ferc supports the reliability in several ways. first we directly oversee the development and enforcement and reliability standards for the both electric system. we also support reliability to the regulation of wholesale rates and markets which compensate resources and send investment signals needed for reliability and of the interstate electric transmissi transmission. finally ferc is responsible for the energy infrastructure including gas pipelines, terminals and hydro facilities. the reliability and resilience of the grade stems from how it's planned, constructed, operated and how they respond to and learn from events that happen that means in setting the standard ferc has to pay attention to not do decisions like trimming trees all the way to emerging cybersecurity. last november we approved the fifth generation of cyber security standards that for the first time requires all fiber assets to receive cyber protection commensurate with their impact on the grid. reliability requires protecting the physical security of the assets f

does ferc have a high level person at ferc that's responsible for trying to help? have you all stood up any additional resources in that sphere in the last few years? >> yes. we have our chief security officer as our classification authority. he has delegated or derivative classification authority under the navigation from the d.o.e. and our general counsel has been very involved in this also. since it happened we've taken a number of steps internally. we sent out a reminder to all employees of the regulations that govern information security. i've ordered a full internal review, kind of a chain of custody of all the documents when they were created. were giving that to mr. friedman's people, and ultimately what we need to do is develop a crisp and clear internal process so we understand what information we are creating an have a process where the right professionals get a chance to weigh in on what level of classification it should have. >> thank you. mr. cawley, let me ask you this. i understand you testified and i generally agree that the private sector is doing

i'm philip moeller, a member of ferc since 2006. thank you for holding a hearing on this important topic. we've got through quite a winter, particularly and eastern interconnect of the to reference on page three of the staff and out with particularly starting january 5, the polar vortex events. we need to send appreciation to the thousands of people who kept the system running, the control room, mr. hunter's members, people who may decisions, dispatch. they came to remarkably well in a system that was very stressed. i consistently said that we will let the market decide which fuels are the winners based on economics and affordability, but i can't be reliability neutral. on this subject it's just important to we have to maintain reliability of the nation's great. i went back and looked at the letter that senator murkowski wrote me in 2011 and my response, and my house testimony that year in which i called for a more formal process to analyze potential reliability implications, particularly environmental rules, to my knowledge that pr

and nerc and ferc represents the best ferc n is federal and it nerc is the private sector. how is this working and quickly give one example of the improvement you could think of. >> really be have only been at this between ferc and it nerc around eight years and i think it is working quite well. we have a somewhat unique hybrid system where the old voluntary system of nerc guidelines has superimpose the $1 billion a day penalty it is an odd marriage so there were some tensions and the beginning of what has helped is to set priorities because of the hybrid system we have to have the same reliability priorities even though we may disagree but you do to get there and the communication at the top between the two agencies has led a culture at nerc to set priorities and i think that is the biggest of we have taken to make the standards better which is what keeps reliability going. >> i think the model is working well and it is almost unnecessary because it is so complex electric grid connected internationally with canada and mexico to bring the expertise of the industry together

>> well -- >> ferc, you touched on it, ferc's proper role. >> yeah. well, thank you for that question. i do not think it's ferc's job to pick certain kinds of fuels. the whole concept of a market is that it uses a generalized product that allows different fuels to compete fairly and so, if there are preferences for certain kinds of fuels that is not a fair market by definition. i think ferc should try to keep the, be guided by reliability and what the customers need, not by a preference for a particular fuel. >> let me ask, because i know time, we'll go through in a second round, right now, just explain, as simply as possible, any of you all want to jump, the system way it works now. you have producers such as aep, first energy in mine. they're responsible for producing the energy that is needed that goes into the transmission which is what we're calling the grid. then you have an rto such as pjm whose responsibility is to make sure it's reliable and affordable and dependable. who makes the decision what goes on and what the reimbursement rate would b

we're actively participating together with city attorney in the case at ferc, trying to make sure that we pay our fair share and no more for distribution services. >> so, we have full support in that. >> the other thing i wanted to illustrate is that most of our customers in the retail side, we charge equivalent to pg&e. and, so, with the transmission and distribution, they're not raising -- the pg&e doesn't typically raise their rate, per se. they're just raising their rate for transmitting our power through their system and distributing it. so, really, it eats into the margin. and, so, instead of paying them 1.2, we're paying 3.4 and we're still charging the same amount. and, so, that's the challenge. >> so, prior to some of these challenges coming into effect, we had a balanced plan. if you pretend you're in february of 2013, the last time we presented a balanced financial plan, fiscal year-end '16 would look like the slide you see in front of you now, where our operating costs would have increased. our capital program would still be quite robust. and we would not be dipping into re

set to increase significantly upward of 16 to $20 million based upon what pg&e has filed for their ferc as well as cpuc rates. those cost increases are far in excess of what we had previously assumed in our ten-year projections. and you, along with the city charter, require the puc every single year to update a ten-year capital plan, a ten-year financial plan, and we then convey that to our policy makers and the public what those rates are going to be needed to cover costs. there is no profit. there is no extra money. it's just what will cover costs. previously that balanced financial plan and capital plan was in existence until these three significant pieces of additional cost increase for large capital, mountain tunnel, the significant increases with pg&e projected costs for the transmission and distribution, and then lastly a regulatory environment change which resulted in us having to do additional improvements because of federal regulatory requirements, in particular, for the safety of the electric grid. many of the requirements are important given the sensitivities that we've seen

