our wholesale competitive markets in new england are critical for keeping prices low to consumers and not violating that is extremely important.@@@ and essentially back-stop planning mode, and require that regions, rtos, utilities, or interconnecting transmission owners, issue solicitations for

long-term contracts or renewables on a delivered price basis. >> i want to make sure i have the other two, i want to get the other two witnesses, if you'd kind of wrap up. >> thank you. >> haunk, congressman. i'm optimistic that if congress sets the goal and sets the process and has a strong back-stop authority, that we'll be able to get this done. if we don't get it done, i think that's when the role of ferc steps in. so if ferc, if the states came up with a specific plan and the plan did not meet the objectives of congress, that congress set, i think there needs to be essentially an overseer. and i personally would be fine with that being the federal government. saying, yeah, this plan actually meets those objectives. but the plan itself has to be designed by the states. >> mr. chairman? >> thank you, congressman

hinsly. just do respond to mr. hibbard. i want to make very clear that ferc is very committed to competitive market solutions. and we wouldn't choose to do anything that would be contrary to that. but i think when we look at transmission, there are some nonmarket barriers. and those include the issues of siting and cost allocation. and agreeing with commissioner azar, think it's necessary to allow the states to move forward in those areas, to see if they in fact can do some interconnect-wide planning collectively. that they're moving forward to do that in the eastern and western interconnects. and see from that, if the siting and cost allocation can be agreed upon. if not, we have do, i think have the federal pressure behind it to inform that process, to make sure that it moves forward. to insure that we meet our national goals. >> thank you. >> great, the gentleman's time has expired. the chair recognizes the intelligentlady from wisconsin.

>> thank you, mr. chairman -- gentlelady. >> when i hear the discussions about connecting, wind generation through transmission to load centers on the east coast, i sort of feel like wisconsin could become a state that has an extension cord just running through it. maybe i should use the swimming pool analogy, instead. but that's the image that it conjures up for me. and i worry that it disincentivizes distributed generation. and as i pondered in my opening statement earlier this morning, how we propose to play for the transmission upgrades that are coming down the pike, is a critical question. will those who do not receive the extensive benefits of this transmission have to pay for the cost of traversing lines across

the country? the ratepayers that i represent, as you've already heard, have supported their share of more than $2 billion in new investments in the wisconsin transmission system. clearly there are transmission technology decisions that need to be made and there are cost allocation decision as it need to be made. but i guess i would ask the whole panel, if anyone wants to comment, how we best protect the ratepayers, how we set up the system in a way to best protect the ratepayers who will not be receiving the huge benefits of this, which transmission build-up. >> if i may junk in, congressman. i think the model that i've been discussing here this morning, of requiring that the cost, of transmission associated with moving generation from the generation source to market, be included in the price, be

offered to consumers is our first line of defense on that. so if transmission were coming from the dakotas, being put into new england, the price of that would include not just the cost of developing the generation, but also the cost of the transmission. we can then compare that price to other generation prices available to us within the new england market for local renewables, for demand resources or for more traditional regenerationth and ultimately, the projects that will go forward will be the ones that benefit ratepayers. >> as far as cost allocation, i don't think we can speak to what would be the best cost allocation at this point in time. it should be tailor-made to the grid that is essentially planned. as i mentioned in my initial comments, if you pick a specific cost allocation right now, it's likely to steer the plan in a specific direction. and i would rather have the

fizzics drive, the fizzics and the economics drive the plan. and then we can pay for it after the plan is designed. >> we would be looking to take a position, case by case, as it comes forward. >> and again, i would agree with commissioner azar. we should not dictate a particular method, number one. >> number two, my preference would be to have the state work it out, ultimately. and the states that were involved in the line, the line went across the state, but the state could make the case that there wasn't real benefits to the state, that hopefully that situation could be worked out and resolved in a collaborative

way. but at the end of the day, if a decision had to be made and it couldn't be made by the states and the region collectively. it would be appropriate for ferc to determine that allocation. and an allocation may decide that a particular state like wisconsin did not benefit. depending upon the definition and breadth of the term "benefit" to from a particular line. and as such, may not be allocated cost. but again, you have to provide the flexibility for that kind of a decision to be made. you can't restrict specifically, or dictate in a rule how that has to be done. it has to be in a very broad, broad way that allows ferc to meet its mandate to insure that rates are just and reasonable. >> let me turn and recognize once again the gentleman from california. for another round of questions. >> thank you, mr. chairman.

