair position. 

Mr. CLARK. I would concur, and I have been supportive in the 

past of the bill that you and Congressman Doyle have sponsored. 

Mr. OLSON. Thank you. I yield back the balance of my time. I am 

41 seconds early, sir. 

Mr. WHITFIELD. Yes. Thank you very much. We appreciate that. 

Well, that concludes today’s hearing. I would like to ask Ms. LaFleur one additional question. 

Recently it was brought to my attention that FERC has jurisdiction over a number of lakes around the country in which hydropower is being produced, and a decision affecting the Lake of 

Ozarks and about tearing down some houses and whatever and 

73 

then went out at the Grand Lake in Oklahoma. Would you be able 

to identify for the committee the name of an individual at FERC 

that would have up-to-date information on the authority and jurisdiction that you all have over these lakes in which hydropower is 

being produced? Not right now, but later. 

Ms. LAFLEUR. Yes. Absolutely. 

Mr. WHITFIELD. OK. Thank you. 

And without objection, and hopefully you all have seen this, we 

have a letter from the American Public Power Association, a statement that they would like to insert into the record. Without objection. So that is entered. 

[The information follows:] 

74 


88048.028
75 


88048.029
76 


88048.030
77 

Mr. WHITFIELD. And we will keep the record open for 10 days because, as Mr. Hall and others said, there are a few additional questions we would like to submit to you all. 

But I want to thank you for coming up today and visiting with 

us and for the exchange that we had. And thank all of you for what 

you are doing and continue to do in addressing these important 

issues. 

And with that, that will conclude today’s hearing. Thank you. 

[Whereupon, at 11:48 a.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

78 


88048.031
79 


88048.032
80 


88048.033
81 


88048.034
82 


88048.035
83 


88048.036
84 


88048.037
85 


88048.038
86 


88048.039
87 


88048.040
88 


88048.041
89 


88048.042
90 


88048.043
91 


88048.044
92 


88048.045
93 


88048.046
94 


88048.047
95 


88048.048
96 


88048.049
97 


88048.050
98 


88048.051
99 


88048.052
100 


88048.053
101 


88048.054
102 


88048.055
103 


88048.056
104 


88048.057
105 


88048.058
106 


88048.059
107 


88048.060
108 


88048.061
109 


88048.062
110 


88048.063
111 


88048.064
112 


88048.065
113 


88048.066
114 


88048.067
115 


88048.068
116 


88048.069
117 


88048.070
118 


88048.071
119 


88048.072
120 


88048.073
121 


88048.074
122 


88048.075
123 


88048.076
124 


88048.077
125 


88048.078
126 


88048.079
127 


88048.080
128 


88048.081
129 


88048.082
130 


88048.083
131 


88048.084
132 


88048.085
133 


88048.086
134 


88048.087
135 


88048.088
136 


88048.089
137 


88048.090
138 


88048.091
139 


88048.092
140 


88048.093
141 


88048.094
142 


88048.095
143 


88048.096
144 


88048.097
145 

Æ 


88048.098