hustler magazine v. fallwell and its kbhaimpact on editorial cartoonists 30 years later. the house energy and commerce subcommittee on energy yesterday held a hearing on the reliability of the electric grid. witnesses discussed transmission infrastructure and alternatives to the traditional grid. this is about an hour, 20 minutes. we're going to get started. i want to let folks know our committee has a pretty major bill on the house floor this morning, a bill that passed out of committee 49-4 on nuclear waste. i know that debate there has started. a number of us have been there already to speak. our colleague is helping to manage that bill.

so i'm not sure he'll be back, but we're expecting votes about 10:45. i'm going to try to be quick with the gavel. we'll continue after that, but it'll be a series of votes. so good morning. today we're continuing our powering america series by taking a closer look at a very important but often underappreciated component of our power sector, the electric transmission system. ever since visionaries such as edison, tesla, westinghouse argued the merits of using alternating current, the matter of which electricity has been delivered has been a controversial topic. we depend on our high voltage network of wires and cables that transmit lelectricity -- to ensure the public's health and safety as well as equality of life that we have come to expect. however, in many parts of our country, our transmissions infrastructure, like our nation's roads and bridges,

particularly if you're in michigan, is ageing, congested, and in need of repair or replacement. joining us today is a distinguished panel of experts to help us better understand the challenges that the electric transmission sector is facing, as well as the opportunities that may be within reach. while much of the debate is focused on generator security, we cannot ignore the vital role that the transmission infrastructure plays in the connecting the electricity producer to the end use consumer. as such, i would argue that a reliable grid is no less important. transmission infrastructure, however, does not come cheap. the planning and construction of new lines often takes years due to permitting and environmental reviews. over the past couple years, public utilities and independent transmission developers have committed over $20 billion annually to upgrade or replace our existing transmission infrastructure. while that's good news, creating jobs, et cetera, sustained

investment at similar levels will be critical to ensure that americans have a modern electricity grid that can deliver reliable power at a reasonable cost. in addition, a predictable regulatory environment and consistent policies regarding how transmission projects are approved and paid for is essential to reduced financial risk and attract new capital. after we pass the energy policy act of '05, we were directed to encourage investment in transmission infrastructure projects that reduce the cost of deliver power by reducing congestion on the grid. they responded by granting grants and in subsequent years began to issue a series of landmark rules to oversee and regulate the details of how transmission projects are planned, paid for, and ultimately developed. order 1,000 is the agency's most recent attempt to regulate regional and interregional transmission planning while also

encouraging competition between transmission developers. however, as we heard from witnesses in our earlier powering america hearings, while some regional transmission planning processes become more effective, order 1,000 has all but failed to develop new lines between and among rtos in other planning regions. moreover, the rule allowing merchant developers to now compete against traditional utilities to build transmission projects has been criticized as ineffective for a number of reasons. with the help of our witnesses, we'll explore these and other challenges associated with transmission planning, cost allocation, and competition. finally, i hope we can discuss how alternatives to transmission lines factor into the conversation. while high-voltage wires form the backbone of our grid technology, demand response, energy storage distributed generation and microgrids can also provide benefits similar to traditional transmissions. since these alternatives may

improve reliability while reducing environmental impacts and cost to consumers, we should explore whether any legal or regulatory barriers stand in the way to prevent energy innovation from reaching its full potential. so we look forward to a hearing from our witnesses. yield the balance of my time to my good friend and colleague on the subcommittee, mr. long, from missouri. >> thank you, mr. chairman. i just want to take a few seconds here to personally introduce one of the witnesses that's here today with us, a fella i've known since grade school and fraternity brothers in college and on through life. that would be one mr. john twiddy. he was a former ceo and now serves as executive director of the transmission access policy study group. welcome, john. i want to thank you for lending your expertise to this hearing. welcome to d.c. >> gentleman yields back. recognized for an opening statement, my friend and colleague, the ranking member of the subcommittee, mr. rush, from

chicago, illinois. >> i want to thank you, mr. chairman, and i want to welcome the witnesses to the hearing today. today we will be examining the state of electric transmission infrastructure. as you know, mr. chairman, there have been many developments in the nation's energy portfolio since issue number 890 back in 2007 as a way to promote open access transmission services. this rule outlined the planning process for transmission providers consisting of nine planning principles, including coordination, openness, transparency, information exchange, comparability, dispute resolution, coordination,

planning studies, and cost allocation. in 2011, mr. chairman, order number 1,000 was issued as a way to further improve the planning process within and among geographic regions and also to determine how transmission costs were distributed to customers. order 1,000 was also issued to provide additional opportunity for nonincumbent transmission developers to compete -- to build projects within the service territory of incumbent utilities. mr. chairman, in reviewing this policy, it appears that the results have been mixed in regards to how successful it has

been in achieving its goal. we are in the midst of a rapidly changing energy landscape, reflective in part by the emergence of renewable energy sources, low-cost natural gas, state-led renewable portfolios, as well as an increase in energy efficiency initiatives and overall reduction in energy demands. mr. chairman, shifting consumer behavior is driving many of these changes as customers demand cleaner forms of energy along with new tools to more responsibly use the energy then consumed, both as a way to save money and as a way to save the environment. traditional methods of buying and selling energy are being

disrupted by -- and emergency technologies such as energy storage and distributed energy systems allow consumers to sell energy back to the grid. mr. chairman, based on testimony that we'll be hearing today, it appears there are some real concerns on order 1,000 and modifications may be needed to help meet its objective. if the goal was to provide a clear and collaborative interregional planning process while transferring fair cost allocations in order to spur additional competition and increase investment in grid

infrastructure projects, then it is less clear if that objective had been achieved. while most of the witnesses believe that changes should be made, there's less consensus on what those changes should look like. i look forward to engaging today, mr. chairman, regarding the opportunities and challenges surrounding order 1,000 as well as recommendations for improving this policy. with that, i yield back. >> thank you. the chairman of the full committee, mr. wall de walden, chair calls upon mr. pollone. >> thank you, mr. chairman. i want to welcome our excellent panel of witnesses. in particular, i'm pleased we have ralph izzo, the president of pse&g. we've work ed together and know

