rate-based regulation and transmission is not, first of all, you have to understand transmission is not a market item. @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @n level of return on equity that would be authorized, but again, that's only an opportunity to earn that level of return. >> do you have any averages of what that rate of return might

look like. >> i'm sorry, what it might look like? >> what is the average rate of return? >> i know there's variables. a ballpark. >> i'll sub nate to you in writing, but i don't have an average today for you. >> okay. thank you. >> i thank the gentle lady. and i thank all of our witnesses. you have been absolutely fantastic and you, mr. wellinghoff, i want to tell you how much we appreciate your willing tons take on this job. this is one of the toughest jobs we'll have in america. you have an outstanding robert and we've had an extensive conversation with you privately, and i really am very, very glad you have this job. i think you'll do a tremendous, tremendous service to our country there in that position. it's very sensitive and it's going to require people like you who are willing to spend the time to get this right so we have a long-term solution, and as we're going forward especially over the next week or

so. we're going need some specifics to help us to think through this issue in terms of where the problems have been. what has caused the problems and what will be needed in order to correct those problems. okay, we'll need some examples and some specifics with regard to what has been used as a blocking mechanism to the resolution of these regional issues because we want to get at that issue. we want to have real competition out there in the marketplace. so for you especially, mr. chairman, we hope that we can work with you in the next week. you have an outstanding staff and you're an outstanding individual, and i think we can accomplish that. >> we'd be theep do that, mr. chairman and thank you very much for your kindness. >> thank you. what i'm going to do now is to work in reverse and i'll give you each one minute to tell us what you want us to remember as we consider this issue over the next week and we'll begin down

in this end with you, mr. hal pert. you each have one minute a piece. >> thank you, mr. chairman. i think the two things that we would emphasize are the issue of super sizing which relates to the cost allocation issue that we spoke about. it doesn't make a lot of sense for us to use up whatever good will we might have trying to locate -- or locate a line that's undersized. the second thing is the federal lands issue and the permeating issue and i've elaborated some on that, but this, we see, is a very large impediment and those would be two things that we'd like you to bear in mind. >> thank you, sir. >> mr. hibberd, thank you, mr. chairman. i would just say that certainly from our perspective in the commonwealth, we completely agree with the goals of the aces legislation. we absolutely have to address

the carbon issue and we have to address it now. what i would urge you to consider from the standpoint of transmission is to try to retain the competitive market structure that delivers benefits to our rate payers in the designs that you implement going forward. the carbon cap that provides a value or cost of additional marginal costs associated for purchase for fossil-generated resources that provides additional revenues to renewable resource should provide the financial incentive needed to get renewables and the associated transmission built and that we want to maintain the distinction between who's responsible for paying for transmission if it's a generating facility and who is responsible if it's needed for -- >> number one, define the goals that we need to be with the transmission grid. >> number two, define a state-led process by which we can meet those goals, one of the

primary aspects would be the decision maker must be beholden only to the public interest. number three, ensure there's federal backstop authority so that we get our job down. number four, don't do harm and with regards to that, don't define a specific technology and please don't define a cost allocation process. >> thank you, mr. cohn. >> thank you, mr. chairman, just very, very briefly, i just want to reiterate that the states are here to help. we would like to work closely with your committee in developing some transmission planning and federal preemption should only be used as a last resort. >> thank you, mr. wellinghoff. i would suggest that hopefully you come away with this, number one, we're not as far apart as we initially seemed to be. we all have the same goals, to reduce carbon and to ultimately develop as much renewables as possible to do that, but i think

we need to remember that there are non-market barriers that we need to look at to how to get that development done and as part of the non-market barriers we do need to put a construct together to allow states to initiate the process of planning, siding and cost allocation to deliver renewables. we also have to have the back pressure of the federal government standing there, being able to step in as noes let it happen and get it done. >> thank you very much. and in the spirit of what mr. wellinghoff said, we may not be as far apart as the initial statement indicated. let's work -- time is of the essence and all of these conversations now continued outside of this hearing room over the next week or so will be helpful to us. with the thanks of the committee this panel is dismissed and we will ask the next panel to come up to the table.

