a critical question. wilke those who do not receive the extensive benefits of this transmission have to pay for the cost of traversing lines across the country? the ratepayers that i represent as you have already occurred have supported their share of more than $2 billion of new investments in the wisconsin transmission system. clearly there are transmission technology decisions that need to be made and there are cost allocation decisions that need to be made but i guess i would ask the whole panel and anyone that wants to comment how we best protect those ratepayers, how we set up the system in the way to best protect those ratepayers who will not be receiving the huge benefits of this transmission build up? .

congressman. i think the model that i've been discussing here this morning, of requiring that the cost, of transmission associated with moving generation from the generation source to market, be included in the price, be offered to consumers is our first line of defense on that. so if transmission were coming from the dakotas, being put into new england, the price of that would include not just the cost of developing the generation, but also the cost of the transmission. we can then compare that price to other generation prices available to us within the new england market for local renewables, for demand resources or for more traditional regenerationth and ultimately, the projects that will go forward will be the ones that benefit ratepayers. >> as far as cost allocation i don't think we can actually speak to would be the best cost allocation of this point in time

it should be tailor-made to the grave that is essentially play and. as i mentioned in my initial comments, if you pick a specific cost allocation right now it's likely to steer the plane in a specific direction and i'd rather have the physics drive, physics and economics drive the plan and then we can figure out how to pay for it after the plan is designed so that is my recommendation. >> as a vermont commissioner i would concur with my colleague from massachusetts as to from the naval perspective where we would be looking to take possession case by case as it comes forward. >> and again i would agree with commissioner azar. we shouldn't dictate a particular method, number one. but number two, my preference would be to have the states try to work it out and if those states that were involved in the

line that went across the state that the state could make the case if there wasn't real benefits hopefully the solution could be worked out and ultimately result in a collaborative way that ultimately at the end of the day if the decision had to be made and could it be made by the states and the region collectively i think it would be inappropriate for ferc to determine the allocation and the application in fact may decide a particular state like wisconsin didn't benefit depending upon the definition and brett dewaal of the term benefit from a particular line and as such may not be allocated cost, but again you have to provide the flexibility for that kind of decision to be made. you can't restrict specifically or dictate in a rule how that has to be done and has to be done in a very broad way that allows the ferc to meet its

mandate to ensure rates are just and reasonable. >> let me now turning to recognize again the gentleman from california. for another round of questions. >> thank you, mr. churn and. i have a question for commissioner azar. you had some recommendations for congressional action to facilitate projects, a transmission projects. do you feel those recommendations are widely shared across the country by state commissioners? >> i have not had the opportunity to float that idea by my colleague so i can't speak to that. >> thank you. that is my only question and i yelled back. >> i thank the gentleman. the chair will recognize himself just to pursue a few questions here. mr. hibbard perhaps you could

deal -- mr. wellinghoff said that if there was 3,000, 5,000 megawatts of wind brought in from off shore and new england it could cause reliability problems down in florida but the converse could also be true, for a power and light and hopefully southern company is to begin florida to generate real electricity could cause reliability problems and new england. how well do we resolve that issue blacks >> thank you, mr. chairman. the issue the chairman and refers to is one of the size of the transmission and the associated capacity being put on to the transmission network in the region, for example if as commissioner azar was referring to you have a 765 tv line dumping -- >> can you imagine the audience right now? [laughter]

okay, what is that? [laughter] what is that? >> if you have a high-voltage line dropping -- >> what does that mean, dropping, what does that mean? okay, try again. >> when a transmission line interconnects or hooks up with a transmission system in new england it looks like a generating facility so if you have a high-voltage line it looks like a big power plant. >> so when people are writing down the street or on the highway and they look off and see something explain to them in those terms so they can understand why people this sensibilities might be affected by what is that is constructed so you can put it in those terms because 765 kilovolts doesn't mean anything to people. >> what they would see is a really big tower but from the standpoint it just puts a lot of electricity on to the grid in a single location and if that were

to suddenly disappear, then there could be problems if the transmission system can't withstand and causes a widespread outage that he is referring to. the value i see in offshore wind technology along the seaboard is overcoming the problem because it can be built out incrementally at lower voltages that what on to individual lines into the major centers along the east coast so that we can build it out without the need for increasing the reliability, the potential reliability risk on the underlying and transmission system so that while i think if we were to take the path of interconnecting 3,000 megawatts in a single point that would be the problem the chairman is referring to but that offshore wind has the potential to be disbursed on a wide spread geographic basis and potentially enhanced reliability of the grid. >> mr. wellinghoff would that solve the florida problem or from our perspective the new england problem? >> i'm not sure, mr. chairman.

