they put that stuff in the air and came our way. we're america's tailpipe. so is maryland so is pennsylvania, so is nmg njew jersey, so is new york. i'm a big believer in treating others how i want to be treated. we need to be mindful of them. epa needs to be mindful of them as well, but i just want to let you know there are other folks adversely affected by your ability and the ability of some people and our country to develop electricity, and we suffer the consequences. i don't like it, i haven't liked it, and we went to court and finally succeeded in doing that. get in the car with me. use your imagination. we're in southern delaware. we're driving on a road to the east to the delaware bay. how do we get to the delaware bay? there used to be a parking lot there, a big parking lot. it's not there anymore.

actually it is. it's under water. you'll see a bunker sticking up out of the water about 500 feet out. it used to be about 500 feet on the land. now it's 500 feet out in the water. something is going on here. we don't make this stuff up. the key is for us how can we have cleaner air, how can we address the issues of rising waters? delaware is the lowest lying state in the country. it's a real problem for us. in order for us to address this, we need to figure out how to do it together. and i'm not interested in seeing epg jam anything down your throats, but we need to figure this out together. it seems like you export a lot of electricity. any understanding of the rules being contemplated here, you don't get a lot of credit for that. the credit goes to california and those other states. we have to be able to figure out how to deal with that. i want to ask you a question of

the lady from california. it sounds to me like you're doing pretty well and you possibly have a cleaner environment and a stronger economy. we believe that, yes you can, if it's the right choice. folks from california, you're in a situation where you acted early. you've baineen a good citizen, good steward, and my sense is you'll be punished for it. we're in the same situation. we don't like that. what should we do about that? >> you were commenting earlier about states needing to work together is exactly correct. to my friend from wyoming, my local utility, the los angeles department of water and power, just concluded a very large agreement with a wyoming wind company to import wind-generated electricity from wyoming to help replace some of the coal-fired

energy that they have been relying on. they are actually taking responsibility for being the largest emitter in our state, even though the electricity we were using was coming from utah as it happens, and there will be costs associated with transitioning away from the coal and into the wind. but overall the net of it is that los angeles rate payers will still be doing okay because the utility is taking steps to help their customers become more efficient in their use of energy. and that i think, is kind of the critical ingredient here that if our rates go up because of new investments that we're making, that has to be offset in some way in order to shield the rate payers from rate shocks and from things that would just make it untenable for them to move

forward on this cleaner electricity plan that we're on. but given some time for the transition, we can do it. i do think that it was right to come up with acrediting mechanism. they're going to have to allow states to work together in an either bilateral or regional basis to come up with programs where they can effectively share the cost and the benefits. that's what we're doing right now through our agreement with the canadian province of quebec where we now run a literally bistate, binational trading program with initialal lounsz. alal alal alal

initial allowances. >> can you just tell me about shipping it off when and other places not getting the credit for it? the credit as i understand it goes to california. what's the fair way to deal with this what's the fair way to compromise. >> i didn't fully understand your question sir. >> can you try to answer this? it certainly pertains to you. you must have thought about this. >> well, as it pertains to the clean power plant i think the two issues or actually three issues are at play. first is the attribution of fossil fuel emissions, co2 emissions being attributed 100% to the energy-producing states. and the other issue at play here is the renewable energy that's generated in wyoming which most of it 85% of that, is shipped out of state. now, applying an escalator to that, 100% of that, to the

producing state is unfair and creates a disadvantage. >> i agree. mr. chairman i'll say this. we have to figure out a good compromise here and you'll have to help us. thank you. >> thank you sir. >> i'd like to thank the panel thank the chairman and ranking member. let me just say a few words about my home state of west virginia and what we've had to say about the clean power plant. our own epa is called it's patently illegal, it's been put forward with the if ifinesse of a bull in a china shop. i would note in the comments that 37 states have submitted negative comments or comments of great concern to this rule while the numbers that have submitted comments in support are much much smaller in terms of states. but i want to talk about the reliability issue. west virginia is joined with other states, probably several of yours to block this plan and

we'll be hearing this consumed in the next several months. and the epa in west virginia -- or the dep in west virginia has said these goals are unattainable and we've heard some testimony to that. with that in mind i would like to talk to mr. westerly in terms of your issue proceededominantly with coal. 90% of our electricity is with coal for good reason, we have a lot of coal. the epa doesn't have a lot of concerns about reliability with this rule. yet last week pg&e released information that they could produce up to 1049 gigawatts in jeopardy. it's the amount of electricity to power 51 homes. this is one of the study

recently released that i think calls into question the reliability issue. are you concerned about reliability in indiana? i would note that ms. nichols did mention the reliability issue as a very important one in the state of california. i'd like to hear your comments on that. >> yes, we are. we have another group that deals with reliability, but here's our fundamental problem. the plan even in epa, has a significantly more fire fuel reductions by closure than it does new generation of renewables and wind and other things. so the plan necessarily will reduce the flexibility of our electric supply in the united states. you add this t the fact that we've had record jm demand days -- they're a little better handled this year than last year with the polar vortex. so we have increasing demand we have decreasing supply and the renewable supply is valuable but it's not reliable.

so sometimes it's good sometimes it's not, sometimes the solar panels have clouds or snow on them sometimes they don't. so you can't rely on them for either thing. their wind capacity is higher than their actual generation and they're not always available when you need them. so i am concerned, as are are a lot of people in the industry. we will see some catastrophic results sometime during the implementation of this plan. we just don't know where or when? >> do you have a comment on that, the reliability issue? >> certainly. we have some significant concerns from the perspective of system reliability the modelling program used by the epa to evaluate the building blocks and whether the goals are actually achievable uses less robust data than possessed and used by our own timso. and they are responsible for maintaining our grid. unfortunately, the epa never

asked miso to do any studies of the grid prior to releasing this proposal. examples of the work we think needs to get done is gathering information about the firmness of the pipeline for gas-fired units, plans for replacement of units, the impact of intermittent renewable resources on reliability. and considering the electrical grid location and network dlirability of units expected to be retired. again, the modelling used by the epa doesn't appear to consider any of these fundamental and necessary factors so we are concerned. >> i would note in my state, we are heavily reliant on coal for obvious reasons, but we also have a lot of natural gas. but to transition these older plans to natural gas is just not a realistic endeavor. it's exceedingly expensive. and to build new ones takes a lot of time and a lot of energy. you're going to expend energy to move forward on this as well. you've also just recently closed your -- one of your nuclear

plants in wisconsin, and your plan that was put forward for you under this clean power plant does not take into consideration your loss of nuclear power? that's got to be a problem for you, too, in terms of meeting this challenge. would you make a comment on that? >> sure. the loss of that plant is huge for wisconsin, and we think that eventually that is going to have to be replaced with a carbon neutral source. and that was not taken into account for the increased cost of this proposal for wisconsin to comply. >> ms. nichols let me ask you a quick question. we had a hearing last week on ozone and the new regulations that are going to be put into effect. is every county in california compliant with the current ozone regulations that we have presently? >> no, senator, we're not. we have remaining challenges in both southern california and in the central valley in meeting the ozone standards, and the new

ozone standard will add an extra challenge as well as some extra time to that effort. >> so you put that on top of what we're doing here with the clean power, and -- >> we care about our citizens, senator, yes. >> well i care about that as well. >> yes. we rely on the science. >> in terms of how we're going to meet this challenge, in terms of our timelines, extension of timelines, extension of measures, what's going to be the best, mr. parfitt from wyoming? what's going to be the easiest to lay down on this clean power plant that will make the biggest impact to meet the challenges? deadlines, timelines, lower standards, less reductions? >> well certainly timelines are a big component of this when you consider developing a plan and the time involved with that and

the complexities and the amount of agencies in states that would have to be involved in that discussion, let alone the legislation and rules that we've already mentioned here and the time that that would take seem to be very problematic. >> thank you. >> thank you, senator capito. senator murphy. >> thank you very much mr. chair. underlying this entire discussion is the challenge we have with carbon pollution methane pollution and the impact it's having across the world. we don't have to look across the world, we can look to my home state of oregon and indeed we are seeing that the fire season has grown by 60 days over the last several decades and a number of acres of forest has been burned, it has increased dramatically. we have an oyster industry that's having great trouble because the baby oysters have trouble forming shells because the ocean is 30% more acidic

than it was before the industrial revolution. we have a farming community that's suffering significant, repeated worst ever droughts because the salt pack in the cascades is steadily declining and this year is one of the lowest ever. and while rain earlier in the year can fill a reservoir, if you don't have the snowpack come august, you're in trouble. so as we see this impact on farming and fishing and forestry right now, we're not talking 50 years in the future 100 years we're seeing it right now. the senator from delaware was talking about land under water. should the energies being damaged by carbon pollution be able to sue those who are generating the carbon proportionable to their contribution? mr. easterly? >> i'm not a lawyer so i can't answer should someone be able to sue. but remember, the environment of our earth has been changing for

all of recorded history. indiana used to be under a huge ice sheet. there are natural variations. the things you talked about, some scientists would say is due to the pacific oscillation and they're likely to continue causing harm in the next 20 years. >> mr. parfitt, would you like to answer? >> i would echo those comments that this is a legal question that i'm not an attorney that can address that. >> a legal question. but the principle, you understand a polluter pays. when you do damage to your neighbor, shouldn't you pay as a basic principle? >> i think this is a complicated question. you've got users that may have some responsibility as well, so from a legal standpoint -- >> okay. you don't want to answer the question. that's fine. ms. nowak? >> if the utilities are

following existing law and regulation, i think it would be very chilling effect to have them subjective to legal claims. >> everyone in their first year of economics learns about extranomalies. certainly our libertarian friends would say if you do damage to your neighbor, you should compensate for that damage. carbon and methane are produced in a million different ways. there are no states that don't produce a lot of both. but we are seeing a differential in how states are taking this on. oregon is now about 70% of its electricity is produced in not fossil format, and ms. nichols you were referring to a 2020 goal of one-third, but that didn't include your hydropower i don't believe. what is it with hydropower included? >> if we included the hydro that we receive we would be already above our 30% 33% goal.