i had a question for commissioner azar. you had some recommendations for congressional action to facilitate projects, transmission projects. do you feel that those recommendations are widely slayered across the country, by state commissioners? >> i have not had the opportunity to float that idea by my colleagues, so i can't speak to that. >> okay. thank you. well that's my only question. and i yield back. >> i thank the gentleman. the chair will recognize itself. and just to pursue a few questions here. mr. hibbard, perhaps you could deal -- mr. wellhof said that if there was 3,000, 5,000 megawatts of wind brought in from offshore up in new england, that it could cause reliability problems down in florida.

but the converse could also be true, huh? that what florida power and light and hopefully the southern company, is do in florida to generate renewable electricity could cause reliability problems up in new england. how do we resolve that issue? >> thank you, mr. chairman. the engineering issue that the chairman refers to is really one of the size of the transmission and the associated capacity being put onto the transmission network in the region. so for example, if as commissioner azar was referring to, you have a 765-kv line -- >> you know, can you imagine the audience right now? trying to -- okay. what is that? can you, what is that? >> if you have a really extra high-voltage line dropping a lot of -- >> what does that -- dropping? what does that mean? >> when a transmission line

interconnects or hooks up with the transmission system in new england, it looks like a generating facility. so if you have a really high-voltage line, it looks like a really big power plant. >> so when people are riding down the street or out in the highway and they look off and they see something, explain to them in those terms, just so they can understand why people's sensibilities might be affected by what it is that's constructed. if you can put it in those terms. because 765 kilo volts doesn't mean anything to people. >> what they would see is a really big tower. from the standpoint of how it affects the grid, it puts a lot of electricity onto the grid in a single location if that were suddenly to disappear, then there could be problems if the transmission system can't with stand and it causes a type of widespread outage that he was referring to. the value i see in offshore wind

technology on the eastern seaboard completely overcomings that problems. it can be built out incrementally that hooks into the major lines of the energy center ace long the east coast. that so that it can be built out without increasing the need for the potential liability risk on the underlying transmission system. if we were to take the path of interconnecting 3,000 megawatts at a single point, that would be the problem that the chairman is referring to. but the offshore wind has potential to be disbursed on a much more wide geographic base. >> mr. wellhof, would that solve your florida problem, or from our perspective, the new england problem? >> i'm not sure it would, mr. chairman. >> could you explain why? >> ultimately, even though you may disburse the,000 megawatts over a number of locations, the issue is going to be the variability of the wind and the effect of that variability on

reliability across the interconnect with respect to frequency. and i have actually directed a reliability division to commence a study that will look at this issue and determine how the incursions in frequency can affect reliability across the eastern and/or western interconnect. >> mr. hibbard, you're back at a ferc hearing, what are you going to say to mr. welling hof when they raise that issue? >> first i will commend the chair -- >> always good. >> and i would encourage them to consider in that study, the difference between variability of three or four or 5,000 5,00 megawatts connected at a single point and the variability of being spread across the region and whatever the outcome, it would be the right answer and would you agree that there is a distinction made in a

concentrated renewable source and something dispersed over hundreds of thousands of miles. >> i try to not practice electrical engineering without a license, and i would agree that there is not a difference between the two. >> by the way, would those same issues exist in a western state, for example, that might not produce 3,000, 4,000 megawatts and try to move, that for example, into a metropolitan area in another state or several other states where they would create the very same issue. it could be applicable in an interconnect. it is an issue that we ultimately have to resolve here. i think that going back to this 765 kilovolt issue is an important thing to understand because in my experience, at least in this committee for 33 years, there are corporate entities that really think big.

the bigger the facility, the bigger the plan, the better it is and there are others that think well, maybe we can disperse the way in which we can disperse. in here it will be increasingly important to generate solar, wind and other renewables from more dispersed sources and that's to a certain extent where the smart grid comes in so we're doing it. we not only need a smart grid, but we need smart people planning a smart grid so we don't overbuild it and put it back to the consumer and we saw all of that happen back in the 1970s and early '80s where all of these nuclear power plants that were guaranteed to be needed. if we didn't build 500 nuclear power plants they told us by the year 2000 we would have