each other for many years. the network of transmission lines are truly the backbone of the power system, and these transmission lines are critical to providing reliable electricity. just like any large conspicuous infrastructure project, transmission projects are rarely free from controversy and in densely populated areas, such as in the northeast, allocating any new space is often a challenge. the electricity sector is undergoing tremendous change. there are new technologies and growth in distributed generation, at the same time demand for power has remained relatively flat. and there are new challenges of extreme weather and cybersecurity threats along with increasing demand for the grid to be more flexible and responsive. all these things require us to evaluate the policy tools using to manage this evolution. we'll hear a variety of opinions today about the degree to which orders are helping or hindering

investments in electric transmission. it's a challenge to get this balance right, so it's no surprise that stakeholders in this arena will have diverse opinions. if we look at the map of existing transmission lines across the country, it's hard for me to believe we need a lot of new transmission. this is a very mature network. since much of that network has been in place for decades, it's also a good bet it needs to be upgraded and modernized. this is something that companies must consider when they're pursuing a transmission project. a project in my own district, the monmouth county reliability project proposed by first energy, is one example where there were no serious consideration given to nontransmission options that could make the area system more resilient and reliable. it was only through the diligent efforts of a group of my constituents called the residents against giant electric that this expensive, unnecessary project is not moving forward. they provided expert analysis

demonstrating that transmission alternatives could be accomplished or an upgrade to the grid at a far lower cost. the administrative law judge who reviewed the case agreed with that assessment. and this project in my home district illustrates there remains a bias to building transmission rather than using new tools. it is the financial interests of transmission companies to build especially when there are clear rules that allow them to recoup those investments. determining if new transmission is needed must involve all stakeholders and be evaluated without bias if, in fact, new transition lines are need and in some cases they will be, then the project should go forward. but where new technology can provide a cheaper solution that's less disruptive to other businesses, existing infrastructure, and community, we should ensure those options are used. so again, the rapidly changing environment we're in right now is both exciting and challenging. the efforts to address transmission challenges have

been admirable but far from perfect. there have been and will continue to be missteps along the way that require adjustment and correction, perhaps even serious revision in some areas. so i'm hoping, mr. chairman, this series of hearings is providing all of us with an opportunity to better understand where the greatest challenges remain. again, i want to thank all of our witnesses, including ralph izzo, for appearing today. look forward to your testimony and yield the balance of my time to the gentleman from california. >> thank the ranking member for yielding. as co-chair of the grid innovation caucus, i'm pleased to be part of this hearing. i thank the witnesses for their testimony and look forward to working with them to create what the presidents of both parties have called 21st century electric grid. congress needs to address the requirements of an evolving grid, including advances in technology, consumer adoption, a distributed generation, increasing cyber threats to this ba backbone of american industry.

just yesterday, two bills sponsored by congressman lotta and myself focused on cybersecurity passed the full committee. this hearing is an important corollary to those efforts. what investments should we be making, what regulatory regimes should we be reviewing, and what more should we be doing to modern ouz o modernize our grid. i look forward to working with each of you to develop a practical, common sense proposals to creating an advanced transmission system, and i yield back. >> thank you. and there are no more opening statements by members. now it's the fun time. our witnesses will have five minutes to give their brief presentation. i'll work this from your right to your left. make sure you hit the button. we have a former commissioner, mr. tony clark, who's now a senior adviser. you're up, mr. clark, for five

minutes. >> thank you, mr. chairman and members of the committee and ranking member rush. my name is tony clark. i'm a senior adviser at the law firm of wilkinson, barker, and nower, which has offices here in d.c. and in denver, colorado. from 2012 to 2016, i had the honor of serving on the federal energy regulatory commission. prior to that, i served 12 years as a commissioner, and for part of the time as chairman of the north dakota public service commission. it's a particular honor to recognize my former colleague, congressman cramer, and good friend of many years. my testimony today centers on a white paper i recently authored entitled "order number 1,000 at the crossroads." it reflects my -- it offers my ree reflections on the order, the status of it, and where it might go from there. i've attached a copy of the paper. as way of background, order 1,000 was promulgated before i got on the commission. not long before. i didn't participate in that, but i did participate in the many compliance filings that

came forward in the wake of the order. the main thesis of my reflection is that however well-intentioned the order is, in practice it is falling short of the lofty goals it set. i suggest that with the passage of a better part of a decade its since option, now is an appropriate time to engage in a meaningful assessment of the order. the paper concludes that one of the paradoxical results of the rule has been that the major transmission projects that many of us thought might come out of order 1,000 actually came out of a preorder 1,000 world. there really haven't been a lot of tangible products that have come through or empirical data to support the success of the order. the paper concludes that if firk were to better tailor the rule, especially recognizing regional differences across the utility industry, it might have for

efficacy. put succinctly, we may today find ourselves in the position of having a rule that ensures significant compliance costs but without a lot of demonstrable benefits coming out the other side. it's perhaps ironic that many of the most impactful transmission projects i mentioned, such as in my home region the multivalue projects, arose from that preorder 1,000 world i talked about. i suggested a reason for this is multifold. some of it is that regions, particularly those that were served by vertical integrated utilities, were already doing a fair amount of planning within their regions prior to the order. for those regions, order 1,000 replaced that collaborative bottoms up process with a federal top-down process where there's a fair amount of bureaucracy involved with it. the name of the game is making sure that you're checking compliance checklists as opposed to actually bringing projects to fruition. creating a federal mandate on top of what was already previously happening with many

regions is complexity. the electricity landscape has changed dramatically in terms of the resources, tech noshlgs and state policies that drive transmission decisions, both since '05 and order 890, which preceded order number 1,000. and then finally, certain implementation decisions such as how cost allocation is handled within regions has altered transmission development models, that were previously broadly accepted. in short, even amongst those who are broadly supportive of order 1,000, there seems to be a widespread sense that something is amiss with it in terms of the underwhelming results that have come out of it. in light of this, i would argue that it's appropriate for policymakers to consider order 1,000's future given its track record. my paper encourages industry conversations about ways that order 1,000 could be streamlined across the board while regional