so we chose not to add it or the legislature chose not to add it, or nuclear, because they were trying to really push for new solar wind geothermal and biomass. >> say again if you included the other non-fossil -- >> we would be at about 40%. >> you got to aim for oregon or it's 70%. >> we envy oregon. >> we often respect greatly the examples that you're setting, particularly here -- you've set up a marketplace. now, if we turn back in time there was a proposal that came really, from a right wing think tanks about using markets to regulate sulphur dioxide to take on acid rain. the concept was to regulate every smokestack, but to complete the marketplace and therefore the most

cost-effective solution would be adopted. how did that work out? do you have memory of that? >> senator, i was the assistant administrator of epa when we implemented the acid rain program. it did reach its goals in terms of the sulphur dioxide that was reduced, and it did so less expensively. we relied on that plan in designing our cap and trade program in california. >> so the marketplace for sulphur dioxide worked extraordinarily well actually lower cost and faster results, and anyone anticipated. it was really off the charts success, and congratulations. why wouldn't that same strategy work well in carbon dioxide? >> well, we believe it would. it was as you know, defeated here, but within california it was actually put on the ballot and the voters chose to keep that system in effect because i think they became convinced that

it would lead us to a cleaner future. >> they wanted to see carbon dioxide reduced in the most cost-effective manner to receive similar off the chart positive result. isn't a clean power plan based on states developing their own plan through a range of different choices of how to address carbon? not quite a cap and trade but that is a possibility? >> it's clearly allowable. it's not required. i know that epa was very familiar with our program when they designed the rule but i also understand that they tried really hard. it doesn't seem like they've quite succeeded just yet, anyway, to indicate to states that they would have the ability to design a plan that fit their own unique situation. >> thank you. >> thank you, mr. merkley. senator brockman would be next but he's graciously agreed to

let mr. bozeman go ahead. >> thank you i appreciate it. following up on senator mark lee's questionlee markley's question, you're out of ozone. the cost to california alone would be 800 million to $2.2 billion per year. do you feel like individuals should be able to sue for noncompliance? >> under the clean air act, citizens have the ability to sue epa or, indirectly, the state for noncompliance with any element of a sip. california has issued a state implementation plan and we are in compliance with our plan. we are moving forward steadily every year bringing down our levels of ozone, and we've actually come into compliance in many counties. >> so your argument, then, is the same as ms. nowak's, in the

sense that if you're doing things as required by law then you shouldn't be sued? >> one of the reasons why we are here to defend the carbon plan the epa plan is that it helps us with our ozone standard as well. we need all the help we can get. >> but in regard to the question, do you agree with ms. nowak in the sense that you know, if you're in compliance with what the regulation requires, you shouldn't be sued? >> mr. bozeman, i went to law school, too, and we were taught that anybody can file a lawsuit. >> i didn't go to law school. >> anybody can file a lawsuit and sometimes they can win. >> i guess what i'm saying what she's saying is that would really wreak havoc in the sense that -- when do you feel like you're going to be ozone compliant? >> at this point we are projecting off into the future. we're working as hard as we can but it will probably be as

challenging, if not more challenging, to meet the ozone standard as it is to meet the greenhouse gas standard and that's exactly why we are supporting the epa rule because it will help us with both. >> do you agree it will cost you 800 million to 2.2 billion a year? >> i can't verify that number. i would say, though that the economic analysis that epa did in advance was using all the tools that we would have used in the same way. >> thank you, mr. chairman. >> thank you, senator. senator whitehouse. >> thank you chairman and thank you very much to the panel for being here. let me ask first commissioner nowak, in 2013 commissioner nowak, the milwaukee journal sentinel posted an editorial in your home state, and i'll quote

climate change is happening. human activity plays a huge role in that. the consequences of doing nothing could be dire and expensive. do you agree with the milwaukee journal sentinel on that? >> thank you for the question. my role as a regulator or an economic regulator, we ensure also the reliability of the grid. i did not or do not endeavor to take on the policy behind what is before us. my role here has been analyzing it and the rules that come before us. i look for three things. the environmental rule that's coming, does it compromise the affordability, the safety and reliability of our grid? that's the lens that i look through this rule. >> so no amount of environmental cost would figure into your analysis then? >> no, that's not what i said. >> that's exactly what you said. i'm just trying to make sure i

put it properly and want you to explain further. >> environmental rules cannot unduly compromise the reliability -- >> no matter how great the environmental cost? >> there is a balance that needs to be struck. >> how do you strike that balance if you don't know whether climate change is happening and whether human activity plays a huge role in that, whether the consequences of doing nothing could be dire and expensive, which i assume dire and expensive are words that would fit into that calculus. >> we look at what our impact on the rate payers would be and the benefits to the environment under the proposed rule. >> but the impact on your rate payers could be felt through climate change as well as through just the rates that they pay, could they not? >> those are -- >> that's not a part of what you looked at, that's not part of your analysis? >> the benefits have been put forth by the epa in their plan and we are weighing the costs against the benefits that the epa has proposed.

>> for what it's worth, the executive director of the wisconsin business alliance has called renewable energy and economic opportunity for wisconsin that will quote, result in business growth, job creation, cleaner air and a quicker path to energy and independence. she recently said, we should look for opportunities to promote jobs and the environment and the clean power plant is a great way to do that. so there appear to be other voices from wisconsin. mr. parfitt, rocky mountain power's owner, the spokesperson for rocky mountain power's owner says multi-cost approaches seem to be a less costly way to meet the power plan's targets. wyoming tribune has said that and i quote, the panels have held earlier discussions with other states about cooperating to meet epa targets, consistent with the multi-state approach that rocky mountain power's owner referred to.

their wyoming counterparts have thus far rejected regional advances. now, montana, which is also a rural state that generates a significant portion of its electricity from coal, has come up with five draft options for complying with the proposed standards, including options that would not require montana to shutter its coal plan. if montana can do this, why can't wyoming, and if montana will work with other states, why won't wyoming? >> well first i'll address montana's five differential alternate tifz. in their alternatives they assume that they will get credit for 100% of the wind energy. and that's not what we've been quade or what has been quade byconveyed by epa. we were told we would get no credit for wind energy consumed outside the state. so that's one difference. as far as the multi-state

discussions, i will say that we have been involved with the same group, the center for new energy environment, in participating in those conversations along with montana and 13 other states. now, there are challenges with a multi-state plan, particularly when we don't know what the end goal is going to be. all we have right now is what has been proposed. we don't know how epa is going to change that proposal based on the comments that have been received. so we don't know what the targets are going to be. >> do you agree that climate change is happening that human activity plays a huge role in it and that the consequences of doing nothing could be dire and expensive? >> you know i'm here to talk about the clean power plan and whether or not, if we're going to do something to address co2 emissions whether or not this is a good plan and is it workable for wyoming, and the answer is

it's not workable for wyoming. >> irrespective of the damage co2 might do? there is no number from co2 harm that could cause you to change your mind on that? >> not on the proposed plan and what that does to clients. >> finally, mr. easterly how have you built costs of climate change for indiana into your analysis of the value of the clean power plan? >> i don't think you can quantify any cost of future climate change on the state of indiana. let's go back to your other question. we need a plan. >> why do you not think you can quantify it? isn't that part of your job? >> there's nothing concrete to quantify. there is speculation -- >> have you read the report that says that 8.23% likely increase in energy costs? >> the energy costs come from the clean power plan yes.

