of the standard. i haven't read them. i would say we have, of course, standards for interconnecting all kind of renewable capacity already. i would not be supportive of áomething that@@@@ r

we're talking about specially authorized renewable transmission lines that would feed into the larger grid. and i agree with glen that if this is attached to hr-2454 and enacted then some of the reason for it goes away. but there's always the possibility there could be disconnected from that bill and as a free standing measure on transmission we think that a greenhouse gas standard would be important. >> how many of you would limit federal authority to only lines that affect renewable electricity that is generated? how many of you would limit federal authority just to that? >> i would do quite the

opposite, mr. chairman. i would limitederal citing authority to lines that, in fact, reliability. >> reliability. mr. jost? >> i would limit federal authority as only a backstop provision, and rely on local and regional planning as the primary mechanism. >> mr. nipper? >> we wouldn't limit it. >> again backstop. >> would you limit it just to renewable? >> what i would say is that if we're going to create special new authorities, they ought to be target ted problem, which is renewables. >> mr. welch? >> i would not limit the federal backstop citing authority. >> mr. miller? >> i think we would support limiting it and also respecting the fourth circuit opinion that we were involved in. >> thank you.

do you support federal backup citing authority for lines for any reason other than reliability? >> no, i would not. >> you could talk a little bit about that first map which mr. miller put up which showed very rich wind resources along the east coast of the united states, with the exception of some portions of the great lakes and out on the west coast it looks like it's -- it has the greatest potential for renewable electricity generation in our country. >> you're absolutely right, mr. chairman. as i mentioned we're pursuing a 150 mega watt wind farm and as you mentioned we can do that 20 miles out and be in 140 feet of water. that's not to underestimate the challenges of construction and operations and maintenance costs. we expect to fully bear the cost of the short haul transmission and which would be opposed to

having a nationwide support for a long haul transmission and be unfairly disadvantaged. >> what could happen if we take mr. miller's charts, i guess they are not mr. miller's charts, they were epa maps that were put together? >> the transmission map is epa. we overlayed it on wind and then coal resource maps. >> if that transmission plan was implemented it would bring a transmission line in from the midwest very close to the east coast. what impact might that have on your planning for renewable electricity off the coast line or off of new jersey >> we would stop. >> why? >> because we couldn't be competitive with the cost of the wind if it's not burdened by the cost of transmission. so the wind from the midwest, if it does not face transmission charge would be cheaper in that

case. >> you're up in the great lakes, mr. jost. could you talk about that as well in terms of potential of renewables coming in off the great lakes and what impact that could have for michigan and what could happen if, instead, power is wheeled in from other parts of the country through federal preelmtion, federal emnent domain takings >> it's a bit similar. first of all, it's clearly windier in the dakotas, for example than it is in michigan. michigan has wind resource even on land. but it's not as windy as in the dakotas. instead of 42% roughly capacity factors your might see in the range of 30% capacity factor. however, once the cost of transmission to get the power from the dakotas to michigan is taken into account it's cheaper to develop it in michigan. you mentioned offshore. michigan does have a very strong offshore wind resource.

unfortunately, offshore is still about twice as expensive to develop than onshore resources so when that calculus is taken into account we think it makes more sense to develop the onshore resources in michigan first. >> you heard the earlier testimony about the problem of getting, of renewable energy resource from the dakotas over to minnesota and the blame being laid at the feet of the federal government. in that region do you believe that is one of the main problems that otherwise the regions have been able to harmonize their electricity transmission policies in a way that viewed as fair to all states? >> well, i'm not familiar with specific federal government problems that may have come up with minnesota. my observation is that the regional planning process has been effective. and is a good solution to the problem. i think as many of us are pointing out, you work the economics when you start putting

effectively free transmission or postage stamp transmission along broad regions and you change the economics dramatically rather than having them compete on a standalone basis. >> now for our audience when we say postage stamp what are you referring to? why is the phrase postage stamp used? >> effectively what postage stamp rate is and it's used an aanalogy to the postal system where you put a stamp on the letter and send it anywhere for the same price. the reality, of course, is the costs are not the same. we look at the cost of transmission to move power from west to east. there's significant cost involved. however, if that cost is ignored and everybody pays the same price regardless of how far it moves it changes the economics and, yes, dakota wind would then be more economic on that basis once the cost of transmission is ignored, then michigan or the