planning conversations may result in some benefits, and i would add there may be some benefit especially when talking about interregional projects where maybe not as much conversation had happened in the past. there may be ways to do it while repeali repealing some of the more prescriptiv prescriptive aspects. i think there are a number of regulatory policy calls coming up that could have a significant impact on how transmission infrastructure will be developed. dealing with issues like rates of return on transmission projects for jurisdictional rates, issued relates to transmission incentives built into the rate structure, and finally one of the big elephants in the room is, as it is with pipeline development, it's very difficult to get infrastructure projects cited in broad through the construction phase because of multiple levels of sometimes bureaucracy and red tape that can block some of those

permitting decisions. with that, i conclude my testimony. thank you. i look forward to any questions you might have. >> right on time. thank you, commissioner clark. our next witness is dr. edward craples. he is the ceo of development partners. five minutes. >> thank you, mr. chairman and distinguished members of the energy subcommittee. we're funded by institutional investors, so we're not your typical utility. we like to think we build the electric businesses of the future. the future is very different from the past, as other members have already indicated. we helped to spearhead two high volt taj direct transmission current lines between new jersey and new york. the high voltage direct current

technology is used worldwide but not yet as common in the united states. as a person who's actually developed interregional transmission projects, i've taken the opportunity to write an article that is part of my prepared testimony that was just published in the electricity journal called triple jeopardy. it reviews why even though everyone agrees these kinds of interregional transmission links are useful and more are needed, both existing and new interregional projects are being choked off by well-intentioned but unproductive regulations. some of these stem from order 1,000 and the inability to implement order 1,000 in a way that's sufficiently prescriptive to handle the many issues that arise when interregional transmission projects are proposed. i'm here this morning, however, to discuss a really important new opportunity in our power industry. federal energy and environmental policy can accelerate what promises to be a once in a generation chance to launch a new domestic industry and that

is offshore wind. if we do it smartly and thoughtfully from the start, the key to success is to plan, design, and build shared, independent offshore transmission, ocean grids, in a thoughtful way and issue the participating coastal states. the federal government obviously has a huge role in this through the boem and procedures that have to be implemented as part of this plan. why are these planned and independent ocean grids so important? because after years of development in europe, technology has pushed the price of offshore wind out to super competitive levels. with that, american offshore wind is now a natural component in the administration's energy dominance strategy. it is indeed fuel from heaven, and its time has come. however, as with all large-scale energy resources, indeed with any important new industry, the business, financial, and physical platform on which it is

built must be carefully designed and developed. unfortunately, some ideas about offshore wind would jeopardize the ability to realize its full potential. early policy proposals in massachusetts, new york, and new jersey explicitly would give generators the exclusive ability to own the transmission lines that take offshore wind to market. these proposals have been promoted by giant, largely european wind developers that would get america's offshore undertaking off on an anti-exceptive and wrong footing. it's obviously in their interest to control as much of the access to the onshore grid as possible. if we allow that to happen, we'll lose the kind of competition that will further lower onshore prices. we will lose control over a substantial portion of our own coasts, a proliferation of cables would distress marine life during construction and

operations, and make it hard to avoide avoid estuaries. they will undermine an industry in a vital period of its growth. we are proposing in our ocean grids a smaller number of large collector stations that are placed at the edges of the offshore wind farms. gathering the electricity from multiple wind farms and getting it to shore via the minimum number of transmission cables buried in the seabed, these cables would be buried under the ocean floor and sized for multiple wind projects, and it could be either direct current or alternating current depending on the distance to shore. if we do it right, we'll create an industry and tens of thousands of 21st century jobs. we'll create competition between generators, and it is that competition that will bring the price of offshore wind down to market levels. i will close by saying that in europe today, offshore wind

auctions are yielding prices of four to five cents per kilowatt hour, which is pretty close to the market price. thank you very much. >> thank you, mr. krapels. our next witness is jennifer curran. she's a graduate of rice university, my alma mater. >> go owls. >> five minutes, ma'am. >> good morning, vice chairman and the ranking members of the subcommittee. as noted, i'm jennifer curran. i appreciate the opportunity to be here with you today as you examine the state of the nation's electrician transmission system. i hope the insights into how we plan transmission are useful to you as you work to shape u.s. energy policy. miso is a 501 c 4 not for profit

social welfare organization with responsibility for ensuring the reliability of the high voltage electric transmission system to deliver low-cost power to customers. that mission is reflected in our approach to transmission planning. we seek not to minimize the cost of transmission but rather to identify transmission which maximizes value to customers in the form of overall lower total energy costs. the system that miso manages is geographically the largest in north america. it spans from manitoba in canada down through all or parts of 15 states to the gulf of mexico. as you might imagine, a geography that wide presents a lot of diversity in resource types, weather, state policies, and consumer preferences as it relates to electric supply. transmission is a key tool to optimize that diversity for the benefits of customers.

that diversity also presents challenges as we seek to design transmission plans and probably most importantly determine who will pay for them. even prior to order 1,000, miso was planning not just for reliability but also for economics and public policy of the $30 billion of transmission investment that has been enabled through the miso planning process. approximately 20% of that is associated with a long-term regional planning effort to address the changing resource mix known as the multivalue projects. the multivalue project portfolio is a set of 17 projects that are distributed widely across the north and central regions of miso. they provide benefits of two to three times the cost, predominantly in the form of access to existing and new low-cost energy resources and

reliably enable the new portfolio standards in the midwest. transmission like the multivalue projects is a longer term view. we are about halfway through the implementation of the multivalue projects with the final project scheduled to go into service in 2023. in the meantime, as has been noted, we continue to see a great deal of change in the electric industry. so where do we go from here? i think the challenge in front of us is probably best described by the two questions i get most frequently about transmission planning. miso, why have you not developed the next set of regional and even interregional transmission? and misoy are you thinking about additional transmission that we clearly won't need? so that dichotomy is clearly representative of the diversity i mentioned, and that diversity becomes even broader as we expand beyond the regional boundaries and plan with our

neighbors. but it's also reflective of the uncertainty of the future as it relates to electricity. the miso planning process uses a scenario based approach. we try to bound the potential outcomes of the future and then look for transmission projects that will be valuable in all of those futures. if we can find transmission that is valuable across that wide range of objectives, then we can feel comfortable that the benefits will continue to accrue to commerce and we can continue to recommend that transmission. we often refer to these as no regrets projects. we have a lot of planning to do to determine whether there is a future set of transmission that has benefits and excess of costs and probably most critically to come to consensus on who will pay for that transmission, who sees the benefits, and believes that the cost they will bear will be in line with those benefits.