>> that's not from the clean power plan this is from increased heat load in indiana requiring increased cooling load during the -- you're not familiar with that report obviously? >> not that one. >> okay. when you're talking about the cost of electricity are you talking about a per kilowatt hour basis? >> yes. >> let me just say if i could -- i'm sorry to go over -- can i just make a rhode island point? it's very brief. >> how long is the rhode island point? >> less than a minute. >> 30 seconds. >> average monthly bills of regular customers in wisconsin are $93.10, and in indiana they're $104 and in rhode island they're $105. even though our kilowatt costs are higher, because we've invested intelligently in energy efficiency and it's that figure that really matters with the pocketbook. >> thank you, senator

whitehouse. senator borosky. >> thank you mr. chairman. it was affordability, reliability and safety? were those the three you considered? >> correct. >> thank you. mr. parfitt just to kind of review, when it comes to how the epa credits renewable energy, wyoming, which pro dusz a significant amount of renewable energy, still stands to be severely disadvantaged. you talked about how much wyoming could produce in terms of wind energy. i think you said that 85% of wyoming's wind energy is ex portd to ported to a number of other states. i heard ms. nichols say california wants to buy a lot more wind energy. but they've said, no, it's only going to be credited to the state where it's consumed not where the energy is created, the hosting state. which means wyoming gets

absolutely no credit for the wind energy is develops. so i appreciate senator carper saying that needs to be drasd. so my question is, how is this going to impact wyoming's ability to obtain our mission target, and then how much additional renewable generation would we have to develop just to meet the epa's proposed target? >> this makes it very difficult for wyoming to achieve its target. the estimate of renewables would be somewhere around 9 million megawatts of wind energy that would have to be developed in order for us to meet our target. right now wyoming consumes about 600,000 megawatts of wind energy. so that equates to about a 1400 or 1500% increase that wyoming uses right now. >> and you mentioned a lack of flexibility from the epa in giving wyoming what we would need in terms to continue of producing a lot of the renewable

sources. you mentioned more than half the land in wyoming is federally owned, that this has a significant impact on meeting the man datesdates coming out of the epa. you mentioned permits to the esa requirements for which wyoming has absolutely no control, and it doesn't seem the epa is proposing any sort of relief in plans to address these. you specifically cited only one-sixth of the total area that the epa has identified for wind energy development is actually available for wind energy development. grous considerations grouse considerations. it sound like they're asking the epa to continue while washington's foot is still on the regulatory brakes. can you go into more detail how federal landowner ship in wyoming and the red tape that

goes to dealing with resources on that land is a washington roadblock that the epa ought to address if they want wyoming to produce energy faster? >> yes, and what wii seen for wind energy products those projects go through the neba process, that they've taken anywhere from four to eight years to get approved through the nepa process. then there is an additional fish and wildlife service for nepa products and those will add to the time involved. the other piece of it is transmission. you have to have transmission to move the energy out of the state. and those right now, we have two projects that have taken up to eight years to get through the permitting process and they're still in that process now. >> and we had previous discussions and debate and votes, actually the energy committee, about transmission lines under the democratic control and senate in the past, and democrats specifically voted

to block transition lines which half of the wyoming land is public land. so that, i think, has played into exactly what you're talking about as well. >> that is correct. >> you also talked about the potential closure of four coal-fired power plants in wyoming over a $1.4 billion, according to the wyoming public service commission. well, that's lost investment and who knows how much it would cost to replace the lost power. that's going to be passed on, i would assume to citizens within the six-state territory of pacificore and senator whitehouse asked a specific question about pacificore. would that mean folks not just in wyoming but california washington state, oregon idaho and utah are all going to get a big new energy tax increase because of what the epa trying to do in closing those four power plants in wyoming and

having to build new plants. is that what you're saying? >> that is correct. those costs would be distributed amongst all the states involved with that system. >> so california would have higher electric bills as a result of the epa mandates here through pacificore. >> yep. there is a portion of that that would be involved. >> unlike most sue and settle arrangements that deal way single plan and single facility under the epa's power plan rule the state's entire electricity section could be subject to environmental lawsuits. epa actually agrees with this concern. during questioning and answering in february the epa's active

heir janet mccave said she sees subjects being subject to third-party lawsuits. we've heard it from the public utilities commissioner as well. i guess mr. chairman, i'd like to, if there's time, ask a couple folks here and three in the panel. do you believe the epa can provide some sort of protection from these lawsuits? >> we think the very foundation of this proposal also trieds on state's right. and to have any state plans with respect to public authority is a great concern of ours. i think state energy policy, and in con you are enslirn mental -- environmental. >> we do not believe they can

protect us from lawsuits under the clean air act. they can happen and they do. >> mr. parfitt? >> we don't believe we can be protected from lawsuits by third parties with a state plan as the proposal has been written. >> mr. chairman, i'm out of time. thank you very much. >> thank you. senator fisher? >> thank you, mr. chairman, and thank you all for being here today. commissioner easterly when we had the acting heir administrator, ms. mccabe here earlier in the year, i asked her some questions about the heat rate efficiency assumption for building block 1. and we know that epa relied on the sergeant in lundy analysis for that, 6% heat rate, and their own terms they said that the epa missupplied the data in a cumulative manner and consistent with how the study was conducted. do you have any other concerns

with how the epa formed that 6% rate that's out there? >> part of the epa's process for building block 1 assumed you would operate the plants in a way that gained efficiency, which really means you have to operate them in a steady state output. but then we have building block 2 that says, oh your coal plants are the last resort. you must and make up for renewable gas, and that will make it much worse. there's also mission controls you have to add on to the dolly plans. they all agreed to reduce the efficiency of the plant because this rule is based on megawatt. so there's a bunch of reasons that the planned plapzly.

>> so do you think it's possible in your state? >> we're hoping, and hoping is a strong word, that we might be able to get 2% if everything was done that could be done. but it is a serious challenge because anything that's cost effective, you have a reason to do it, anyway, if you're the utility because you make more money. so the things that are left will only be cost effective because the cost of not doing them under this plan is more expensive than the little incremental thing you'll get. >> that's exactly right. would compliance with other environmental regulations, would that have any impact on your state's ability to meet that 6% it will, because we still have some utilities that's going to have two sections. they will affect them now, so it

will decrease ser risky. i support an environmental policy and i know many colleagues on my panel aums. i believe that's available for a number of reasons: security reasons, cost reasons. it's the wise thing to do. do you think that this clean power plan encourages diversity within our energy sector? >> not in the long run. in the long run, it basically is the plan to cut down coal-fired plants and run renewables. those are fine sources of energy, but once you get close to a monopoly you have pricing power, and that gas won't look

like it does now in price. when i worked in the utility industry for a short period of time, we had a natural gas price spike and it was very disruptive to all of our customers. and so i'm worried those are going to happen in the future. >> and how is that -- well let me go to another panelist first and then i'll ask another question. but mr. parfitt do you think that we're encouraging states to look at a balanced portfolio when it comes to their energy needs with this plan that's before us now? >> from our view the answer would be no. it seems like the purpose is to go to redispatch of other types of energy sources to replace coal. it's not looking at a mix it's really aimed at reducing coal. >> you know, i'm from the only public power state in the

country. in nebraska we rely on our public power. it's a strength for our state, it's a definite strength for our rate payers. we're very concerned on the impact it's going to have on families across our state when and if this plan is implemented. because we rely on our coal-fired electric plants. we have diversified portfolios. we continue to develop those but to have a requirement, a mandate, to have those implemented, i think in an unreasonably short period of time will affect families, and it will affect our most needy families. mr. parfitt, how do you view that in wyoming? you're our neighbors to the west. how do you view that? how are your families going to see what's coming to them?

>> we share the same concerns as to what the proposals will do to utility rates, particularly with our compliance pathway and the stranded assets associated with that. >> and ms. nowak of wisconsin i don't know what your energy portfolio looks like in your state, but i would assume some of your rate payers won't be pleased when they get their bills. >> not at all. you're correct senator. our rate payers have already invested over $11 billion since 2000 to clean up our air. that's continuing to be paid for. we've reduced emissions by 20% if you look at 2005 as a baseline. so they've done that. we're not getting credit for it. we are a predominantly coal state. like indiana, we're a heavy manufacturing state. this will have a very large impact between our model

estimated at 3 to $13 billion for generation alone. that doesn't include any natural gas infrastructure or transmission infrastructure that needs to be done. so that's going to hit every rate payer from our low income to our large manufacturers. >> it will hit everybody in>> wes: and across the country. yes. >> thank you. >> thank you mr. chair. >> you were the first one here and the last one to speak, it looks like. >> a little budget committee hearing. that makes us all nervous. well mr. aishly i don't like this idea that there should be a mix of sources of power, like nuclear power. since i've been here and seen the argument i am of the belief that if you become too dependent

on one source of power you're not able to have the competition that keeps costs down. do you believe that's still a valid concern? >> yes. and ironically we don't have any nuclear. i'd love to have some, but it's so hard to build as you know. it's not likely to come in my lifetime.disappointing, i got to tell you. natural gas rates have fallen and the cost of plants to nrc is more regulatory than ever and we're almost killing it off, which would be a disaster. the issue we can all agree on republicans and democrats, is more healthy environment is less of things that kill trees. i think we can do better about that. in the course of that, i think we'll have a benefit of co2

emissions probably at the same time. i am not ready to press down on the brow of myjj )uuq'ts billions and billions of dollars in cost over the co2 issue frankly. we just need to balance this out and be reasonable about it in my opinion. so i believe you said, ms. nowak, that you believe that these regulations passed, cost of electricity will go up. mr. parfitt, in your state do you think it would go up also? >> yes, that is correct. >> and mr. daishly? >> yes. we're not sure how much. >> and ms. nichols, do you believe it will go up or not? >> you know, there's been a trend, i would say, over decades for the cost per unit for

electricity to go up. but what we think is important is the bill what the customer actually sees and in that ooerchlt order. >> i would concur with ms. nichols that it's been our experience that you can reduce carbon emissions and also keep electricity prices down. >> now, ms. nowak you indicated we spent a lot of money you spent a lot of money to make coal cleaner than it's ever been before. and if those plants are closed are you saying those are what stranded cost loss of that is damaging to you? >> it's the cost for the new generation only. it doesn't take into account

paying for units that have been recently built. power plants are paid for over many many years. rate payers will be paid for the addition of new electricity. so yes. >> and mr. parfitt, i would ask if you can say yes on that too. but let me ask a simple question. it seems to me that the mandate regulations that drive up costs are the very, approximate an aerg ergonomic state, the government could pay for everybody and then work on cleaning up power plants or whatever they want to do to achieve a certain goal.