blackouts all over america so we need to think big and put the costs on the shoulders of rate payers all across america in the new england region,@@@@@ @ @ @ there's an old saying that a wise man learns from their mistakes and a wise person learns from other people's mistakes. on my age in service and congress i'm an expert in both areas of mistakes, and i just

don't want to see that happen again and that overbuilding issue is really something that's quite important to me, so if you could, mrs. azar go to the question of acdc and explain to the viewing audience what that is and why current decision is made upon which it is made. >> it is the primary transmission grid we have right now and it's completely interconnected. so when you put an electron on the ac grid it's going to go to the path of least resistance. with models you can predict where it's going go, but the electron goes where it wants to go. on a dc line it is directed. >> so dc means direct current. >> thank you. >> the direct current line you have a lot of control over it and the electron goes in one direction. you know, for instance when you drop the electron on one end of the dc line, you know where it

will end up. it will end up on the other side of the dc line. where if you drop an electron at the same point you're not quite sure what path it's going to take. the only thing you know is you're pulling power off at certain locations so there are two very different models. >> for the purposes of our discussion today how does that instruct this discussion in terms of the goals that we're seeking to achieve. you know, i can give two answers to that. one is that we need to know what the goals are from congress, and then we're going to be able to decide which of those or the combination of both of them will solve the problems that you will put forth for us. i can tell you from a personal perspective with the dc lines if you're trying to get power from us and fairly lookized location in the dakotas and you're trying to get it far east it's -- as

long as you're over 400 miles long, dc lines will likely be a very good solution to that problem. >> are they more or less expensive? >> that's a good question. as a general rule i would say they're less expensive and it depends on what kind you're building and that should be a decision in your opinion made by the regions. >> that is correct. >> and that could actually turn on how much burden is placed upon consumers in terms of their electricity bill each month. >> that is correct. >> mr. wellinghoff, if i may, you heard mr. hibberd and others talk about what the impact would be of the waxman bill on the marketplace. the signal will be sent to move away from carbon-producing electrical generation. there will be a national renewable electricity standard now as a result encompassing

additional 20 states and he largely believes that that's going to now force states on a regional basis because of these national goals to reach accommodation on these new lines and that the federal government will be less needed in the future. perhaps with the exception of the federal lands issue to resolve these issues. what is your response to that -- because we are trying to create a market-based response, and i'll just give you an analogous situation and perhaps you can reflect upon it. after we passed the 1996 telecommunications act, all of a sudden there was an explosion of broadband deployment across the country. telephone companies, cable companies and others who had been telling the local pucs, it's not, in fact, cost effective to be deploying fiber optic and broadband technology and we're now in a mad race to do so because there is now a new federal law which is placing a

premium upon it and we actually had a dot com bubble because of the vast and very rapid deployment of broadband across our nation. now we created thousands of new companies, some survived and some didn't, but it was great for the country in the long run. is there any reason to believe that the legislation now as it's drafted won't unleash a similar and very, very significant deployment of renewables across the country and kind of press regions and individual utilities to finally resolve the longstanding call it, and i will call it opposition. i'll call it skepticism because i saw it in the telephone sector. i saw it in the cable sector. they moved overnight to changing their perspective. do you think legislation will do that and as a result perhaps this federal role isn't going to be as needed -- with the exception of the federal land issue? >> certainly, as you're aware,

chairman markey, there are 29 states now that have renewable portfolio standards in my state, nevada is one of those where it's 20% by 2015. so it's far ahead of most state standards and those standards, have, in fact, created markets for renewable energy and moved renewable energy into those markets very effectively. so i think that's happening already on the one hand, but on the other hand, i have people coming into my office who tell me that wind is being curtailed in the midwest because we don't have adequate transmission. that tells me we have a problem. it's not just the markets creating the renewables and it's to ensure that we need to make it deliverable. >> just saying that the states are not cooperating in the midwest in the transition. >> i'm not saying necessarily the states or the federal government. it's a combination of the fact that we have certain barriers that have planning, siding and

cost allocation that need to be relooked at in a way that we can facilitate the transmission. >> you're basically saying the federal government needs more authority because the states aren't doing the job and moving that wind around in the midwest. >> i'm saying that ultimately what we need to do is ensure that the states understand -- >> and i appreciate that, those priorities and that in fact, they will need that, in addition to the new law which we're passing which will create all those incentives for utilities to move and for states to move. you're saying that that's not going to be sufficient, that you believe that the states themselves have some built-in inertia and some of those utilities do as well and that because they don't move, even though we passed this new law and create these high goals that have to be met by national mandate that we will still need