nonetheless, i believe that regional or interregional transmission will be a critical part of the overall solution set as we seek to ensure the reliability, the efficiency, and the resilience of the electric grid into the future. thank you. >> and thank you, mrs. curran. our next witness is dr. ralph ids zoe, the ceo of public service enterprise group. dr. izzo, you have five minutes. >> good morning, mr. chairman, ranking member rush, and ranking members of the subcommittee, as well as ranking member pollone, who's had a long and exemplary career of serving my home state. i'm pleased to provide new view on continuing to strengthen and ph. modernizing infrastructure. today i will highlight one federal policy that stands as an impediment to that goal, that

being order 1,000. i'm here representing public service enterprise group and our subsidiary pse&g, a 114-year-old company. pse&g owns around 1,600 circuit miles of transmission. despite the fact that pse&g has been named the mid-atlantic's northeast reliable electric utility for 16 years in a row, much of our electric infrastructure is old. while it has helped power the industrial northeast for nearly a century, in recent years we have had to work to replace, upgrade, modernize, and sometimes move parts of the grid in order to ensure our system can withstand extreme weather events and other threats. for even as our customers are using less electricity, the reliance on it has never been greater. of course, we don't have a blank check. our investments must be prudent. over the past ten years, we've made improvements that have

reduced unplanned transmission outages by over 80%. so the customer benefit is clear. transmission investment has been helped by federal policies that have recognized the importance of transmission and the risk in building large projects. however, order 1,000 stands out as a policy that undermines these efforts. enacted in 2011, order 1,000 was touted as landmark reform that would promote cost efficient transmission planning and remove barriers to development. but in the seven years we've been living under order 1,000, the promised efficiency looks more like confusion, controversy, and chaos. regional grid operators have begun to voice their views. last year called order 1,000, and i quote, a solution in search of a problem that is creating more of a challenge. southwest power pool ceo nick brown said it created, quote, more overhead and more uncertainty.

our main experience with order 1,000 has been through competitive solicitation launched in 2013 for a project so solve voltage issues in southern new jersey. to call a process a mess would be generous. pse&g made an initial decision and reversed itself. disputed cropped up between states and stakeholders. pgm found itself having to make judgments outside its expertise, for example on which alternatives might secure environmental permits or how to interpret the fine print and exclusions when a developer says it will cap construction costs. five years into the planning process, we still do not have a constructive project to address a major need on this part of the grid. across the country, other red flags continue to appear. no region outside organized markets have even attempted to administer an order 1,000 bid. the southwest power pool spent $5 million on a competitive process for an $8 million project that was deemed unneeded

and never built. the california iso awarded a project to a partnership between a foreign developer and another entity only to see the developer go bankrupt. mr. chairman, if the seven years these can no longer be called growing pains, but even beyond the chaotic implementation of order 1,000 there lurks a more fundamental concern. it tends to drive short-term band-aid fixes for the grid, projects that solve multiple problems and provide long-term value tend not to move forward because they're ruled out as being too costly. competition is a positive force, but the goals must be set to achieve the outcomes we want. people in businesses depend on an efficient electric system that is resilient for the long-term against an array of very real threats. leaving order 1,000 in place risks our ability to achieve that end. thank you. >> thank you, dr. izzo. the chair now called upon

twitty, executive director of the transmission access policy study group, and a dear friend of mr. long. offline, you probably have stories about him we'd all like to hear. you have five minutes. >> mr. chairman, indeed, i do. good morning, mr. chairman and members of the subcommittee. i am john twitty, executive director of a t.a.p.s., the transmission access policy study group. our association has been active here in the capitol protecting the interest of transmission dependent utilities. we represent joint action agencies, a rural electric cooperate i, and an investor owned utility. as load serving entities dependent upon the transmission facilities of others, we recognize the importance of a robust grid and have long advocated policies to get infrastructure built.

by enactioning the section -- t are directed to facilitate planning to meet the reasonable needs of load-serving entities and enable load-serving entitying to secure long-term firm, physical, or equivalent financial rights for long-term power supply arrangements or plan to meet their service obligations. these directives translate into steps that can and should be taken. but that is not happening to the degree necessary to make congressman date. first, the grid has to meet the needs of load-serving entities. although there are established rules for an open and transparent transmission planning process, this is not happening consistently. we're particularly concerned that transmission dependent load serving entities do in the have a seat at the table the way they

would if they shared a load of the grid. they also facilitate the state citing process and spread investment risk and responsibility and provide an opportunity for small load serving entities to offset their increasing transmission rates against transmission revenues, thus reducing costs to ultimate customers. second, we need to be sure our investment in new transmission is appropriate. consistent with section 217's focus on the reasonable needs of load serving entities. t.a.p.s. members have experienced rapid increase in transmission costs while a portion of the increase is no doubt justified, transmission has become an investment magnet. the potential for guaranteed incentive elevated returns on equity on low-risk transmission assets may spur investment that

is not necessary. while we support the ground-up consideration of grid resilience, it should not become a blanket justification for excessive investment. this exposes load serving entities to increased costs, especially if the rto choices of large transmission owners have left them with loads and resources in multiple rtos. it also makes new investments riskier. fourth, above cost incentives are not needed to attract investment. there is no shortage of entities seeking to invest in low-risk transmission asset at the base equity return that's intended to reflect the cost of attracting capital. there's no need for incentive rates of return, much less to expand their availability beyond opportunities provided under current policy.