i just feel like electricity is high for homeowners and things like that. these mandates require greater expenditures to produce electricity or the equivalent of a tax on their lifestyle, isn't that correct? >> yes, it is. but different people benefit and don't benefit so if you're in a regulated utility that makes a profit, if the price goes up here and your percent of profits is the same that goes up. if you're an remc in a co-op, your customers are your owners and they really see it, and there is no net benefit there. >> well i think that's the question is the tax on the economy worth the benefit that is achieved? and dr. lawnbore here from the copyenhagen institute said the increase in co2 over the next 60

years is not going to be a detriment to the world. in fact, it will be a net benefit. he will agree that if this continues out into the next 100, 150 years, you begin to have a cost. so he questions some of the expenditures we're talking about today. and i just believe that's a fundamental thing. he talked about how many lives could be saved with just a fraction of these costs helping poor people in a lot of different ways. thank you, mr. chairman. i appreciate this hearing, and good witnesses we've had. >> thank you, senator sessions. senator boxer wanted to have just a moment to -- unanimous consent request to enter something into the record so we'll just recognize you for 30 seconds to do that and then me for 30 seconds and then it's over. all right? >> it's never over. okay. so, mr. chairman i ask unanimous consent to place into the record a very important

chart that shows that californians are paying $20 less per month for electricity than the national average, as we reduce carbon pollution in such great way, and i'm so grateful to mary nichols for playing a role in this. >> without objection so ordered. and my 30 seconds two documents, one from the census bureau that says california has the highest u.s. poverty rate when comparing income and cost of living across the state. and secondly, from the manhattan institute, that migration from california to oklahoma increased by 274% in the 2000s. and without objection so ordered. >> you're lucky. >> we are adjourned. >> you're lucky to get us. the house returns today at noon eastern with legislative work starting at 2:00. including a measure to fund trauma care centers. later this week they're expected to take up a

senate-passed resolution disapproving of regulations on union election rules. the white house has issued a veto threat on the measure. live house coverage is here on c-span. and the senate's back at 3:00 p.m. eastern to consider executive nominations for the transportation and commerce departments. then returning to debate on a human trafficking bill. a procedural vote to advance that bill is scheduled for tuesday. depending on the outcome it's possible they will get to consideration of attorney general nominee loretta lynch. majority leader mitch mcconnell has said that her nomination will only come up after completing the human trafficking bill. you can watch the senate live on c-span2. >> some live programming to tell you about. at 4:00 p.m. eastern live coverage of a senate homeland security committee hearing on improper social security records of deceased people. then at 6:00 p.m. eastern we go live to the counsel on foreign relations with transportation secretary anthony foxx talking

about transportation infrastructure. you can see all that here on c-span3. a senate judiciary subcommittee held a hearing last week on the governance of the music market. several representatives from the music industry testified before the congressional committee to discuss how streaming music services are affecting song writers and publishers. this is a little over two hours. >> welcome. this is the first hearing in this congress of the subcommittee on antitrust competition policy and consumer rights. i'd like to begin by thanking my friend and colleague senator klobuchar for the tremendous job she did in chairing this

committee before me. i'll note that she and i have always had a very good working relationship and we share the same basic goals for this subcommittee, which involves ensuring first and foremost that consumers are protected from those who would abuse the marketplace and second that we perform effective oversight of the department of justice's antitrust division and of the competition side of the federal trade commission. i look forward to continuing that bipartisan work in this congress, and i'd like to thank senator klobuchar and her staff for their hard work in preparing for this hearing. i'd also like to thank the chairman of the full committee, senator grassley, for supporting this hearing. senator grassley planned to be here but he's stuck on the floor managing some human trafficking legislation that's pending this week. a few housekeeping matters

before we begin that i'd like to address. after senator klobuchar and i give some opening remarks about the hearing we'll hear from our panel of witnesses who i will introduce a little bit later on. and then we'll have five minute question rounds with our panelists. today's hearing deals with a serious issue and i trust members of the public who are here will act accordingly. i want to note at the outset rules of the senate prohibit outbursts, clapping, or demonstrations of any kind. this would include blocking the view of people around you. so please be mindful of the rules as we conduct this hearing. i don't think this will be necessary. i certainly hope it won't but i'll ask the capitol -- >> it depends on what you say. >> exactly. i guess we have some rule on that. if it becomes necessary i'll ask capitol police to remove anyone who violates the rules.

if you'll indulge me i want to provide some background on this complicated issue, an issue that perhaps could be familiar to some in the room but is not familiar to most americans. this hearing is about the market for music. specifically it's about the market for licenses to publicly perform copyrighted musical competitions. what does this mean? well, every song has an author. the person who wrote it. not necessarily the person who performed it or recorded it. and that author has a copyright in that congress meaning that anyone who wants to perform it in public has to get a license from the author in order to do so. which turns out to be a lot of people. lots of businesses play music for customers. radio stations and internet streaming services like pandora,

or iheartradio are the obvious examples. but there are all sorts of other examples. you've got bars and restaurants that play music to set an ambience. you've got retail stores that do the same thing. television networks and cable companies that air college football games, where there's a marching band in the background and that marching band tends to play music, and that music tends to be copyrighted. all those people need a license for every song they play. or else they have to pay enormous damages to the copyright holder. but the market could not function if every neighborhood restaurant had to go look for every author of every song they wanted to play and negotiate with each of those authors for license fees. nor do individual copyright holders have time to contact every bar in america and ask them for license payments. as a result, for more than 70 years, publishers and song writers have relied on

performing rights organizations or p.r.o.s as they're known in the industry, to license music on their behalf, and then collect and distribute the royalties. the two largest p.r.o.s are called ascap and bmi and we're pleased to have representatives of both of those organizations here today as witnesses. both ascap and bmi sell blanket licenses to all works in their inventories and between the two of them those licenses will cover most every song. roughly speaking, and the number is debatable ascap and bmi each control approximately 45% of the market. the remaining roughly 10% belongs to two other p.r.o.s, csac and global music rights. so what does this have to do with antitrust law? well it turns out that virtually the entire market for the licenses we're talking about is

governed by a pair of antitrust consent decrees from a long time ago. in the 1940s the department of justice separately sued ascap and bmi over concerns that they had violated the sherman act through aggregating control of the music license market. doj settled these cases and entered into separate consent decrees with ascap and bmi in 1941. the consent decrees are somewhat unusual. they are perpetual in duration and they essentially function as a kind of regulatory system for the price of these music licenses. the decrees contain requirements that look very much like compulsory license and royalty scheme. specifically they require that the p.r.o.s offer a fair rate on a nonexclusive basis to any user requesting a license. and that they not discriminate among similar licensees.

any disputes about the rates are to be resolved by the judge in the southern district of new york, who oversees the decree. a process that has come to be known as rate court. for almost 75 years the consent decree ruled ascap and bmi blanket licenses have allowed consumers of music to have access to virtually the entire catalog of written music by negotiating with just a few entities. the system has allowed innovative distribution methods to arise while enabling individual songwriters to get royalties from thousands of bars restaurants and radio stations across the country. then came the internet. and things changed. in 1995 after the advent of web streaming congress decided to require internet companies who perform, publicly perform music but no one else to pay royalties to recording artists and record labels and the guys who play the songs rather than the people who

write them in exchange for requiring the record labels to license their works. in other words, congress set up a scheme on the sound recording side that looks very much like the scheme the consent decree set up on the musical composition side. the major difference, however, is that the price of royalties for composers is ultimately controlled by judges, judges applying antitrust law and price of royalties for recording artists is controlled by the copyright royalty board which is a panel of administrative judges housed in the library of congress. and these two groups of people do not agree about the price of a license to play music on the internet. the royalty board sets rates for sound recordings played on internet radio that were substantially higher than those the rate court had set for the

underlying compositions. for example in 2013, pandora paid approximately 48% of its revenue to recording artists and record labels and only about 5% of its revenue to songwriters and to publishers. this disparity in rates led publishers to believe they would be able to achieve better rates outside the consent decrees so they made a request of ascap and bmi. they asked ascap and bchlt mi to change their membership rules to allow something called partial withdrawal. meaning the right to exclude digital services from the blanket licenses that they normally sell. that would require companies like pandora to separately negotiate with publishers for public performance licenses and at whatever price the market would bear. all of that led to litigation that is still pending. it also led to allegations that the music publishers who think