the federal government to come in as a club. is that what you're saying? >> i'm not blaming the states nor am i saying the federal government is the panacea. >> here's the problem. in i appreciate what you're saying and you're engaging in a bit of terminological to maintain good relationships with the states and i appreciate the position that i'm putting you in. at the same time we're going to create a brand new law here that will affect these new state --? that's correct. >> and we need evidentiary basis that is based upon a federal perception of the problems that exist in these states. so while we won't use the word blame, we need to find some way in which we pinpoint what it is that is occurring, that is the problem and then we can tailor our solution to it, but we can't deal with it in kind of broad generalities. we need to have the specifics and then even in the report language of the legislation we can ensure that we're explaining

the problem as it exists, let's say, in a particular region. and here we're talking about the midwest and the fact that wind is not moving around each though it's readily available. so pinpointing what that problem is helps us then to tailor the language to reflect that problem. so maybe you can elaborate a bit on the midwestern problem where the bottlenecks are, what causes it and then we can kind of contemplate on what might be necessary. >> and i'm suggesting part of the bottlenecks are the fact that number one, ferc, doesn't have the authority to allocate across boundaries. so between pjam, for example, we don't have the ability to allocate cost of transmission across these boundaries and as such, we're not getting the types of transmission built, and i think you'll hear from mr. walsh from itc in the next panel and he has a very interesting transmission project that i

would commend you to explore this with him further because he's in the midwest trying to get large amounts of wind out of the dakotas into the chicago area and i think one of his issues he's talking about is cost allocation across two regions. so what i'm suggesting ultimately is that congress needs to look at an entire structure of planning, siding and cost allocation that is initially deferred to the states, and i would say that the states should, in fact, ultimately solve that problem, but if they can't, then the pressure should be there to allow the federal government to step in if necessary. >> you know, thank you, mr. wellinghoff. you know, i was the author in 1992 of the wholesale transmission access provisions in the energy policy act that for the very first time gave the ferc the ability to force

utilities to stop blocking requests for open and non-discriminatory access to wholesale transmission line so there could be more competition in the area. the ferc then builds upon the new law that i created and issued a generic order, 888 on transmission access which is a historic order and that's based upon my 1992 law. i'm very sensitive to this issue, but i don't think we should tailor something that goes beyond what is needed, and i say that part of the problem we have in massachusetts and new england as well is with the and it's your predecessor of ferc who has just left office that preempting the state and local governments from granting ferc siding authority on wholesale electric transmission lines,

that issue is illuminated by the fact that ferc is unresponsive to the local concerns when it comes to the siding of liquefied natural gas facility in fall river, massachusetts. i have an lng facility in my district, in everett, massachusetts. massachusetts working with the federal government has licensed two lng facilities about ten miles off of the coastline to bring in lng into our market and into the new england market. it's upwards of 30% of the natural gas that we use in new england and we support lng and we have licensed two facilities and not withstanding massachusetts saying to the ferc, we don't need another one on land. we're doing it offshore and we licensed them. the ferc, not your ferc, but the ferc up until this point is saying, no, you're going to have another one in massachusetts and even that decision itself could affect the amount of renewables that we need.

right? >> not withstanding the fact that natural gas could be half of the carbon and its use as coal, it's not nearly as good as renewables will be but it will affect our marketplace by having that forced upon us and the ferc has been pressing that now for the last four or five years. so that kind of calls into question kind of this federal one size fits all process where even when the state is saying back off, the ferc continues to come in and say, no, this is what you will have for new england. how do we reconcile that, mr. wellinghoff? >> mr. chairman, i'm not suggesting a one-size-fits-all process. unlike the lng process ferc has the primary and initial responsibility with respect to siding and permitting that states be given the initial opportunity in this regard and that opportunity, i think,

should be given all the tools necessary for it to succeed. >> i thank you, mr. wellinghoff. other members who wish to ask questions of this panel? let me recognize the lady from wisconsin. >> i appreciate the viewing audience and we had a discussion to follow the electrons and i would like to pose a question about following the money. i ask anyone who want s s to jua brief prim or the economics of transmission. is there a guaranteed rate of return? how is that determined? who decides and what is the guaranteed rate of return for the transmission? >> congressman boldin, i would attempt that. i'd like to believe in