east coast. we don't think that's the right way to look at it. >> one of the things that we're really trying to accomplish, obviously, in the waxman-markey bill is to generate renewable electricity and renewable energy jobs generally in all 50 states. so, mr. izzo has a plan to, along with many other people in new jersey to generate, you know, new renewable energy jobs that help with the employment in his company but in the state of new jersey as well. and we don't want to invoke the law of unintended consequences here and have a great revolution, have a standard that's imposed on new jersey and then not have the jobs created in new jersey, especially if they have the richest renewable energy resource right off their shore. mr. english >> mr. chairman, i think you make a good point. but i also suggest one other

thing. that it might make more sense in light of the objective of the legislation, in like of the fact that we're entering into a little different world than we have in the past that really what we're trying to do here is maximize the amount of renewable energy that we get produced all over this country. now, the fact of whether it's produced in one state versus another state, as long as it's the most cost effective way in which we can produce it and we, can in fact, make use of it all across this nation, i would think be the ultimate objective. now i can understand why some folks may want to look at this very localized and maybe very parochial thing, but this is a national piece of legislation. and we're trying to achieve a national objective and the thing that's limiting us to being efficient is this transmission system. >> absolutely. by the way, we couldn't agree more on this. okay. so if you're looking at this

map, and the fact that we're talking about along the coast and they may have more wind there, then obviously, we ought to be looking, that's where we taught produce it and we should use that most cost effectively and that's what we should be the driver and where we go. if we can't do that and have to do it out in the dakotas, fine, do it out in the dakotas. it shouldn't matter whether it's off the coast of massachusetts or in the dakotas as long as we're meeting the nation's needs and we'll have a huge amount of power that will be necessary to come from renewable energy if we will meet these objectives. one quick point, i know i've got a home down in south carolina. it's up on a mountain top. we got a huge amount of wind up there. but i can assure you if you try to build a wind generator up on that mountain you'll have a lot of people up there that will be objecting to it unlike what you'll find in the dakotas. >> absolutely. the point that mr. izzo is making and mr. jost as well is

that using this postage stamp analogy, it doesn't cost 47 cents to really move a letter from new jersey to new york city. okay. probably costs less. but the average is 47 cents. so that someone from south dakota can mail a letter into new york city. and that we have this communications across the whole country. that's great. we accept that. it's the way it should be. what mr. izzo is saying is that if you do the same thing for electricity, and you make it the same price to transmit electricity in from the middle of america, to new jersey, as it would be to bring in off the coast line of new jersey, then that's going to undermine the economics of all the projects along the east coast because it hasn't factored in how much it

costs to transmit that electricity 1500 miles all the way into the east coast market. and so the question then becomes, how many new jobs will be created along the east coast of the united states if there is no incentive any longer from mr. izzo because he's almost bound by his obligation to his shareholders to take all of this very inexpensive but subsidized electricity coming in from the midwest. how do we square the circle, glen, so that mr. izzo and mr. jost and others are disincentivized to produce renewable electricity. >> based on fair rates. that's what you're talking about. the people that are receiving the power, that are using the power are paying the costs. that's what it comes down to. if you're not talking about iling that letter from the

dakotas to some other region of the country and you're talking about, instead, what it cost to actually mail that letter to that location, that's the real issue that you're coming down to. >> what would you respond to then? >> so, i would say that if i looked at just this last year alone, the price difference associated with transmitting power from the plain states to new jersey, depending upon how busy the transmission wires were ranged from $20 to $80 a kilowatt hour. typically it was $30 to $40 an hour. that means it would be cheaper for a customer in new jersey to use the wind farm operating 25% of the time than to use a wind farm operating in the plains 40% of the time. because it's the total cost that matters. if you eliminate transmission and suddenly the 40% time of the dakota farm looks cheaper but you put a burden on the american

taxpayer and you've ended our economic development in that region. >> ah-ha. well, we want to be fair here, though. that's our goal of the bill. we want to incentivize renewable, this green energy revolution should be every where not just in certain parts of the country. so we need to find a way then to make sure that we don't invoke this kind of consequence that undermines economic development in states that have incredible resources indigenous to them. and that's a real difficult problem here and something we have to work through. i apologize to everyone. i really could spend a whole afternoon with you, and next week i might spend an afternoon with each one of you in working out this issue because we have to be fair. we have a bigger vision. every state can play a role here.