those seeking transmission incentives should not be permitted to turn away load serving entities in the footprint, seeking to make their load ratio investment in the grid. finally, the transmission planning process can also be a more effective vehicle for inclusive transmission investment. nonincumbent transmission developers, especially those that accommodate participation by small load serving entities should have a fair opportunity to develop needed new transmission. congress should encourage the commission to reinvigorate the order 1,000 competitive transmission development process in a manner that will promote joint transmission ownership as well as to use competitive discipline to curb rising transmission costs. at t.a.p.s., we want to be part of the solution so long as the needs of our customers are met, and i look forward to this discussion. thank you, mr. chairman. >> and thank you, mr. twitty. our final witness is mr. rob

gramlich. >> thank you have much, vice chairman, ranking member rush, members of the subcommittee. i appreciate the opportunity to be here today to talk about the important issue of the state of transmission. there is no infrastructure more important than transmission, which is essential to the reliable and affordable electricity service we depend on for almost every modern, commercial, and individual activity. since this subcommittee was involved in passing the energy policy act of 2005, the industry has succeeded in building a lot of transmission. transmission benefits have exceeded the cost by factors of 2 to 3.5 in the major investments in the central region you've heard about in miso and the southwest power pool. transmission investment has enabled over $100 billion of generation investment in rural communities. transmission investment is needed for both a distributed future and a large utility scale generation future, either one or

both. we've learned a lot about what works. regional planning and cost allocation in particular have worked well. we should build on that success. in my written testimony, i provide nine ideas for expanding transmission and improving its performance. however, none of these ideas matter if there's no leadership at the department of energy. i think we are awaiting for that leadership. i fear the agencies are too distracted by misguided proposals to provide life extensions to old power plans. we're all wasting our time comparing different dictionary definitions of reliability and resilience when we should be updated policies for transmission. if resill yen yes is a code wor that needs to sink on its own poor merits as my former boss pat woods said recently. to improve transmission, most of my recommendations are for ferk, but i was some for d.o.e. and

congress as well. it doesn't matter if it's under the heading of order 1,000, 890, 2,000, or an entirely new vision they could rule out called order 2020. we need to update transmission policy to create the grid we know we'll need in the future. i recommend that ferk and congress build upon the twin policies i mentioned of broad regional planning and beneficiary pays cost allocation. that's what worked in texas. that's what worked in,000,0 mis. number one, ferc should align transmission owner incentives for advanced transmission technologies. i didn't say more incentives. not asking for a subsidy. i said align the incentives so that transmission owners have an incentive to deploy cost effective technologies. number two, ferc should incorporate advanced transmission technologies into transmission planning.

i don't like to call it nonwired alternatives. i think they're just other transmission options. they should all be considered, along with new lines and other assets. number three, ferc should fix interregional planning and cost allocation. clearly no improvements have been made since order 1,000's attempt to improve that. congress, the department of energy, and ferc should all improve federal backstop citing. i think it's important for the future grid we need and make sure it works and is used where appropriate. number five, ferc should require proactive planning that captures all of the values of transmission. too often it gets compartmentalized and not all of the benefits are included. number six, the administration should improve federal coordination and transmission permitting on federal lands. number seven, the department of

energy should harness the authority and capabilities of power marketing administrations. they can be involved in transmission. they can utilize section 1222 of energy policy act of 2005 and help in other ways. number eight, the administration should couple department of energy's planning and support for planning and corridor designation with department of interior's efforts to identify renewable energy zones and transmission corridors. finally, congress should consider public finances to right size transmission. too often we underbuild for the resources that we know will be there when our children, their children, and their children's children will benefit from. those resources are there. we know they'll be there even in texas, where we built a lot of transmission. we've essentially used up that

capacity, and looking bark, we would have done better to build it the right size. i'll stop there and look forward to your questions. thank you. >> thank you, mr. gramlich. for the panel, we're having votes called within the next 10 to 15 minutes. we'll have to basically go into recess. until then, we'll try to get through as much member questions as possible. we have five minutes to ask questions. being the chairman, i'm first. and y'all know i'm a texan. and y'all know that texans love to brag about fellow texans. we say they done something good. they say that in haskell, texas. haskell is the home of our former governor, our current energy secretary rick perry. he did something good with what's called competitive renewable energy zones. he used those to fix a problem we had in texas, a big problem. we have a lot of wind power, but

we have the most power out west, rural texas, where it's not needed. we need it in eastern texas, central texas, houston, dallas-ft. worth, austin, san antonio, but that is part of why texas leads the nation in wind power. in fact, one day a couple years ago, almost half our energy was provided by wind. offshore corpus christie, texas, that wind whips almost 300 days a year. we're making progress on that. my question is for you, mr. gramlich. can you talk about whether that's something we can do elsewhere. >> sure. and you're absolutely right, congressman. the texas model as well as the market structure overall is a model for the country. i think we'd be doing a lot better in all of the ferc jurisdictional areas if we essentially had the market model

throughout the northeast and the rto/iso areas as well as its proactive transmission planning model that has access to all of that wind and gas resources and others out in that western texas and the panhandle. essentially, it's a simple formula of identifying where the generation resources are and proactively building to those resources. the alternative that is too often used in many other places is just to wait one by one for all the little projects to connect and know one of them are going to build a transmission that are needed. you need to proactively build and right size the lines to the resource area. >> thank you. doctor, would you like to add anything? you're the wind expert about the model in texas. >> totally agree. in the northeast, we're looking at a wind resource offshore that could be 10,000 to 20,000

megawatts, texas-sized, mr. chairman. >> very big. >> that is very big. it represents a capital investment opportunity of $30 billion, $40 billion, big even by texas standards. and yet, our transmission policy in the northeast is the opposite of that of texas. it has let the generators build and own the transmission, which seems almost insane to me. we should do what texas did. we should learn from texas and build a transmission and plan a transmission first and let the generators compete like hell to get access to that transmission. that's what you did, and it works great. >> this is a great hearing so far. last question for you, mr. gramlich. you recently wrote a white paper about new technologies that can optimize a transmission system at a much lower cost than building new transmission lines. can you briefly describe how that will work and how to compare that to the cost to the consumer, what the benefits are

of your white paper, your plan? >> yes, thank you, congressman, for the question. i formed a coalition called the watt coalition, working for advanced transmission technology. we put out a white paper where we were thinking in part about wholesale customers and thinking we do need more transmission, but we should also make sure that the existing grid is used as efficiently as possible. and many of these new technologies actually weren't really commercially available when the energy policy act directed ferc to promote them back in 2005. and so there's an unfinished chapter in the implementation of congress' act. that is the operational side, the utilization of the existing wires. a whole lot was done on incentives for new transmission, but nothing was done on utilization. again, we're not asking for more incentives necessarily. just alignment of incentives and