>> i'm not sure that what, mr. chairman. ultimately even though you may disburse the 3,000 megawatts over a number of locations the issue is going to be the variability of the wind and effect of it on reliability across the interconnect with for a frequency. and what actually directed a reliability division to commence a study that will look at this issue and determine how that incursions' in frequency can affect reliability across both eastern and or western interconnect. >> mr. hibbard, you are back at a ferc committee. what are you going to say when they raised the issue? >> first would commend the chair for looking into this. [laughter] >> good, good. >> and i would encourage him to consider in that study the difference between variability of thousand, 4,000, 5,000 megawatts being connected

at a single point to the variability and impact of it being spread over a very wide geographic region and what for the outcome is uncertain that it would be the right answer. >> would you agree there could be the distinction made between the concentrated renewable source and something that is dispersed over hundreds and thousands of miles? >> mr. chairman i try not to practice electoral engineering without a practice but i believe there's a difference between the two. >> by the way with those issues exist in a western state for example that might want to produce 3,000, 4,000 or 10,000 lots of renewable in their state and try to move that for example in to a metropolitan area and another state or several other states, would create the same issue? >> it could be applicable in either interconnect. >> so it's an issue we ultimately have to resolve. i think going back to the 765

issue is an important thing to understand because in my experience at least on this committee for 33 years, there are corporate entities that think big, the bigger the facility, the bigger the plan, the better it is and there are others that think maybe we can disperse the way in which we generate electricity. maybe we can do this in a way that in here is going to be increasingly important to generate the solar and wind and other renewables from the dispersed sources. and that is to a certain extent where the smart grid comes in so that we are doing it and we are not only going to need is margaret with smart people planning a smart grade so we don't overbuild it and put those burdens back on to the consumer. and we saw all of that had been back in the 1970's and early

80's where all of these nuclear power plants that were guaranteed to be needed -- if we didn't build 500 new power plants they told us by the year 2000 we would have blackouts all over america so we need to think big, but all these costs on the shoulders of the ratepayers all across america and the new england region we've really suffered from the over enthusiasm i will say of the central planners and so we have to be careful here that those types of we will call it planners don't control this process because it is just the opposite year of we hope we are entering in terms of the development and i can just feel the hoofbeats of the central planners moving towards this whole concept, and after 33 years i am kind of aware of what

can happen. there's an old saying a smart man learns from his own mistakes and a wise person learns from other people's mistakes but at my age and service and, an expert in both areas of mistakes so i just don't want to see that happen again, and that overbuilding issue is something that is quite important to me. so mrs. azar can you go to the question of the cdc and first explain to the viewing audience with that is and why different results occurred depending upon the decision which is made. >> the alternating current system is the primary transmission grid we have right now and it's completely interconnected so when you put an electronic on that grid it's going to go through the path of least resistance and we with models you can predict where it went to go but you can on direct it, it goes, the electron goes where it wants to go. on a d.c. line --

>> that means direct current. >> thank you. you have a lot of control over it, the electron was in one direction. you know for instance when you drop an electron on one end of a dc line you know where it is clinton and up, on the other side of the line where as a ac great if you look drop the electron you are not sure what pat is going to take. the only thing you know is you are pulling power of certain locations, so it is a very, they are two very different models. >> for the purpose of the discussion today how does that instruct this discussion in terms of the goals that we are seeking to achieve clacks >> i can give to answers to that. one is we need to know what the goals are from congress and then we are going to be about to decide which of those weird combination of both of them will solve the problems you're going to put forth to us. i can tell you from a personal

perspective that the dc line, if your problem is trying to get power from a fairly localized location let's just say in the dakotas and george fighting to get it far east, as long as you are over 400 miles long, dc lines will likely be a good solution to the problem. >> are they more or less expensive? >> that is a good question. as a general rule i would say less expensive but it depends what kind your building. >> and that should be a decision in your opinion made by the region's? >> that is correct. >> and that could actually turn how much is placed on the consumers in terms of their electricity bill each month? >> that is correct. >> mr. wellinghoff, if i may, you heard mr. hibbard and others talk about the impact would be of the waxman-markey bill, it