so thank you all very much and please sit down and if someone can distribute these cards with the names of the witnesses and do so in a way that reflects where they will be sitting on the panel, i will very much appreciate it and then you will sit wherever you want and then we will recognize you in the -- this is --

>> sit wherever you want and i will recognize you in the order that ias going to recognize you. it's like musical chairs. we have enough chairs for each of you and if you can find the open one it will be very helpful to us. >> we thank you all very much for being here and we apologize for the delay.

this is obviously a very important issue. we may be writing the transmission rules for the next generation of electricity generation in our country over the next couple of weeks. we'll see if that can be accomplished. perhaps it can, perhaps it can't, but your testimony will be central to accomplishing that goal. we could not do it without your participation. we apologize to you for the delay and your panel being recognized and for it being friday afternoon getting later as the minutes transpire. we'll begin with ralph isso. he's chairman, president any chief executive officer of the enterprise group incorporated. he is a leader within the utility industry and the public policy area. we thank you for being here, mr. izzo, whenever you're ready, please begin. >> mr. chairman and members of the subcommittee, i thank you for the opportunity -- >> could you move the microphone

just a little bit closer. >> thank you for the opportunity to testify. and owns and operates electric generating capacity in the northeast, mid atlantic and texas. pscg has long supported policies to promote long renewable generation. we are planning major vestments in solar, off-shore wind generation and an energy storage technology that will make renewable energy more competitive. the question today is not whether we should vigorously promote renewable generation, but how. specifically, how should we use transmission policy to promote renewable generation at the lowest possible cost. this would include not just federal siding authority, but transmissions with cost allocation that are fundamental to determining how much transmission is built and where. there are two competing views on this, one view which i strongly favor is that governments should

establish prices for externalities such as the cost of emitting greenhouse gasses and let market forces determine which technologies and which locations are most promising for investment. this is the approach taken in the landmark aces legislation. it establishes a price for carbon with a cap and trade program and a market-based subsidy for renewable generation through the renewable electricity standard. with these price signals, developers can compare the cost of renewable generation in different looks including with the associated transmission costs. the alternative view is that they should plan and cite transmission that would connect areas with strong renewable resources to areas of high electric demand via some green transmission super highway paid for by taxpayers.

under this model, thinkment would pick technologies and locations and build transmissions to facilitate them. i have strong views about this approach. first, it can lead to expensive outcomes. all business owners know that if they establish the fact to keep production costs down they have to weigh that against shipping costs, but if we socialize shipping costs of renewable generation, we skewed decisions away from locally based options that may have a lower total cost. that is why a bipartisan coalition of ten northeastern governments wrote to congress warning that this policy would undermine their efforts to grow renewable industries. moreover, building thousands of miles of transmission lines in anticipation of the arrival of renewable generation may lead to an expensive excess of transmission capacity. transmission planning is a deliberate process meant to

respond to long-term reliability and economic concerns. it is not intended to predict and facilitate dynamic markets. second, as has been said so many times already, there is no such thing as a green transmission line. transmission lines carry all electrons without regard to the carbon footprint of the generator. in fact, the dispatchability of renewable resources would suggest you would have a significant underutilization of the transmission line unless you filled it with other forms of generation. so a green transmission line would give market advantage to any power plant fortunate enough to be close to the new line. third, creating a new, planning process across the region is unnecessary. we already have regional planning processes that are effective and sensitive to local concerns. cross-regional issues should be addressed from approved coordination between regional planning bodies which is exactly the approach taken in the

committee with the bill. finally, existing tools can help renewable projects connect to the grid without distorting price signals and without potentially burdening customers with an excess of expensive transmission. for example, if the cost of connecting to the grid are too much for one developer to bear, multiple developers can share costs among their projects or ferc can require that rate payers initially bear these costs provided they're reimbursed by developers after the projects become operational. in closing, i believe we will meet our long-term carbon reduction goals, but sitting here today, i cannot tell you what renewable technologies and more importantly, in what locations it will take to get us there to serve our customers at the lowest possible cost and neither can government. that is why i strongly support policies such as an res and carbon pricing that send price