that their judge-set royalty rates are too low, were colluding to keep pandora's prices high, instead of competing with each other to drive -- to drive consumer prices down. in a lengthy opinion, the judge of the southern district of new york ruled that publishers have no right to partially withdraw their digital rights from the blanket license under the ascap consent decree. judge coat also rejected publishers' attempts to use the prices they negotiated with pandora while they tried portion withdrawal as benchmarks for setting prices generally noting evidence that the publishers had cooperated instead of competing in those negotiations. that case is now pending on appeal. and even as we speak, a different judge in the u.s. district court for the southern district of new york is now conducting a trial concerning

similar questions under the separate bmi consent decree. meanwhile the department of justice's antitrust division is currently considering -- currently considering an effort to modify the consent decrees to allow partial withdrawals among other things. that would have another, a number of important consequences that today's panel can discuss. on the one hand the publishers say that partial withdrawal will allow them to negotiate prices with internet companies in a free market. and surely the most striking feature of the current system is that there is no free market. as it were. on the other hand others believe that have partial withdrawal the market will not really be free because a few music publishers control most of the licenses and they have been accused in the past of colluding to drive up

prices for consumers. in short what to do about these consent decrees is a hard problem. and it's one ultimately that affects many millions of americans. today we'll hear from a variety of parties affected by the consent decrees each with a slightly different place in the market. here we have an opportunity to discuss openly the topics that doj is discussing privately. as we listen today we must remember that we have both a responsibility to encourage creativity by recognizing the value of copyrights, and we also have a duty to ensure that prices for music remain competitive for consumers. senator klobuchar. >> thank you very much, mr. chairman. i congratulate you on taking over the subcommittee. we don't have a formal passing of the gavel. at the subcommittee level. but it's exciting and we have worked -- oh, yeah, here you

are. thank you. and we have worked very well together as senator lee noted and i know the majesty, and i know that's going to continue. this hearing focuses on an important and timely topic. the state of competition in the music industry and a pair of antitrust consent decrees that govern licenses for the public performance of musical works. now we're not here to talk about the sound recording side of musical licensing, that set of copyrights is governed by a different structure and a different set of rules. today's hearing is about the underlying musical works, the lyrics and the composition that songwriters create, music publishers work to get out into the world and that licensees like broadcasters and digital music services help us all enjoy. as senator noted the consent decrees under which ascap which is the american society of composers, authors and publishers, and bmi, which outside of this room refers to body mass index for anyone

that's gone on a diet, but inside of this room refers to the broadcast music inc. those consent decrees under which they operate have been modified several times in their history. it's appropriate from time to time for the department of justice to review these consent decrees to make sure that they are meeting their intended goal of preserving and promoting competition. there are some who argue the consent decrees have run their course and should be sunsetted while others maintain that the consent decrees serve a role in protecting against competition concerns and should be strengthened. the doj's review of the consent decrees is also informed by recent activities in the courts both enforcing the consents decrees. and through private antitrust litigation. as chairman lee mentioned there's a recent litigation in the u.s. district court for the southern district of new york including, which includes some of the parties who are witnesses here today. it is against this complicated backdrop that doj is taking a fresh look at the consent decrees.

our focus today is on striking the right balance between impacts on consumers, main street businesses and those broadcasting content. through radio tv satellite and new digital services. and respecting the rights and value toed the creators of the music that we all enjoy. when the consent decrees first went into effect, no one imagined the diskman or the boom box, much less the ipod and digital streaming over the internet. in addition to innovations, restructuring, and new players entering the market congress has also acted throughout this time to recognize new rights in music. we've acted to recognize new copyrights for sound recordings production and distribution, and most recently in 1995 for public performance of digital sound recordings. although this area is at the intersection of antitrust and copyright law our hearing today is going to focus on the antitrust side and any competition issues in the present-day market for licensing

musical works. i look forward to hearing from all of our witnesses today about the ongoing doj review. and your recommendations on the best path forward. thank you. >> thank you, senator klobuchar. before we swear in our witnesses we want to note at the outset we've received some letters from members of the public concerned about this issue and unless there's objection, those will be entered into the record. now i would like to introduce our witnesses and then we'll swear them in. we'll move from this side of the table over. first we got beth matthews who is the ceo of ascap, the full title being the american society of composers, authors and publishers. to her immediate left is chris harrison, vice president of business affairs for pandora media, inc. then matt pinkus for sounds

music publishing. next we have mr. mike dowdle. who is from my home state of utah. mr. dowdle is the vice president of business affairs and also the general counsel for bonneville international. lee thomas miller is with broadcast music inc. a songwriter affiliate and also the president of the nashville song writers association international. and finally we have jodie griffin, who is a senior staff attorney with public knowledge. okay. will each of our witnesses please stand and be sworn. do you affirm the testimony you're about to give before committee will be the truth, the whole truth and nothing but truth so help you god? thank you. okay. we will now hear from each of our witnesses beginning with

ms. matthews and then continuing to her left until we get over to ms. griffin and after that we'll proceed to questions. ms. matthews. >> good morning chairman lee, ranking member klobuchar and members of the subcommittee. my name is elizabeth matthews and i'm the chief executive officer of the american society of composers, authors and publishers which was formed 100 years ago by songwriters. ascap is a membership association operating on a not for profit basis. we are comprised of more than 525,000 song writers composers, lyricists, and music publishers. and we represent over 10 million musical compositions. songwriters are the unsung heroes behind american music. every song you hear comes from the heart and mind of a songwriter. song writers create the notes and the lyrics on the page. this is a copyright and musical composition that any artist might record. unlike recording artist, however, songwriters do not earn

money from selling merchandise or touring. many songwriters do not have salaries, benefits or other reliable sources of income. they rely on public performance royalties to earn a living, feed their family and pay the rent. ascap's job is to ensure song writers can make a living creating the music that we all love, because music matters. music is not just a business. it is an important and continual contribution to our society and to our day-to-day lives. ascap licenses the right to publicly perform our members' music to over 700,000 licensees in the united states and we work with over 100 public performance societies globally, who in turn license our members' works outside of the united states. in 2014 alone we processed payment for over 500 billion public performances. more than double the year before. and we are only one of several market actors. in 1941 ascap entered into a consent decree with the department of justice because

ascap did not have significant competition. fast forward 74 years and today competition with ascap is alive and well. we compete directly with bmi and unregulated competitors, new licensing companies, foreign p.r.o.s, and even with our own music publisher members whom are always free to directly license their works. the barriers for entry are quite low and yet we are still governed by a world war ii era consent decree. which was last updated before the invention of the ipod. there have been seismic changes in the music landscape. people no longer buy the music they love, they stream it. streaming services offer more choice, and more consumer control. as a result they require access to a massive variety of songs in order to provide users with an optimally tailored content experience. this means the use of music has increased exponentially, but the payments have not followed. for a songwriter this is a

terrifying trend. new and innovative market players require experimentation and novel approaches to music licensing, and yet the consent decree restricts our ability to adapt, because it is still stuck in 1941. some digital music services are unwilling to pay songwriters a fair market rate making it impossible for song writers to earn a sustainable living. as a result major music publishers are threatening to resign from ascap and bmi entirely, which would be a devastating blow to collective licensing and to song writers. in response we have proposed a number of changes to the ascap consent decree, including the following. first, rate disputes with businesses that use music should not be decided in an expensive, time consuming federal rate court litigation. we propose a faster, less expensive process. second, our members should have the flexibility to grant ascap the right to license their music for some uses, while retaining the right to license other uses directly.

ascap fully supports transparency for licensees in this regard. that approach is both pro competitive and consistent with the u.s. copyright law. third, we need to simplify the music licensing by allowing ascap to license more than just the right of public performance. ascap may facilitate one-stop shopping, a single destination where businesses may secure every right that they need, if the consent decree is changed. the department of justice is undertaking a review of our consent decree and we look forward to working with them to make these pro-competitive changes. we've also engaged with congress. in our efforts to modernize the current music licensing system. in that regard we applaud the leadership of senator hatch and others for introducing the songwriter equity act. which represents an important first step in reform. if consent decrees are not changed and major music publishers resign from ascap and bmi then the system of collective licensing may collapse and everyone loses.