would be sense to move away from carbon producing electrical generation. there would be national renewable electricity standard now as the result encompassing an additional 20 states and he largely believes that is going to force states on a regional basis because of these national goals were to reach accommodation on these lines and the federal government is actually going to be less needed in the future perhaps with exception of the federal lands issue to resolve these issues. what is your response to that because we are trying to create a market based response and i will just give you an analogy or analogous situation perhaps you could reflect upon. after we passed the 1996 telecommunications act, all of a sudden there was an explosion of broadband appointment across the country. telephone companies, cable

companies, people telling it isn't cost-effective to be deploying fiber optic or you know, broadband technology we are now on a mad race to do so because there's new -- a federal law placing a premium and by their time we reached 2,000 we had a dot com bubble because of broadband across the nation and now we've created thousands of new companies, some survive and some didn't but it was great for the country in the long run. is there reason to believe the legislation as it is drafted will not unleash a similar and very, very significant deployment of renewables across the country and kind of press regions and individual utilities to finally resolve their longstanding i won't call it the position but skepticism because i saw that in a telephone sector. i saw it in the two cable

sector. they moved overnight to change their perspective. do you think the legislation will do that and as a result perhaps the federal role isn't going to be as needed with the exception of the federal lands issue. >> certainly as you are aware, chairman markey there's approximately 29 states that have no portfolio standard in my state nevada is one of those we have a standard that's 20% by 2015 so it is far ahead of most states standards and those standards have in fact created markets for renewable energy and moved renewable energy into the markets effectively so i think that's happening already on the one hand but on the other hand i have people coming to my office to tell me wind is being curtailed in the midwest because we don't have adequate transmission, so that tells me we have a problem it's possibly the markets are creating these new markets for renewables but the need to somehow in short at this transmission gets built to make a deliverable. we need to make a deliverable. >> you're saying that the

state's are not cooperating in the midwest and the transmission of wind? >> i'm not saying this are we the state or federal government. i think it's a combination of the fact we have barriers which include issues of planning, citing and cost allocation that need to be we looked at in ways we can facilitate more transmission. >> when you're basically saying the federal government needs more authority because the states are not doing the job moving the wind around in the midwest. >> i'm saying or ultimately what we need to do is ensure that the states understand -- >> and i appreciate that. >> and that in fact >> by your saying they will need that in addition to the new law we are passing which will create all of those incentives for utilities to move and states to move, your saying that is not going to be sufficient, then you believe the states themselves have some built in inertia the and some of those utilities to

as well and that because they don't move even though we passed this wall and created these goals that have to be met by national mandate that people still need the federal government to come in, is that what you're saying? >> i'm saying that i'm not blaming the states, nor am i saying the federal government is the panacea. i am saying -- >> here's the problem, and i appreciate what you're saying and you are engaging in a bit of terminal logical which is necessary for you to maintain good relationships with the states and i appreciate the position i'm putting you in that the same time we are going to create a brand new law that is going to affect all these states and so we need some evidence serious basis for pre-empting the states that is based upon a federal perception of the problem that exists in these states, so while we won't use the word plame, we need to find a way in which we pinpoint what

it is that is occurring that is the problem and then we can curtail the solution to the we cannot deal with it and kind of broad generalities. we need the specifics and then even in the report language of the legislation we can ensure that we are exploiting the problem as it exists let's say in a particular region and here we are talking about the midwest and the fact wind is not moving around although it is readily available, so pinpointing with that problem is helps us to then tailor the language to reflect some you can perhaps elaborate on the midwestern problem where the bottlenecks are, what causes it, and then we can kind of contemplate on what might be necessary. >> and i'm suggesting part of the bottlenecks are the fact number-one, ferc doesn't have the authority to allocate a crossed boundaries so between pgm for example we don't have

the ability to obfuscate transmission across the boundaries and as such we are now getting the types of transmission belt and i think you will hear from mr. wolf on the next panel and he has a very interesting transmission project i would come in you to explore with him further because he is in the midwest trying to get large amounts of wind out of the dakotas and to chicago area and i think one of his issues he is talking about is cost allocation across to regions so what i'm suggesting alternately is congress needs to look at an entire structure of planning, citing the cost allocation that is initially deferred to the states and i would say to the states should in fact will tightly solve that problem but if they can't, then the pressure should be there to allow the federal government to step in if necessary. >> this before, mr. wellinghoff.