inclusion into the planning process. >> thank you. one question for you, mr. clark. i'd be curious to know if you think regulators are doing a good job of keeping up with emerging technologies in the transmission or distribution space. grade a, b, c, d, or something below that. >> i'd say it's incomplete, if that's an answer. part of the challenge when we talk about regulators is when you're looking at multiple jurisdictions of regulatory authority. unlike the case of texas where you have a wholesale regulator that is both the retail regulator and the wholesale regulator, for most of the rest of the country, it's very difficult to bridge some of those divides. it's just the way the jurisdictional nature plays out. ferc has wholesale authority, but many of those other decisions regarding resourced adequacy are made at the state

level. >> thank you. my time is expired. time for mr. rush. you're up for five minutes. >> morning. thank you, mr. chairman. mr. gramlich, as i mentioned in my opening statement, we're moving into a new energy paradigm such as distributive energy, and energy storage are increasingly being developed and coming online. in your opinion, in order 1000, as constructed, the best way to increase employment of these types of low-cost clean energy resources. >> sure. thank you for the question. we are indeed moving toward that future of a more distributed

network with many small, sometimes retail or state jurisdictional resources. i think the planning processes need to incorporate that. i do not agree with those who say that means we're not going to need as much of the bulk power grid. in fact, resources are still often variable and remote, and we need to move the power around geographically as well as over time, which storage can do. we're going to need the big grid, so to speak, and we're also going to need much more coordination, which at the local level, which is really where state regulators to handle. i think reliability and efficiency can improve, however, if we bring those distributed resources into the wholesale markets. there are going to be a lot more resources available, and if there are any shortfalls, for example, if we give them access to the wholesale markets, we'll have a lot more reliability.

>> commissioner clark, in your written testimony, you stated that regents that are still served by vertically integrated utilities were already doing a fair amount of regional planning before order 1000. you maintain that order 1000 actually replaced a collaborative approach to transmission planning. what recommendation would you suggest that would help improve order 1000 to better achieve the

goals of better process planning, cost allocation, and increase competition, including for a nonincumbent transmission developers. >> thank you for the question, ranking member rush. what i would do for those, especially those regions of the country where, which is still the majority of the states where the states maintain vertically integrated utilities, i would argue that order 1000 should be put on a pretty severe diet so that it's slimmed back in terms of trying to leverage those things that were working in the past. you had indicated -- referenced my testimony where i talk about this. a lot of the compliance oblt x obligations with regards to things like competitive bidding and the processes each of these regions have to go through, don't fit very well in regions of the country. the reason is because utilities working with their state utility

commissions had always done that sort of regional planning in the past or miso's mvp projects was referenced earlier as a good example of how that worked well. those type of projects were not seen coming forward anymore because now the name of the game is we have to comply with order 1000. so it really just becomes a compliance exercise as opposed to the more organic process that happened bottoms up. i think there are some different issues maybe in parts of the country that have restructured where you might have natural tension between generation and transition as it relates to the marketplace. even there, i don't think order 1000 is working perfectly as indicated by some of the examples dr. izzo talked about. at the very least in those vertically integrated regions of the country, i think it could be slimmed down from a compliance standpoint, maybe focus more on the good aspects of regional planning and collaboration and

maybe especially on interregional projects where there may not have been as much conversation going on as there was after order 1000. >> thank you. mr. long, five minutes for questions, sir. it says l-o-n-g. >> i think i'm ready to start now. thank you, mr. chairman. i appreciate you yielding to me. mr. twitty, ferc order number 1000 was an effort to introduce market concepts to transmission development, but the scope of transmission completion to date has been severely limited during implementation, forcing american businesses and households to overspend for transmission

projects. why is competition in this area so important? >> well, i guess, congressman, first thank you for the question. we all believe that competition brings lower prices and better services. whether that can happen in a commodity like transmission, or for that matter, other aspects of the electric business i think is still a question out for debate. i think it's clear that we have to pay more attention to how transmission gets built, how its ownership share is divvied up, what the rates of return are that are provided to the people who are building it, and as i've suggested, there are lots of folks out there who don't have the opportunity to participate in the ownership, and in some cases even the planning for these projects. i would suggest that if you really believe in competition,

you really believe in having a grid that's right-sized, that everybody should be at the table, whether we like order 1,000 the way it was written or the way it's been implemented is a good question, but -- >> clearly, you think it should be re-examined or repealed altogether. >> no, no, i think there are some good aspects of work order 1,000, but i think it's not working the way it was intended. and if more people were a part of the planning process, really a part of the planning process, really a part of the ownership structure, i'm thinking we would have a better outcome than we do today. >> according to your testimony, taps members in the southwest power pool have seen an average annual increase, rate increase, of 17% for the last five years. that's annually. a few weeks ago, the ferc commissioner sat at the same table where you folks are sitting today, and i told him that your former employer, city utilities of springfield, has studies that show the costs are

substantially higher than other customers and the spp. what needs to be done either by congress or ferc to fix this high rate of annual rate increases for my constituents in springfield, where you live. >> well, i think i mentioned in my testimony the rates of return that are offered by ferc today are pretty attractive. i think we probably all agree that if we had our 401(k)s and our i.r.a.s invested at those guaranteed rates of return, we'd be pretty happy. i think that needs to be suggests. i don't think there's need for incentives on top of the guaranteed rates of return, so that's a big piece of it. and the bottom line, as you mentioned, real customers paying real utility bills like everybody in the room, pay these increases, and i would suggest that if it wasn't for abnormally low natural gas prices today that are masking lots of these problems, people would be at

your doorsteps wanting solutions, and they'd want them pretty dog gone quickly. >> talking about transparency for a moment here, how would greater transparency in the planning process of transmission building impact the cost of those transmission services? >> well, i guess i think that by transparency, we're including a number of things. if we have more people at the table who are actually using the transmission grid, i think it's going to help the right size grid be built, i think it's going to impact the siting process. i think commissioner clark mentioned earlier, the siting process probably the most critical aspect of building these kinds of projects. i've been somebody that's knocked on people's doors asking for rights of way. and i can tell you that if you have mayors, if you have elected members of boards of public utilities, for instance, nart of that process -- part of that process, it's going to be a better process, it's going to get the right thing built, it's going to be done as quickly as possible, and all of that translates into lower cost. >> you mentioned in your