copy right owners, licensees, music fans everywhere and most importantly, the song writers who are the heart and the soul of the music industry. thank you. >> beautifully timed by the way. you closed that out just as the final second ticked off the clock. mr. harrison. >> chairman lee, ranking member klobuchar and distinguished members of this subcommittee, thank you for inviting me to testify. my name is christopher harrison. i'm the vice president business affairs at pandora media. launched less than ten years ago pandora is now the most popular internet radio service in america, reaching more than 80 million participants -- 80 million listeners each month. the mission of pandora and more than 14 hound employees is to unleash the infinite power of music by being the effortless source of personalized music enjoyment and discovery for

millions of listeners. where others may see a music industry in turmoil pandora sees abundant opportunities for new leadership to create a music industry that benefits the entire ecosystem. the recent launch of pandora's artist marketing platform which gives free access to artists to see how their music performs on our platform is the first of many initiatives intended to unlock the power of pandora to enable musicmakers to grow their audience. in addition, pandora represents a significant new revenue stream with royalty payments approaching $450 million last year alone and more than $1.2 billion since we launched in 2005. ensuring a vibrant and growing music industry in the years to come requires a marketplace that's open, transparent and vigorously competitive. unfortunately there are a number of significant obstacles that threaten this future and require the attention of this subcommittee. it's been nearly three years since this subcommittee reviewed competition in the music

industry with its hearing on sony atv's acquisition of ami which reduced the number of major music publishers from four to three. among the most important obstacles is an alarming lack of transparency. as i described in my written testimony this lack of transparency was a key factor in pandora's inability to obtain competitive market agreements with the music publishers who had allegedly withdrawn their digital performance rates from ascap and bmi. i commend mr. pincus for making the repertoire of songs available and i hope other publishers and p.r.o.s follow his example. in order to foster competition we recommend the creation of a publicly available database of records to house all relevance music copyright ownership information. by enabling services to quickly ascertain who owns which work a single database of record could enable services to identify on a

catalog by catalog basis the owners of the songs they perform, which would encourage true competition among copyright owners for distribution on digital platforms. while the transparency provided by such a database would mitigate the anti-competitive behavior pandora recently experienced, transparency alone is insufficient to solve the problems that pandora faced over the past few years. as this hearing takes place, the largest music publishers and pro are demanding changes to the very decrees designed to forestall their thank you well documented anti-competitive conduct. in the past year four different federal district court judges have found evidence of the same types of egregious anti-competitive conduct that gave rise to the original consent decrees 70 years ago. pandora directly experienced some of that anti-competitive behavior which i detail in my written remarks. while we're open to sensible modifications to the consent decrees, any modification must ensure a competitive vitality and independent pricing activity

that does not exist at this time. to amend the decrees in the manner that the p.r.o.s and publishers seek would seriously harm competition by turning a blind eye to harmful conduct, by permitting publishers and p.r.o.s to artificially inflate prices and ultimately harm consumers' access to the music they love. while we remain optimistic about the future of music streaming the government has a critical role to play to guarantee a functionally competitive music licensing ecosystem. as evidenced by the coordinated behavior i described previously, there is a continued need for government oversight to ensure that certain participants in this highly consolidated industry cannot leverage their market power for unfair gain. thank you for your consideration of this important issues. i look forward to answering any questions. >> thank you, mr. harrison. mr. pincus. >> good morning chairman lee, senator klobuchar and members of the subcommittee. i'm honored to provide my perspective as a music publisher

and small business owner. the fundamental question of this today's hearing is simple why are the property rights of songwriters and publishers subject to perpetual heavy handed government regulation? i am the ceo of songs music publishing. i represent 350 contemporary songwriters. the current environment is very hard on songwriters and perpetual government regulation is making it worse. i'm an avid user of many digital music services somewhere in the many models out there is the answer to future growth for my company. i started songs in 2004 to transact with the digital market freely and easily. however as i detail in my written testimony the current consent decrees artificially depressing the performance royalties that digital services pay because i'm unable to negotiate for my property rights in a free market. three successful songwriters i represent wrote a song for the recording artist jason derulo.

the song went number one. it was streamed 1 in 4424 million times on pandora. as the songwriter it doesn't get any better than this. and yet their 50% interest in this song generated only $3,158.05 in royalties to be shared among the three of them. if streaming music is the future it is clear that all song writers and publishers should be very concerned. this rate of monetization is not fair for my song writers. like any businessman i am best suited to determine a fair price for the property rights i represent and to say no when i feel unfairly compensated for them. instead, i am compelled to allow anyone to use 3450i songs no matter what the terms because of perpetual government regulation. those lobbying for continued regulation often cite the high earnings of the top 1% of recording artists. while i represent the creators of some of the most recognizable songs in the world the reality is that many of the creators i represent are struggling to make the minimum wage from their

music. like the acclaimed indy rock songwriter, the husband and father who has been plagued by illness and unable to afford proper medical treatment his sole income comes from creating music, despite achieving notoriety for a song streamed over 11 million times on pandora, he was paid only $642. i have a responsibility to secure fair compensation for the talented songwriters i represent and i'm unable to do so due to perpetual government regulation. because under the current consent decrees, i have only two very bad choices in seeking fair rates for my songwriters. accept unfair government regulation that depresses property value or withdraw entirely from the collective licensing system and incur tremendous cost and terrible inefficiencies. to the benefit of boths rights holders and businesses that use our music our songs are licensed collectively through performing rights organizations such as ascap and bmi. however despite radical changes

in how music is used and consumed, today's songwriters and music publishers continue to be highly regulated by consent decrees imposed during world war ii. in my written testimony i identify modifications to the decrees that i believe will allow for a more competitive, free and fair market for all copy right owners and music users. critical changes to the consent decrees include amendmenting rate setting procedures to allow for negotiations in payments that more closely reflect a free market. allowing direct licensing of performance rights. establishing a formal mechanism for sunset or at least periodic review of the decrease and providing music publishers and their agents the flexibility to license digital services seeking multiple rights. i believe the department of justice has an important role in enforcing antitrust laws against any real anti-competitive actions of specific parties but that role should not be used to regulate small business owners and prevent the free market development of an entire industry for almost 75 years.

as a music publisher my livelihood depends on widely licensing my songs. that is the reality in free market. if given the freedom like any other music publisher i'll exercise it responsibly to the benefit of my songwriters. thank you, again, for the opportunity to share my views with you today. >> thank you, mr. pincus. mr. dowdle. >> good morning. chairman lee ranking member klobuchar and members of the subcommittee. my nail is mike dowdle and i am vice president of business affairs and general counsel for bonneville international corporation. which owns television and radio stations in salt lake city, los angeles, seattle, and phoenix. i am pleased to testify today on behalf of the national association of broadcasters, and as thousands of free local and radio stations throughout the nation. my testimony will focus on the continued necessity of the ascap and bmi consent decrees. absent these consent decrees no fair competitive market would exist for the licensing of

musical works. this would harm not only broadcast audiences whose access to our programming would be jeopardized, but customers of the countless businesses that publicly perform music every day including restaurants bars retailers and sporting venues in your local communities. to illustrate the issue let me provide an example. ksl-tv bonneville's nbc avail at-in salt lake city has music interwoven throughout its programming. these musical performances take place in the background of its movies and television shows and live sporting events and local news during transitions between programs, and even within commercials. for its locally produced content skl-tv has editorial discretion over which specific songs it airs. so in the event that it could not obtain the rights to a certain song ksl could likely take steps to ensure that the song is not performed. but for a significant portion of its content namely network and syndicated programming live events and commercials it has no

editorial control. if ksl lacks the right to publicly perform a song it runs the risk of significant penalties under federal copyright law. our radio stations that air syndicated programming, commercials and live events run the same risks. they simply must have the public performance rights to the full catalog of musical works in order to operate lawfully. even the right to a single musical work gives the copyright owner significant market power. the risk of anti-competitive abuse is compounded when these rights are aggregated which is exactly what the performing rights organizations, or p.r.o.s do. ascap and bmi control 90% of the public performance rights to musical works in the united states. aggregate those rights in a blanket licenses and then fix a single price for all music within that license irrespective of which songs are actually used. in any other industry this would constitute per se violation of the antitrust laws.

but the consent decrees entered into between the doj and both organizations more than 70 years ago served as antitrust lifelines that allow ascap and bmi to continue to operate in spite of their anti-competitive nature. absent the protection and framework afforded by the consent decrees, ascap and bmi would have unfettered ability to extract above market prices and terms for the rights and those works from broadcasters and other licensees. let me be clear. broadcasters would cease operations without the ability to clear these rights. and the consent decrees are critical to that end. before i conclude i want to touch on two specific points that are central to today's hearing. first in an attempt to circumvent the consent decree, large music publishers sought to selectively withdraw from ascap and bmi to directly negotiate with certain digital services. two federal courts interpreted the consent decrees to prohibit

such partial withdrawals, and now the p.r.o.s are asking both doj and congress to amend them. such a modification pore partial withdrawals shouldn't be allowed. the fact is, any music publisher with sufficient size and scale to consider direct negotiations for selected rights, such as digital rights would have essentially the same power in the market as the p.r.o.s, and raise the same antitrust concerns. relaxing the consent decrees in this way would enable music publishers to engage in the same behavior that prompted the consent decrees in the first place and has been condemned by the courts since. second, this subcommittee need look no further than the recent antitrust actions brought against the third major p.r.o., csac to glimpse the anti-competitive practices undertaken by an unregulated collective. these practices resulted in a

$58 million settlement between csac and the television industry just a month ago are detailed in my written testimony and provide a real-world example of the antitrust abuses that would be unavoidable outside of this consent decree framework. in conclusion, this subcommittee has long recognized the important role that the antitrust laws play in ensuring free and competitive markets. for the benefit of consumers. ascap and bmi consent decrees remain vital to television and radio broadcasters' ability to fairly efficient a transapparently license musical works to the benefit of their audience and your wants. thank you for inviting me to testify today. i look forward to answering any questions. >> thank you. mr. miller? >> good morning. my name is lee thomas miller. i am an american songwriter. i grew up on a small tobacco farm in kentucky and when i was 11 i started playing piano, then guitar, then violin. music has a way of kind of taking you over. i knew early on it wasn't just a

hobby. i went to college and instead of studying something sensible like business as my mother wished i studied classical music composition, which basically just meant i was overqualified for my job, singing and playing in the bars at night. but there i was classically trained and writing honky tonk songs on the side. then i learned about broadcast music incorporated. i was always looking for an excuse to visit nashville so i took a trip to bmi. i met with the songwriter representative who explained to me what bmi did. when your song plays on the radio, we collect the money he said. and i said, sign me up. then i played him my self-made recordings of the songs i had been writing and he was very blunt. you're not much of a singer, and guitar players are a dime a dozen. but i believe you can be a songwriter. so i graduated college, saved $1,000 and moved to music city. for years i wrote songs. hundreds of songs. i played in bands and took temporary jobs to pay the bills.