there is a row for everyone. we have to make sure that we winter to the east coast the things that are theirs, and so forth to the rest of the areas. even as you were saying, you represent a 75% of the land mass in the united states. there is an ocean mass as well that is also up there. excuse me? that is what i am saying to you. i want to make sure they are able to go out into the ocean and have the incentive. we have to work out a fair formula. we will have to stick very close together over the next couple of weeks so we can have this conversation and reflect on what our national goals are with each state in each region and the history of each state in region. some are commonwealth's not even

states which have their own traditions that might not follow the traditional federal lands act. i thank each of you. remainder of the hearing to congresswoman baldwin who will bring to it a close. thank you so much. >> i don't get to sit in this chair very often but i won't make you stay long just because i'm enjoying it. first, a quick comment and i'm not -- i'm construing or interpreting from some of mr. welch's testimony that there's some frustration with the planning occurring at the state level process. one of the things i would point out and certainly we heard some testimony in the first panel about very successful state level planning, but if you look

at order 890 in this process, it's really relatively new and i think i would argue it hasn't yet been given a chance to play out. if you look at the area i'm most familiar with, the first time my order 890 processes were approved by ferc and then subject to additional compliance requirements was on may 15, 2008 and, thereafter, they had to do a filing in august of 2008. it was just approved on may 20, 2009. so, you could make an argument, really just three weeks ago this is getting under way and it's a process that's to be given 12 to 24 months to, to occur. so, it certainly concerns me to have a characterization of this state and regional planning process as not -- as being

broken or not working when really much of the new focus is subject to order 890 and it's just under way. i have one, one question for the panel with regard to -- it goes without saying that construction of a transmission super highway will be a money maker for certain parties involved and we heard the chairman of ferc testify about the economics of transmission citing and construction as well as the guaranteed rate of return and so i guess i would like to ask you all what role, if any, should these entities with profit interest play in the transmission citing and decision making process? how should we appropriately limit or not the role that they play? and why don't we go from left to right this time and start with mr. miller. >> well i appreciate that question. that's been one of the most

troubling aspects of the planning process in the pjm region, the pjm is essentially, from our perspective a trade association of utilities proposing projects and ratifying the proposals amongst themselves. they do not have -- until very recently -- have a process that complies with the ferc order 890. they were looking only in at transmission solutions and not at alternatives and they do not do the kind of balancing of impacts, you know, other issues of public interest that state utility commissions more clearly have authority to do. so, the current way we do regional transmission planning is very disturbing. the owners of the transmission lines propose projects. there's a reactive approval process and there's no balancing of other considerations even within the alternative energy solutions like energy efficiency, dsm.

they are starting to incorporate those things but the process is very conservative and very oriented towards producing transmission solutions. >> mr. welch? >> well, to go to your question, first the frustration that i feel with the planning process is i would agree with you that order 890 went a long way. the one thing we don't have is in my rto and the others we don't have full participation. as a result of that when you try to do regional planning you're not going to get to the solutions set that you need. number one. number two, like wind, we had problems in 2003 with the largest blackout that affected this country. we finally came to the conclusion that nerc was funded improperly and wasn't independent in their decision making for setting reliability standards. as a result of that we changed the way nerc was funded.