testimony that grid resilience should not be justification for excessive investment. in our recent hearings, the concept of grid resilience has been described as a crucial characteristics our energy system needs. can you explain what you mean by that? >> well, resilience seems to be the word of the day in our business, and there are so many risks, many of them presented through cyber threats, where we need to think about how the grid gets built and how the grid gets put back after an outage. we probably all agree pretty easily on what resilience is, particularly those people who have been, like dr. izzo, running a utility today. but we shouldn't let it be the end all be all to build something that you can't cost justify. i used to say to our customers, look, we can guarantee your availability 100% of the time, but you couldn't afford the service. and then later, the engineers would say, well, we probably

can't really guarantee it 100% of the time. so, it needs not be an effort to gold plate the system in the name of it will never go down. >> okay. thank you. and good to see chris also here today, so thank you for being here. i yield back. >> thank you. >> thank you. mr. mcnerney, five minutes for questions. >> i thank the chair on this. mr. crepe yel mr. krapels, your proposal for offshore wind is interesting. what types of proposals have you seen outside of the new york/new jersey area, including the west coast, where we have deepwater out there? >> thank you, congressman. i've seen and studied very carefully what the european countries have done. so, both germany, the netherlands are the leaders in offshore wind deployment. and in both of those countries, the idea of an ocean grid that's separately owned has been part of the policy for some time, and it works very, very well. in california, i think it would

be wise to look at the offshore in the same way that texas looked at the upstate. it's a region with unlimited wind energy potential. floating storage wind turbine technology is evolving so quickly, i think it will be economic within the next few years. and thinking about this from a grid standpoint, build a grid that maximizes the benefits to consumers would be the right way to go. >> thank you. do we in congress need to do something, such as pushing the blms, offshore federal land leasing, to be structured so that neighboring wind farms can use a shared infrastructure? >> i think that would be extremely helpful. right now, each wind generator can build its own transmission line to shore, but once they do that, that place on shore is occupied by that generator for the rest of time. so, thinking it a little bit more holistically would be very wise. >> thank you.

mr. gramlich, you mention ed earlier that ferc does not need to grant any more incentives but to better align the incentives we already have. what are your suggestions to go about doing that kn. >> thank you, congressman. there are examples from other countries that we are currently looking at and trying to work with a number of transmission owners on, as well as ferc staff and others. in the uk, for example, when there is congestion, the transmission owner has an incentive to reduce that congestion, so, thereby, the savings are shared between customers and shareholders. so, that concept, i believe, could be applied here in the u.s. it's not an easy task to implement these forms of performance-based regulation, but i'm optimistic that with the best minds from the transmission industry and regulators, we can figure it out. >> so, i'm kind of interested in the d.c. overlay area. what would be the next steps to

get them to happen? >> number one, having people like you say that's an important thing to do. so, thank you for that. having ferc and the department of energy take interest, i do think there is a very interesting study that i cited in my written testimony called the seams study that a number of national labs have been working on that has been partially released, but not fully released, and that will be a great model. so, when that comes out, i think facilitating a dialogue on how do we get that type of grid would be very worthwhile. >> right. well, you mentioned that there's a lack of private market interest in financing high-capacity versions of the line, such as the texas competitive renewable energy zones. public funding to the right size might be appropriate. can you tell us more about how such could be structured so we don't build endless capacity

needle needlessly? >> yes, there's always a risk in regulated industries of overbuilding, and you need to think about that. but in this case, know where the resources are, right? the wind resources, solar, geothermal, you name it. these are location-constrained resources that haven't moved over generations, and they're not going to move over generations. i submit we shouldn't be that worried about overbuilding to access those resource areas. our great, great, great grandkids are going to benefit from whatever we do to build out that network. >> interesting. i'm going to yield back in the interest of time, mr. chairman. >> thank you. as a reminder, votes are about to be called to all between republican and democrat until we have to go vote. we'll recess for maybe a half hour, 45 minutes, and come back -- what? oh, adjourn. okay. next member to ask questions is mr. griffith from virginia. five minutes. >> thank you very much, and in

the interest of time, i'm going to send some questions afterwards as we're allowed to do within the next ten business days, and i will do that, but i'm going to ask one question live, mr. twitty, because i represent aep country in southwest virginia. and you mentioned that aep zonal transmission rate has significantly increased about 15% per year over the past six years. i'm wondering if you can explain that to the folks back home and then answer the question that that's obviously a significant increase for customers in my area. are there sufficient consumer protections in place to prevent unnecessary investments in the future? so, first, explain why it's going up so much, and then, if you can do it quickly, and then what do we need to do to protect folks? >> i would answer it, congressman, by saying as i did to congressman long, it's too rich an investment for the people who own and build new transmission. it's too rich. we need to reduce returns on equity. we need to make sure we're not providing incentives on transmission investment for a run of the mill, standard

transmission line. that's certainly number one. number two. as i've said, i think we need more people at the table from the very beginning. owners of transmission need to let those of us who need the transmission to get their generation to load, to be at that table and to own a load ratio share. these are the people who represent customers, real customers. and if they are at the table, i think they're going to do a lot of good work to make sure that there's no gold plating, there's not any overbuilding, that we build exactly what it is we need to get generation to load. it's a long process. it requires your influence on the ferc. it requires lots of people talking about these issues. it's easy to say we want somebody at the table. if you're a transmission owner, you want to be a transmission owner and do exactly what you want. if there's other voices at that table, it gets a little bit

messier. i think you get a better product if that's what happens. >> i appreciate that. and with that, mr. chairman, i'll yield back so somebody else can get a question in. >> mr. johnson, mr. long, mr. kramer, mr. -- a question? you'll take the time -- mr. johnson, you're recognized. i'm sorry, let's take time from yielding back. your rights may yield to mr. johnson. mr. griffith, thank you. >> thank you. thank you, mr. chairman. i'll make these quick. mr. clark, you know, one of the primary objectives of order 1,000 was to promote inner regional transmission development, but there is broad consensus that order 1,000 failed to achieve that goal. so, in your opinion, how could this objective be achieved? >> sure. i think part of it is, congressman, and thank you for the question -- part of it is, as i said, attempting to focus in on what you're actually