i studied the songs i heard on the radio and began meeting and learning from the songwriters who wrote them. at the time the music business was healthy. and music publishers could take chances. a prominent publisher took a chance on me and then real work began. my first cuts were not memorable. when bmi sent me my first check it was for $4.69. today it is framed and hanging on my office wall. that check meant everything. that check meant that i was a professional songwriter. all in all it took 11 years after i moved to nashville to have a hit on the radio. in 2003 i received my first bmi award. an award given to the 50 most played songs of the year. it was a song titled "the impossible." ironically it was about overcoming insurmountable odds through faith and determination and believing anything is actually possible. to me earning that first award was like a ball player going from aaa to major leagues.

in today's music industry environment, songwriters count on their performing rights societies. one thing keeping us afloat is that performance royalty check. we do not tour. we do not sell t-shirts. we write songs. all day every day. and when we succeed we pay self employment income tax with what remains we buy gas and bread and white picket fences. but since the year 2000 the national songwriters association where i serve as president estimates that america has lost between 80% and 90% of its professional songwriters whose primary income is from royalties. i'm talking about creators. and what we create is not some obsolete, irrelevant cultural product of days gone by. it's music. wh you fall in love, when your heart breaks. it heals. it inspires. it time travels.

it crosses party lines. so how does the bmi consent decree impact me? i feel it puts bmi and songwriters at a disadvantage in several important ways. if rate disputes could be resolved by arbitration rather than expensive litigation that would feel like a win for everyone. new services could launch. and songwriters could get paid quickly without spending lots of money on lawsuits. songwriters also worry bmi is not allowed to license rights other than the performance right. most new services need several rights. a one-stop license from bmi would be a quick and efficient way to get those services off the ground. these aspects of the bmi consent decree, in my view have devalued the musical composition to the point where the songwriters are being crushed. it is bad enough that it is so easy to steal the music today, but a legal framework that allows songs to be streamed for nearly free will destroy the

livelihood of the american songwriter if it is allowed to continue. u.s. department of justice is presently undertaking a comprehensive review of the ascap and bmi consent decrees. and we hope that they will recommend substantial changes that will allow us the flexibility we need to operate in the free market. i am america's smallest small business. i sit down and make stuff up. i can make you laugh. i can make you cry. i can make you do both with one three minute story. that's the power of music. and it all begins with a song. but i'm here to tell you there are not many of us left. thank you chairman lee. ranking member klobuchar and members of the committee. >> thank you, mr. miller. ms. griffin? >> chairman lee, ranking member klobuchar and members of the subcommittee thank you for inviting me to testify today. i would like to thank you, mr. chairman, for your remarks emphasizing that competition

policy is first and foremost about protecting consumers. my name is jodie griffin and i am a senior staff attorney at public knowledge an organization that advocates for policies that promote freedom of expression affordable communications tools and the public's ability to create and access creative works. before public knowledge i was a musician. and helped launch and worked for the five-time grammy nominated independent label bemop sound. the justice department's consent decrees with ascap and bmi comes at a pivotal time for the music business. now more than ever it's crucial policymakers promote competition and innovation in music distribution to benefit listeners and artists alike. new music services give consumers convenient ways to legally access music at reasonable prices, and they have the potential to give artists greater control over their own careers. however, this market is still new and it's still growing and it is crucial that we encourage

competition and innovation where consumers and artists will only be left with fewer options and less leverage in the marketplace. antitrust and copyright policies should promote a robust and competitive music marketplace where artists can get their music out on the market and receive a fair price for it. and users have competitive choices among legal music services. if all of the middlemen in the music business from publishers to labels to distributors are facing robust competition that forces them to be accountable to musicians and their audiences, but if an intermediary can leverage a large catalog of copyright acquisitions to dominate the market, it has the power and the incentive to use that leverage to raise prices for consumers, pass less revenue on to artists, and prevent new services that would challenge its dominance. for example on the sound recording side of the music business one of the major labels negotiate licenses directly that they have been able to use their market power to obtain large

lump sum cash advances and equity in the new companies, the benefits of which are not passed on to artists and independent labels argue that the majors can demand royalties disproportionate to their actual market share because they have enough market power to veto new services. the very act of creating large collective licensing organizations concentrates market power and the market for public performance rights and compositions is very concentrated. this has between case for decades so for decades we had antitrust settlements ensuring the largest performing rights organizations offer reasonable licenses, despite their market power. this doesn't mean it is an inappropriate to periodically review and update the consent decrees to encourage a more competitive market. but at this moment we can already see multiple warning signs that dismantling the protections in the consent decrees would result in a less competitive and innovative market with fewer choices for consumers. in recent years the music publishing industry has only gotten more consolidated as the

biggest publishers buy up smaller firms. ironically enough, some of those mergers were even justified by the argument that post-merger publishers could not possibly act anti-competitively because we can rely on the market protections in the consent decrees, and in statutory licenses. and even more recently a federal judge has found that when the major publishers attempted to license their digital rights directly to pandora they chose collusion over competition. they could have used that opportunity to compete with each other, and with ascap. but instead they chose to coordinate with each other. despite the objections of some songwriters and independent publishers within ascap. a federal judge later examined these negotiations and found that the publishers behavior magnified their already very considerable market power, so much so that the resulting licenses could not even be honestly considered free market benchmarks. again, this does not mean we must always have consent decrees nor that they can never change but the evidence shows at this moment in time we need to protect competition more than

ever. as the department of justice and congress review competition in the music licensing marketplace and the antitrust consent decrees in particular it is crucial that we continue to support policies that encourage a competitive market in which no company has the power to pick winners and losers. a marketplace that allows new entrants to compete ultimately benefits consumers and artists alike. thank you and i look forward to your questions. >> thanks to all of you for your opening statements. those were very helpful. we'll now begin our question and answer period with five minute rounds. i'll go first and then senator klobuchar and then we'll alternate on each side of the aisle. ms. matthews, we'll start with you. so your consent decree has been around since the early 1940s, i guess it's the second oldest of the two consent decrees.

when we look at the music market today we can see that it has changed a lot over the last 75 years. we certainly see delivery methods in particular have changed a great deal since the early 1940s. what can you tell me about this, about how the market has changed over the last 75 years and how those changes, in your opinion, bring about the need for some kind of modification of the status quo? push the button. thanks. >> excuse me. the competitive market has increased dramatically since the '40s. we compete both with regulated competitors such as bmi and several unregulated new market entrants have shown up on the scene in the last several years. the most important change i think that has happened in the past decade has been consumer behavior.

because people are no longer buying music, a major source of revenue related to mechanical reproductions has steeply declined for songwriters. so as a result the reliance on public performance is increasing. digital services are becoming increasingly more customized and personalized with the proliferation of high-speed wireless brand adoption more music is being played than ever before. so while the volume of music has increased in terms of overall public performances, the revenue is simply not tracking. in terms of increase. and at the end the songwriters are being harmed. as a result major music publishers are threatening to resign. if they resign collective licensing will collapse. >> thank you. mr. harrison i'm presumptively always supportive of free market

solutions. to competition issues. now, you've suggested that these very old consent decrees are not outdated at all. what evidence in the market leads you to believe that the consent decrees that we're talking about today, as they're written, are necessary even in the digital age? and even in the digital sector? >> well i think there's two -- two things i would point you to. first is just the structure of ascap and bmi. they are horizontal joint sales agents. they take works from otherwise competing publishers, aggregate those catalogs together, and then fix a single price across all of their members' catalogs. as mr. dowdle indicated earlier that is normally viewed as a per

se antitrust violation, and the consent decrees provide, because of the protections they provide, have immunized ascap and bmi to prior private antitrust claims. more contemporaneously pandora over the last two years has experienced what happens when publishers attempt to partially withdraw. you alluded to judge coats' opinion in which he found that when given the opportunity to compete against each other, the publishers, and ascap chose not to. and instead chose to coordinate their behavior use their market power, and drive rates above the competitive market rate. >> and speaking of -- speaking of that litigation speaking of judge coats i want to turn back to you for a minute, ms. ms. matthews, in the pandora v. ascap litigation, the rate judge discussed several examples of this behavior that she found to be questionable.