signals to the market and unleash creativity and the entrepreneurial spirit of the american people. >> thank you. >> thank you very much. our8á%ái1@ @ @ @ @ @ @ @ r@ @ @ dependent, that is depend own the facilities owned by others to acquire what they need. our members report that more transmission is needed in almost every area of the country to

serve a variety of purposes including increased use of renewable energy, reliablity and enhanced competition. in our view, the single most significant impediment continues to be siding and we urge congress to clarify and continue to support the federal backstopped siding authority included in epact 05. they were a major step forward, but have been called into question -- by the recent decision in the fourth circuit court of appeals. as the intervener on the side of ferc, it believes that legislation should clarify that the original congressional intent on 05 by providing ferc with the backstop transmission siding applications when a state denies an application. it's important to note for us that as state government and public power, utilities are not typically supportive of the federal policy and we've had concerns about the congressmen

for other areas. however, the importance of siding new interstate transmission lines cannot be understated and our continued support of the compromise in epact 05. high voltage lines are always better in actuality, and the interconnected nature is the lower voltage line if located strategically could have the greater ability to ease congestion and to enhance reliability than a higher voltage line and could experience less local resistance to the siding and cost less than a higher voltage line. of course, there are situations where the highest voltage line is necessary and we want to make it clear that cleaner is not always better when it come to the grid. the impact of proposed new higher voltage fas ils on the network needs to be fully considered. so that the optimal mix of facilities can be determined.

in the transmission facilities including public power utilities is another way to get more transmission built. if the responsibility for building and owning the transmission grid is spread more broadly among the entities serving customers, then joint transmission planning would be facilitated simply because there are more participants at the planning table supporting the needed projects. if network customers of a dominant regional transmission provider are encouraged to have the low ratio shares of the transmission system. it will be more closely aligned and the friction between transmission-dependent utilities and transmission owners can be reduced. there are many examples, mr. chairman, where that is the case. appa supports the transmission planning provisions including the committee-passed version of the american clean air and security act that they will bolster rather than duplicate or further complicate the existing planning process under ferc

order 890 according in the regional sub levels of the country. the manner in which transmission facilities costs are allocated among transmission owners and transmission-dependent facilities is one of the most controversial topics related to transmission. appa strongly supported the language in epact that underscores fercs flexibility. we don't always agree with the decisions made by ferc on cost allocation. we continue to believe that congress had it right in leading these decisions with input and administrative due process to ferc to determine under sections 205 and 206 of the federal power act. the issue of who pays for transmission facilities provides regional benefits is a difficult one and says such facilities could provide future system benefits and extend well beyond the facilities for whom the facilities are constructed. the app urges ferc to provide

greater guidance on cost allocation that afford the regional benefits. appa has the allocation of cost facilities to the sub regions or entities that will receive little or no benefit from the facilities and therefore opposes a federal statutory requirement to allocate such cost on an interconnection wide basis. lastly, mr. chairman, appa has concerns with the ferc, provided under epact 05. in regards to section 219 is the statutory requirement to offer a variety of transmission incentives to applicants and it appears that these entities have been helping themselves to these incentives and the commission has not taken a sufficiently disciplined approach to awarding rate incentives. we appreciate your long health concern in this area in your letter to ferc asking for their incentives and we look forward to their response and to working with the chairman on that issue.

>> thank you very much. i appreciate the diplomatic way in which you used the word entity in your testimony. our next witness is glenn english. he is the chief executive officer of the national rural electric cooperative association, but more significantly, he served in the united states congress for ten terms as one of our most distinguished members and it's our honor to have you back before the subcommittee, glen, whr you're ready please begin. >> i appreciate that. i'm not sure my board of directors would agree with the more significantly, but i appreciate that and understand where you're coming from on that. i think the one thing the board and i can share in common is that we'll each reserve to ourselves which of us believes that you had a more important

job. both of you are thinking -- the fact that you are both so important for us. >> you are very kind. i appreciate that. electrical operatives are consumer owned and we're in 47 states across the country and we serve, however, 7% of the population through about three-quarters of the land mass of the united states. so when we talk about transmission and when we talk about the fact that you're talking about generating renewable merge in this country it will come from areas that are served from electric cooperat e cooperatives. we floon have a big part of the future as we move forward in that general direction. >> repeat that number again. 7% of the customers. >> three-quarters of land mass. >> okay. thank you. it is all owned by those individual consumers throughout those 47 states, mr. chairman. >> also, i think we can all agree that the signing of the american clean energy and