trying to accomplish in the rule. the rule itself is expansive. it ran several hundred pages long. the compliance filings are probably thousands of pages on top of that. and i think part of the reason that you get that result is the order tried to do a lot of things all at once. it was partly competition policy. it was partly an investment policy. it was partly a regional planning policy, partly a cost allocation policy. some of it dealt with intraregional things, some of it interregional things. and when you push that much out in a rule and expect the regions to do something with it, you end up with, my opinion, just a lot of bureaucracy and checking compliance boxes. that's why i say i think putting the order on a diet and trying to focus in on what you're really looking at doing is probably would be the most helpful thing. some of it may be reinforcing some of the planning conversations that happened but without the more prescriptive elements of it. and i think part of it might be focusing more on the issue of interregional projects as opposed to spending a lot of

time within these regions having to vet through and try to manage the type of intraregional projects that were happening organically prior to the order itself. >> okay. what would be the advantages of greater interregional transmission? >> because you have an interconnected grid, both in the west and then in the eastern interconnect, there may be certain projects that serve a broad, regional benefit, that have benefit that acruise to many times over. but if you're only looking within your region, you might not see the value of the benefit of those particular lines. some of them could be reliability lines. some of them could be market efficiency lines, but some process to have a yard stick to compare the interregional type of projects might be valuable, and that may not have been captured in earlier ferc orders, such as 890. >> all right, thank you. i yield back. >> thank you, mr. johnson.

ms. castor, five minutes, ma'am. >> thank you, mr. chairman. thank you to all the witnesses who are here today. we recently in the oversight and investigations subcommittee had an oversight hearing on the state of the grid in puerto rico. i want to thank the committee for continuing to focus on our neighbors in puerto rico. unfortunately, right after the army corps of engineers and d.o.e. testified that they thought they had things on track, they had a major outage again. so, i'd like to ask you all after to supplement the record with any recommendations moving forward there. clearly, there's an issue on transmission and the need for micro grids and more resiliency there. but as we work to modernize the grid everywhere and deal with the cost of the changing climate and building greater resiliency, we need to make sure we're taking advantage of nontransmission alternatives, such as microgrid, distributed

energy resources and energy storage, nontransmission alternatives not only have significant environmental benefits, but they can help prevent long-term, areawide blackouts after natural disasters like we saw in texas and florida and puerto rico this summer. we also need to be focusing on the needs of consumers and be a lot smarter. these nontransmission alternatives can be a great benefit to consumers. ferc orders 890 and 1,000 recognize the benefits of nontransmission alternatives, requiring regional transmission plans to consider whether nontransmission alternatives can more efficiently, cost effectively, meet the needs of a region. but despite all these benefits, these alternatives are not being utilized to the extent they should be, especially given how these advanced technologies, such as energy -- how advanced the technologies have become. so, mr. gramlich and mr. twitty, do you think that if there was a

stronger ferc order that required more than just consideration of alternatives, we would see greater use? and what are the barriers to broader deployment and utilization? >> i do. thank you for the question. for reliable and resilience, you can improve both by better monitoring and control of the infrastructure. it seems obvious. we do it with just about every other form of infrastructure, with better monitoring and control systems and computing power, all through our economy, we have these opportunities to monitor and control better. and that helps with reliability as well as efficiency. so, transmission's no different. the only problem is it's a regulated industry. the incentives, as i said, are misaligned, and the planning requirements are not up to date with the new opportunities we have. >> mr. twitty, short answer. >> congresswoman, thank you for

the opportunity to respond to that. i would certainly agree with those comments, and i would suggest as somebody who used to have responsibility for keeping lights on, at the end of the day, that's the most important thing that all of us are after, and technology is a wonderful thing. it marches along. and yet, implementing it in the real world, getting the right kind of investment at the right time, is always going to be critical. and making sure it works as it relates to the total grid. it's one of the challenges today of intermittent resources. wind and solar are wonderful, and we're all trying to figure out ways to harness them properly. but when the wind doesn't blow or the sun doesn't shine, it's a real challenge. so, you have to have a system designed that can take this intermittent resource, and in the case of microgrids, sort of turn over control of a part of your grid to others.

and for people, again, like dr. izzo, who have responsibility for keeping lights on today, that's a pretty nervous thing, because if it doesn't work properly, if the technology isn't fully baked, lights go out -- >> i see the importance of planning and investment. >> exactly. >> thank you so much. >> thank you. and seeing there are no further members wishing to ask questions, i'd like to thank all of our witnesses, again, for being here today. thank you, thank you, thank you. much obliged. before we conclude, i'd ask consent to submit the following documents for the record. a letter from grid alliance and a letter from wires. without objection, so ordered. and pursuant to committee rules, i remind members that they have ten business days to submit additional questions for the record, and i ask that the witnesses respond within ten business days upon receipt of the questions. without objection, this subcommittee is adjourned!

coming up later today on c-span3, former fbi director james comey will be speaking at the brookings institution about being fired by president trump. he'll also talk about the russia investigation and his book, "a higher loyalty: truth, lies, and leadership." that's at 2:30 eastern live here on c-span3 today.

sunday on "q&a," university of california santa barbara english professor yunte huang on his book "insappable," about conjoined twins. >> you can imagine, these are two married couples. they cannot be in the same bed, right? and also, their family -- so, that's how when they set up this two separate households, about a mile from each other, and they stick to this very rigid schedule, is that they will say stay, live in chang's house for three days with chang's wife. and during these three days, chang basically is the master of the house. he can do whatever he wants to. and eung will give up his free

will, okay? that's called ultimate mastery. and three days later, they move to eung's house and then he will be the master of the house and chang will give up his own free will. >> did it work? >> apparently. they had 21 children. >> "q&a" sunday night at 8:00 eastern on c-span. the hudson institute recently hosted a discussion on u.s. space and satellite policy. we'll hear from former federal communications commission chair robert mcdowell as well as an official from the commerce department and staff from the house science, space, and technology committee. well, in any event, people are not here to listen to me, but i'd like to introduce our moderator for this afternoon's panel, pierre de vries, who is a co-founder of the silicon