for the record will you tell us what ferc does and how much input they may have?>> we essentially create policy daley in terms of the precedents set. >> is that how energy will be produced or delivered? >> we do not have a role in the generation outside as a regulator of tied to a power production primarily a safety and environmental rule. >> if they are not able you see they are not able to produce because they do have that power. are you able to step in to give them the ability? >> typically we call that a must run and we have several and we anticipate that is the essence of my testimony we needed deeper dive. >> so you have no input whatsoever of policy directory of generation? >> we are intwined. >> could you reverse the closure if ferc to not be guaranteed cuddy reverse any of the closers letter under way? >> there may be areas where it is a possibility but we have to like it each individual circumstance because we knew these units would shut down for years when the approvals came out so as to be at the bottom of boilers you have to have us enough substantial

that was to ferc, the regulator of the market.als were named in the settlement documents. around that time, jpmorgan announced they were selling the commodities unit masters runs. weut three weeks later, reported in august there was a federal probe of individuals involved in this ferc investigation. we did not know what was. we were able to report today one of those was masters. while this was going on, they were trying to sell this unit. investigationhe became what we could probably on howthe sticking point some bidders were looking at buying it. >> thank you for explaining the behind-the-scenes. we will be back in two minutes with much more on "in the loop." ♪ >> it is christmas in april, as it is every able for golf fans. the master started yesterday. the tournament is not the only thing back. so our successful u.s. golf courses. after falling in 2012, golf course prices rose 57% last year $4.25 million. joining us as a member of golf royalty, the son of champion gary player. he is also c.e.o. of the golf course design firm and

always been in our ten-year plan, but not to the recently filed and heightened levels by pg&e, to ferc and cpuc. but lastly and a very much smaller amount of it, the regulatory environment, we used to comply -- we used to work with and want to comply with best practices in all our utilities, but that has gone from being best practice to now in the next coming budget mandatory. it is vaster than what we had originally assumed. so, i'm sorry to have to report it and i wish i could -- i wish i could tell you exactly that we can continue to give $50 million of cheaper power to the general fund, but i don't see how to do it at this point any longer. >> and then two follow-up questions. i had shown some of the timelines around the decrease in -- i don't think you can see it from here, but a decrease in go solar s.f. installations and clearly these are all trend lines, but i think all of us as well as the public are concerned about, if you slash funding, potentially down to zero, what is your suggestion in how we move this forward? is your department able to continue to operate this program?

and ferc. we ignore the and rage so we have done i think a really good job at trying to work with d.o.e. and pick their brains and make sure what we are designing that they would agree with our projections, our analysis and our way of framing issues in the opportunities and the same with the. jason, i feel we are presenting a bit of a rosy picture. everyone knows i am a stock realized. i know the challenge we are having, but we couldn't be better positioned at this point for something that keeps the conversation going. one of the reasons we are doing so much outrage is just a recognition that this is an issue. the only thing i hope when this proposal goes out as people will will look at it and say epa lists and. epa did what they were supposed to do. they challenged the full range of ideas. they put up lots of questions and they are willing and the comment process to get to a final that might be different from the proposal because it is informed by further discussion. i think many times we get

reported that there was a federal investigation of individuals involved in what they settled with fercbout, but one of those individuals was actually blithe masters -- b lythe masters. >> that changes things. >> and that had an impact on what was going behind the scenes with the whole bidding process. >> and stephanie raise the question if she was not going to go with the unit to a new owner, why did she not just get a bigger, more important job. cavanaugh's job opened up a week before. it possible that the bank cannot or would have difficulty planting a more senior job level somebody was under investigation by federal prosecutors? >> that is very possible. it is definitely something to consider that this had an impact on the bank's decision-making process. if you are jamie dimon these days, you have to walk a very fine line. i guess what though? she has to lead and has had a mixed ordinary run. keri geiger, to every much him on the latest out of j.p. morgan. >> coming up next on "market makers," the lawyer that says when it comes to wall street, the agency is mostly talk and not much

amendments including with senator toomey to help small business and have a dialogue with my colleagues on ferc to to set a foundation for what i hope to be a success in the future. >> thank you senator menendez and i know you are doing important work and i look forward to working with you. senator toomey. >> i too want to say in a body that is not considering nearly as much legislation as it ought to on the floor and far too committees are not working i commend you for a meaningful substantive open markup. this is exactly what we should be doing and i commend you for that. i think it's unfortunate we are continuing for another two years in this case a very flawed policy of the temporary tax code and i was encouraged by your insistence that this is the last of them. that is very important. i think of the many items in this list of extenders many of them fall into one of two categories. there is a handful that are unambiguously pro-growth and encourage economic activity without discriminating or distorting economic activity and though should be made permanent. then there are a lot better that ar

we have done this work very well alongside a regional entities, which are under the purview of ferc and i agree the regional, rto side, undertake such significant work not only in building out our transmission infrastructure, but insuring the generation. needs to be in those states where there are members who participate in rto's, isos, but we can't allow utility regulators, and i don't think they will or should or can to check the duty they have. it is a duty that they have to their states and repairs. so i think it is something we will continue to work through. >> we been dancing around that has been a bit of a challenge for the nation for the last 250 years. while i think there is clear recognition of statute contemplates the states have been the fund mental obligation, you are putting out payments. there are some expectations. i wonder if you could speak broadly. they recognize all the flexibility, collaboration, regionalism. is there framework you think about which will be sent to look for christ aboard? >> yeah, we will be teamed up a number of ideas and taking comments on what st