you know, i was the author in 1992 of the wholesale transmission access provisions in the energy policy act that for the first time gave the ferc the ability to force utilities to stop blocking utilities for nondiscriminatory access to wholesale transmission lines so there could be more competition in the area. the ferc been built upon the wall that i created and issued generic order 888 on transmission access which is a historic order and that is based upon my 1992 law so i'm very sensitive to this issue but again i don't think we should taylor something that goes beyond what is needed, and i say this to you, chairman wellinghoff, part of the problem we have in massachusetts and new england as well is with, and it's not you, it's your predecessor of ferc that has just left office, but

pre-empting the state and local governments from granting ferc sliding authority on wholesale electric transmission lines. that issue is illuminated by the fact ferc has seemed to be completely unresponsive to the local concerns when it comes to deciding of the liquefied natural gas facility in fall river, massachusetts. i have an lng facility in my district of massachusetts. massachusetts working with federal government has the license to the lng facilities about 10 miles off the coast line to bring in lng into our market and into the new england market. it is a portnow of 30% of the natural gas we use in new england and we support lng and we have license to facilities that notwithstanding, massachusetts city into the ferc will, we don't need another one on land.

we are doing it offshore and licensed them with, and the ferc, not yours but the ferc at this point says no, you are going to have another one in massachusetts and even that decision itself could affect the amount of renewables that we need. notwithstanding the fact natural gas may be half of the carbon use as coal it's not nearly as good as renewables will be but it's going to affect our marketplace by having them be forced upon us and the ferc is pressing that now the last four or five years. so that kind of calls into question, kind of this federal one-size-fits-all process where even the when the state is saying back off the ferc continues to say no, this is what you are going to have four knipling wind so how do we reconcile that, mr. wellinghoff? >> well, mr. chairman i am not suggesting a one-size-fits-all

process, and i'm suggesting on like the lng process ferc has the primary and initial responsibility with respect to siting and permitting that in fact of states and given the initial opportunity in this regard and that opportunity i think should be given all the tools necessary to succeed. >> thank you, mr. wellinghoff. are there other members that wish to ask questions of this panel? that we recognize the gentle lady from wisconsin. >> thank you. one rather big question but i appreciate the chairman for asking the witness is to make this understandable for the viewing audience, and we had a discussion recently following the electrons and i actually like to pose a question on following the money. i ask anyone who wants to give to stay very brief primer on the economics of transmission. is there a guaranteed rate of return? how was that determine? who decides? and if so, what is the guaranteed rate of return for

transmission? >> , baldwin, i will attempt that. i like to believe in rate base regulation and transmission is not first of all you have to understand transmission isn't a market item, it is an item that we have limited number of entities who are putting in transmission and it is under a rate based on cost scheme so they are authorized return on their investment and they have an opportunity to earn a return button to earn the return they have to manage their expenses and they have to manage their operations and efficient way to ensure their expenses matched with their projections are so the return comes out to the level they hope to achieve. the regulators wouldn't it be state regulator or federal

regulator a level of return on equity that would be authorized but again that's only an opportunity during that level of return. >> do you have any averages with the rate of return might look like? >> i'm sorry, but it might look like? >> what is the average rate of return, and others variables, a ballpark -- burr i can submit in writing by don't have an average for you today. >> thank you. ai thank the gentlelady. i thank all the witnesses. you've been fantastic and you, mr. wellinghoff i want to tell you how much we appreciate your willingness to take on this job. this is one of the toughest jobs we are going to have in america. you have an outstanding record, and i've already had in conversation with him privately and i am very glad that you have this job in that position.

it's very sensitive and it's going to require people like you who are willing to spend the time to get this right so we have a long-term solution. and as we are going forward especially the next week or so, we are going to need some specifics to helpless think through this issue in terms of where the problems have been, what has caused the problems and would be needed in order to correct those problems. we will need some examples and some specifics with regard to what has been used as a blocking mechanism to the resolution of these regional issues because we want to get to that issue. we want to have real competition in the marketplace. for you especially, we hope we can work with you the next week. you have an outstanding staff and you are an outstanding individual and i think we can accomplish that. >> we would be happy to do that,

mr. chairman, and thank you for your kind words. >> what i am going to do now is work in reverse and give each one of you one minute to tell what you want us to remember as we consider this issue over the next week and we will begin at this end with you, mr. halvey, one minute each piece. >> thank you, mr. chairman. i think the two things we would emphasize the are the issue of super sizing which relates directly to the cost allocation issue that we spoke about. it doesn't make yeltsin's for us to use up whatever good will we might have trying to locate, excuse me, trying to locate a line that is undersized. the second thing is i think the federal land issue the, the permit initio, i have elaborated some on that but we see this as a large impediment. those would be thehi