as this issue continues to arise, i'd like to give you a chance to respond to some of those. if the publishers are permitted to partially withdraw will ascap view them as competitors in the market for music licenses? and if so, do you think that will result in competitive pricing? >> it's counterintuitive i know, but ascap views the major publishers, and independent publishers, as competitors today. we only accept a nonexclusive grant of rights. meaning that they are always free to direct license with any music service, including pandora. if they were allowed to grant us a partial grant of rights which is supported by the u.s. copyright law, because copyrights are divisible, they would simply remove those rights from ascap in their entirety. so we would not be competing for them with respect to that

particular license. but it would be pro-competitive in the sense that i would create more choice for music licensing services. >> okay. we'll probably want to follow up on that a little bit later but my time has expired and turn over to senator klobuchar. >> okay. well i think i'll start where he left off there senator lee. so a significant amount of the attention has been placed on the partial withdrawal of certain rights from the performance rights organization as discussed a recent letter the doj filed with second circuit on friday indicates that the department believes the consent decrees as currently written do not permit the partial withdrawals. ms. matthews, you answered that in part but mr. pincus, why don't we start with you. why with the partial withdrawals needed, in your view? >> well the current system works quite well with respect to most aspects of collective licensing. i think there's broad satisfaction with the radio

licensing system the television licensing system the bars restaurants, stadiums licensing system. but with respect to the additional rights i believe that the rates are artificially suppressed. if you look at market comparative rates, they have been up to three to four times higher in multiple situations. there are many companies that are doing business in an unregulated way in the digital market that are functioning just fine without government oversight. and that puts us in a position where we feel like if we're -- if our earnings are going down and the listenership of radio is migrating to the lower paying rate then our businesses are going to suffer over the long-term. and what we'd rather be able to do, like in any other small business, is to be able to negotiate directly for those rights. >> okay. mr. dowdle mr. harrison, do you want to respond to that?

this idea of the partial withdrawal? >> yes, thank you, senator klobuchar. there's an old adage i was a young lawyer, i was a litigator and there's an old adage time honored in that profession that says that facts make bad law. hypothetical situations make worse law. in this case i would just urge the members of this committee not to make a decision based upon hypothetical threat. that's first. second of all, the very fact that music publishers we're talking about are big enough to make a threat that scares ascap and bmi should raise a lot of eyebrows on this committee, and at the department of justice. those withdrawals are best put in, as has been mentioned here, the possibility of those withdrawals are best put in the light of what might happen, if you take a look at what happened when they threatened them. they engaged immediately in

occlusive and anti-competitive activity activity. if you want to see what will happen that gives you a pretty idea of what will happen. that i think should really raise some eyebrows and raise a question whether or not they ought to have their own consent decrees, frankly. >> want to respond at all, mr. harrison? >> i agree with what mr. dowdle said. the concern is not partial withdrawals in theory. the concern is partial withdrawals in practice. and what we experienced over the last two years when given an opportunity to compete when they actually believed they had partially withdrawn, the publishers chose not to. and to the extent that the department is looking into this issue, i think it's wise for this subcommittee to be mindful of actual behavior, not what folks might say they want to do. >> my last question, there are a number of different ways that licensing rates are set throughout the industry.

some have argued rates should be set in the free market rather than being subject to terms administered and regulated by the government. mr. pincus, in your written testimony you talk about the right of public performances, quote, inherently a free market a free market right. what do you mean by that and if you could just answer briefly so i can get some other comments on that. >> if it weren't for the consent kris governing, then negotiation would be between publishers and licensees directly. >> so do you think that's a good idea then? >> i do. while i understand there are anticompetitive concerns, i for one have never been accused of acting anticompetitively, yet i'm regulated broadly by a system that's meant to protect against the behavior on a blanket basis. >> miss griffin, do you want to respond? >> i think so when i think of what a true free market is it

is one that has competition, one this brings more choices and lower prices to consumers. when we look at the publishing market right now, it is hard to know what a true free market rate is because we don't have examples of negotiations where the licensee can say no and still stay in business. that is why we still need the competitions. >> okay. anyone else want to respond to that? >> under the current decrease, the license is compulsory meaning there is no negotiation whatever so ever in order to have access to the assets. a licensee applies for a license, they can immediately exploit those copy wrights. >> thank you very much. i'll turn over to my colleagues. >> mr. tillis. >> the partial withdrawals

allow, how is this going to affect broadcasters that sim ul cast through digital channel? >> we'll be faced with having to negotiate, if you can call it a negotiation, with people who we don't know how much of their product may be used in our programming. therefore therefore, we have to have those licenses. our hands are tied. we have to come to an agreement with them. that gives them an uneven field in which we have to play immediately. we don't have a choice. we have to sit down. we can't say no. second of all, we've seen how they behave in a quote unquote free and open marketplace. they collude. immediately go to the conduct we believe that they've already proven they go to. that is they tend to conduct themselves in an anticompetitive way. that's what we'll be faced with.

a gun to our head and no market power. >> miss griffin, what's the consumer interest here? how do consent decrees help consumers? >> thank you, senator. consumers benefit when they have choices for different services that give them different types of offerings and different price points. and so, here the role of the consent decrees in creating that market is allowing perspective new licensees to enter the market, pay areas and then launch a service and give consume er consumers a new choice. >> i have i guess a general question for anyone who would like to speak on it. i'm trying to get a sense in each of your view what fair market value means from your perspective. and i'm happy to have anyone, but i'm really just trying to understand how the consent decree stands in the way of

achieving it as well. but we can start down here with miss matthews. >> so, a free market would encompass a willing buyer and willing seller. negotiating openly. and in an instance where they do thot a not agree, either party can simply walk away. when they do agree presumably they would reach a free market rate. under the consent decrees that does not happen because the right is compulsory. ascap and bmi do not have the right to say no. >> mr. harrison. >> i would agree with miss matthews' first characterization of fair market value. it's the value that clears a market when you have a willing buyer and seller without an information asemitri and with the ability to walk away. i'd also agree with mr. dowd's characterization of services and the experience of pandora, that

when publishers won't tell you what they own and then threaten willful copyright enfringement that comes along with $150,000 damage in potential for each work, services don't feel they have the ability to walk away. >> mr. pinkus. >> as a small business person, i think a free market is a place where i can decide what's most appropriate for my business and in this context, i don't feel like i can do that. >> senator, with all due respect to our discussion about a free market, we have actors that wouldn't exist in a true free market. we have collectives that are sanctioned in their activity. their very existence doesn't allow a free market as such to operate and so, you have to come outside of this sort of theoretical free market immediately when you give the right to collectives to bargain in the way they do.

there has to be a construct to govern that sort of activity. i agree if one seller or buyer are talking, that would work. when you're talking about a seller of theize and magnitude of large music publishers or collective societies, you don't have a free market. >> mr. miller. >> well free market is something that the song writers can only dream of. we've never had this. we have been told what our copyright was worth since the beginning of writing songs. and it's got us to the place today where the it's quickly becoming unsustainable. the thought of being able to sit down and have a negotiation on in 2015 what our craft may be worth would be life changing to our profession. we are the ultimate player that can't say no. we are handcuffed to the bottom of the ocean. and we're just looking for some relief. >> miss griffin.

>> i would agree with miss matthews that a free market is one where either side can walk away without going out of business entirely and i would note i think mr. miller mentioned how song writers feel that they have to go through these licenses and i think part of the reason song writers feel that way is that the pros dominate the business so much that you have to go through them and that's what makes it so dangerous from a competitive perspective. >> thank you. >> just to go back to your opening statement, the competitive environment faces today has become more and more challenging. how does ascap compete with the other bureaus? just give me a little more detail on how that competition actually plays out and answer my question don't licensees end up needing a license from all the

pros? >> the current business practices most licensees obtain a blanket agreement from the three largest pros. they are always free however to license around. meaning they can program around those assets purposely because they have complete creative control over their programming. except in an instance where as mr. dowdle pointed out perhaps other programming from other sources. the barriers to enter the space however today are so low, an individual could buy one catalog of copyrights and complete with a p.r.o. publishers are directly competing with p.r.o.s. international foreign societies are competing with p.r.o.s and i wouldn't be surprised if technology companies enter the space and start competing with p.r.o.s. >> your view on that same comment. on how the competitive marketplace looks to broadcasters and others. >> thank you, senator. yes.

first of all, i'm a member of ascap, have been for over 20 years. a very unimportant member, but i am a member and still have publishing interests as well in music awards. these are friends of mine, so i'm not trying to say anything personal about their personal behavior. but they don't really compete as to a ticket or because they don't allow people to license with those societies. as to the works in their catalog, they deal exclusively, i don't think that is competition. frankly. >> miss griffin, what risks do we run if doj were to disband the consent decree wholesale and then address any subsequent antitrust violations as they arise. if we got to a free market and how does partial withdrawal mitigate or aggregate those risks? >> if we were to disban

entirely, i think the three major publishers would have the market power to demand whatever they want. for licenses. they may or may not be able to efficiently license the nondigital pieces of the market like restaurants and bars and cafes and that could be a big mess as well, but just looking at the digital side, i think the issue is that you know i come from the recording side of the business and we see that there in the major labels when they license uses that are not governed by stat torrey licenses. we've seen them get large lump sum advances. which they will, it is reported they will often say that that's not attributable to the artist contract, so it doesn't go down to the artist at the end of the day and then the independent labels say that the majors get royalties that are more than their share of the market. so much so that some of the independent la