it reports to ferc. it's funded through an assessment through all of the utilities and rather in that assessment is paid to ferc who then pace nerc. we've taken the financial incentives out of the hand of the rto or the rely jacket council in this case. when we talk about independent planning it's not about some kind of closed door deal here it's about getting the financial impacts off the back of the rto so they can do the job that they are there to do. then when we get to that point you have the question that says hey, who should participate and which of the rates of returns that these companies should earn? i think that the fair thing to say here is, when you start to build regional projects that everyone is affected they should be participating in as financial investors. those people should be part of that investment proposition because they are all there to make the grid work and work in a

concert way. when you build a regional grid, you have to have yourself in a position where you can maintain it. no one company could ever go across thousands of miles, havolihav have linemen, line crews. so it takes the participation of all those people on the route. without everyone being there at the table this gets very tough to do. so when you get to that point, whatever ferc says is just and reasonable that's what it will be. >> thank you for the question. let me suggest a way to think about cost allocation and rate of return together. under the current system private companies enter into agreements to provide transmission and they go out and raise the capital in the markets to do that. so as regulators consider that they have to provide the cost of that and rate of return on top

of that. if the costs are more broadly shared, first of all, you have a guaranteed revenue flow which will reduce the cost of capital to raise the money in the first place and in the second and, therefore, a reduced rate of return to the companies would be justified. so there would be two ways by sharing the cost that you would reduce the cost of building out this transmission, sharing it across a broader range of customers. >> mr. english? >> we've had many complaints about the fact that it's difficult for electric cooperateives to participate in this process, both because of the size and complexity and type of expertise that's required to participate independently. but also i think a lot of it does come down the situation that big entities in the region, quite frankly, are the ones that seem to have the control and the influence or at least feel they should.

and many of those, so that basically 0 doesn't have an all inclusive broad participation locally in designing many of the systems that come forward. so i think there's much more that needs to be done and the improvements in that and hopefully we'll see that in the future. we need at that broad based planning system in place. >> mr. nipper? >> yes, ma'am. we would agree with the comments that have been made that it requires participation by everybody involved. the stake holders. in our member's views that's among regions some a bit better than others but really is necessary that everyone be at the table and be participating and their input be accounted. i will say that in following up the comment on the rto and iso regions and they vary a bit as well but the opportunities to participate in the stake holder process with some of the other

stake holders for our members leaves a lot to be desire, i'll say that. then i would just lastly mention the benefits that i mentioned in my testimony about joint ownership and if there are opportunities, equal opportunities for folks and american transmission company is a good example of this, where an opportunity for broad and joint ownership by multiple entities provides planning and other benefits as well. >> okay. mr. jost? >> i might just pick up on something mr. miller said. i think ferc's incentive policies have created a situation where not only independent transmission companies but integrated utilities that hold distribution transmission and generation favor investment in transmission for solutions to the problems, even if they are not the most optimum solution because frankly the rates of return are higher and the level of risk are

significantly lower than other kinds of investments. that might be under state regulatory policy, for example, vis-a-vis what ferc has put in place. our concern is you see a rush to invest in transmission. i want to clarify again there are transmission projects that make sense and if they make good economic sense they ought to be supported. i think we have to be careful not to insent investment because of the low risk high return environment vis-a-vis the public interest and therefore, i do think broad public planning of some nature is necessary with broad participation. >> thank you. mr. izzo? >> we operate the regulated transmission business and unregulated generation business. the regulated tran mission business provides reliability 99.99% of the time to a regional planning process. it works and works well. that is regulated on rates based

on our doft service. unregulated generation basis always has to consider the cost of connecting to the grid as part of its investment strategy and fully bears that cost. we need to dispel the notion that renewables are not being built because of the transmission system. renewables are not being built because we're not sending clear price signals. this committee deserves recognition of doing that. the next thing i expect to hear from people if only we refrigerated freight trains. it doesn't make sense to ignore the transportation charges. >> i want to thank all of you gentlemen again for your time and expertise and your patience. before i adjourn, i need to ask unanimous consent that two letters from ferc to chairman markey are put in the record.

without objection. so ordered. and with that our hearing is adjourned. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2009] . today in "washington journal" they will be talking with bruce stokes. then it will speak with phil mattingly. later, secure flight will be discussed. that is with a former tsa administrator. it stars live at 7:00 a.m. eastern here on c-span. -- it starts live at 7:00 a.m.

eastern here on c-span. today aussies been3 -- today on c-span3 they will take a look at how to prevent polio around the world. that begins at 1:30 p.m. eastern. now israeli prime minister netanyahu, palestinian leaders to start peace negotiations without peace preconditions. he made the speech sunday. this is about 30 minutes. [applause] inutes. [applause] >> honored guests, citizens of