security act in 2009 is going bring about a profound change in the way that not only energy is generated in this country, but the way that we use energy in this country. it's going to change our lives and with that understanding, i hope that we can also recognize that we've got to be prepared for that kind of a dramatic change and the transmission system as it exists today was certainly not designed for this kind of change. in fact, it wasn't designed for the 1992 energy act with the deregulation on the wholesale level. so we're still trying to adjust to that. >> what we would suggest, mr. chairman, is that we need a sense of urgency here and we need transmission as a part of this act. it needs to be addressed as this act. as a result of that, we think there are some very basic principles that need to be incorporated as you move forward with any legislative language as

it applies to this new transmission system, new transmission policy that the country is going to be following. as i think you know, we have established each cooperative in each of those 47 states can participate in a -- in any renewable project and any part of that three-quarters of the land mass of the united states. solar wind project in south dakota, for instance, may be invested fr by people from wisconsin, co-oped from wisconsin or they may frontal boundary alabama or georgia or wherever. they can own a piece of that and what we're looking for is a way in which we can generate that power through renewables in the most efficient way possible no matter where it's located. we should be looking at the most cost effective way in which we can do that. >> just as we know that certain wind corridors exist that can provide us with a great amount

of production with wind energy throughout the great plain, not every farm is the same. not every state is the same, that we also have got to make sure when we locate that kind of generation in those areas that we can move that power out of those regions. so we need an effective transmission to do it and we also have to be very aware of the fact, and it's been our experience that bottom-up planning works the best so you need local, regionaling and you need local folks to decide what's the best way to move forward on this. so that's the principle that we need to adhere to, the bottom up from the top down as far as planning the transmission system of this country. i would also suggest under these conditions and given the fact that to have a more efficient transmission system and we'll

have to move the transmission across state lines that we may run into difficulties and incumberences and we might run into delays that the national best interest is not being served. so i think we've got to -- while we're having the local planning, we've got to also make sure that we don't have impediments put in the way that will prevent the local planning from being implemented. we've got to make sure that the overall national policy of moving across state lines is dealt th and for that reason we do think that there is going to have to be some authority on the federal level as far as siding is concerned. again, it should be a focus on certain qualifiers. as we look at that siding authority. first of all, there should be facilities that are only identified on regional planning. there should be facilities that are in interstate projects and it should be, in fact, the owners of those facilities

should not be able for enhanced rates as far as what they're building that transmission and the cost of the facility should be fairly and broadly allocated along with the use of the facilities should not be limited to one kind of power and it should not be renewables only and that's because of the fact that the laws of physics as we've heard expressed here today doesn't distinguish between electrons. they're all the same once they get into the transmission system. >> we'd also suggest that the law that we're proposing would, in fact, itself dictate the direction that we would be manufacturing and generating those particular electrons. also, we would suggest the broad, fair cost allocation. we think that's a very important point and those of us who are electric cooperatives are sensitive about that. we would have a few people and

all of the costs being dumped on those people would be unbearable and it should be allocated on the basis of who's getting the benefit? who are the folks receiving the benefit of that energy that is being produced. also, we would suggest, mr. chairman, that we move forward and recognize the fact that there are more benefits by transmission system in the country than just the movement of that power. the right of ways for that would become extremely valuable, and it would be a way in which it would become new technologies and ways to move in the new technology and you're particularly interested in the smart grid and there are many uses that could be incorporated for any new transmission system along those lines. between the towers is another

way that we could make good use of that transmission system. so, mr. chairman, i would suggest to you that we need a new transmission system to go along with the legislation that's being proposed. >> thank you. thank you, glenn, very much. our next witness is reid. he's executive director of the energy future coalition, a non-profit organization that seeks to reform u.s. energy policy. we welcome you, sir. whenever you're ready, please begin. >> thank you for inviting me to testify today on this important and timely topic. i find a great deal of agreement across the table and in particular with congressman english. last year in partnership with the center for american progress and the energy foundation, the energy future coalition undertook a series of listening