[Senate Hearing 109-609]
[From the U.S. Government Publishing Office]
S. Hrg. 109-609
MOELLER AND WELLINGHOFF NOMINATIONS
=======================================================================
HEARING
before the
COMMITTEE ON
ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
to
CONSIDER THE NOMINATIONS OF PHILIP D. MOELLER AND JON WELLINGHOFF TO BE
MEMBERS OF THE FEDERAL ENERGY REGULATORY COMMISSION
__________
JUNE 8, 2006
Printed for the use of the
Committee on Energy and Natural Resources
______
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COMMITTEE ON ENERGY AND NATURAL RESOURCES
PETE V. DOMENICI, New Mexico, Chairman
LARRY E. CRAIG, Idaho JEFF BINGAMAN, New Mexico
CRAIG THOMAS, Wyoming DANIEL K. AKAKA, Hawaii
LAMAR ALEXANDER, Tennessee BYRON L. DORGAN, North Dakota
LISA MURKOWSKI, Alaska RON WYDEN, Oregon
RICHARD BURR, North Carolina TIM JOHNSON, South Dakota
MEL MARTINEZ, Florida MARY L. LANDRIEU, Louisiana
JAMES M. TALENT, Missouri DIANNE FEINSTEIN, California
CONRAD BURNS, Montana MARIA CANTWELL, Washington
GEORGE ALLEN, Virginia KEN SALAZAR, Colorado
GORDON SMITH, Oregon ROBERT MENENDEZ, New Jersey
JIM BUNNING, Kentucky
Bruce M. Evans, Staff Director
Judith K. Pensabene, Chief Counsel
Robert M. Simon, Democratic Staff Director
Sam E. Fowler, Democratic Chief Counsel
C O N T E N T S
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STATEMENTS
Page
Bingaman, Hon. Jeff, U.S. Senator from New Mexico................ 6
Cantwell, Hon. Maria, U.S. Senator from Washington............... 3
Domenici, Hon. Pete V., U.S. Senator from New Mexico............. 1
Moeller, Philip D., Nominee to be a Member of the Federal Energy
Regulatory Commission.......................................... 8
Murray, Hon. Patty, U.S. Senator from Washington................. 2
Reid, Hon. Harry, U.S. Senator from Nevada....................... 1
Smith, Hon. Gordon, U.S. Senator from Oregon..................... 6
Thomas, Hon. Craig, U.S. Senator from Wyoming.................... 6
Wellinghoff, Jon, Nominee to be a Member of the Federal Energy
Regulatory Commission.......................................... 10
Wyden, Hon. Ron, U.S. Senator from Oregon........................ 6
APPENDIXES
Appendix I
Responses to additional questions................................ 27
Appendix II
Additional material submitted for the record..................... 57
MOELLER AND WELLINGHOFF NOMINATIONS
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THURSDAY, JUNE 8, 2006
U.S. Senate,
Committee on Energy and Natural Resources,
Washington, DC.
The committee met, pursuant to notice, at 10 a.m., in room
SD-366, Dirksen Senate Office Building, Hon. Pete V. Domenici,
chairman, presiding.
OPENING STATEMENT OF HON. PETE V. DOMENICI, U.S. SENATOR FROM
NEW MEXICO
The Chairman. The hearing will please come to order. Good
morning everybody. We are here this morning to consider the
following nominations: Philip Moeller to be a Commissioner of
the Federal Energy Regulatory Commission, and Jon Wellinghoff
to be a Commissioner of the Federal Energy Regulatory
Commission.
Before we begin, I understand that the distinguished
Minority Leader, Senator Reid, and the two Senators from
Washington, Senators Murray and Cantwell, would like to say a
few words regarding these nominees. Senator Reid, if you would
please begin, then we will follow with Senators Murray and
Cantwell, in that order.
STATEMENT OF HON. HARRY REID, U.S. SENATOR
FROM NEVADA
Senator Reid. Thank you very much, Mr. Chairman.
The Chairman. You are welcome.
Senator Reid. I appreciate you and Senator Bingaman getting
us to this point. I know that we have had a lot of qualified,
good commissioners on the Federal Energy Regulatory Commission,
but there will never be anybody that is better qualified and a
better person than Jon Wellinghoff. He will do as well as
anyone has ever done. We know that there are a lot of problems
facing our Nation; for example, the Enron trial underscored the
need for a nominee of Jon's caliber and experience. He is a
person with strong commitment to consumer protections and
diversity of experience, not only with traditional sources of
energy, but also with renewable sources.
I think he is the right person at the right time. He has
three decades of experience in energy markets, spanning both
the public and private sectors. His public experience included
not only time back here working in the Senate and the Federal
Trade Commission, but extensive experience at State level,
working to protect Nevada consumers. He has served as chief of
the district attorney's consumer fraud division in Reno,
counsel to the Nevada Public Utilities Commission and for 7
years he was appointed by the Nevada Governor as consumer
advocate.
Jon saved Nevada utilities customers millions and millions
of dollars. He helped write and enact Nevada's renewable energy
requirements, which is one of the strongest of the Nation. He
has extensive experience representing private clients, hotels,
renewable energy providers and others, and his current role as
a member of a prominent law firm in Las Vegas.
Members of the committee, I certainly have to say that Jon
is not only well-qualified personally, but he has a wonderful
wife, a close personal friend to former Secretary of Labor,
Secretary of State, and what ever else Secretary Shultz did.
She was a presidential scholar working at the White House where
she met Secretary Shultz. In addition to that, he has a
brother-in-law, a prominent Las Vegas lawyer, one of the best-
known lawyers Nevada has ever had--Neal Galatz, who is in the
audience--he and his lovely wife Helene are longtime friends of
mine. I can say nothing more to you, Mr. Chairman and members
of this committee, but that he will do a good job, he is not a
partisan, he will do what is right for America. Thank you very
much.
The Chairman. Thank you very much, Senator Reid.
Senator Reid. If I could be excused, may I do that, Mr.
Chairman?
The Chairman. You may be excused.
Senator Murray.
STATEMENT OF HON. PATTY MURRAY, U.S. SENATOR
FROM WASHINGTON
Senator Murray. Well, Mr. Chairman I am very pleased to be
here this morning to help introduce Phil Moeller as a nominee
to be a Commissioner of the Federal Energy Regulatory
Commission, and I believe that Phil's wife, Elizabeth Vella
Moeller, is in the audience. I want to welcome her and thank
her for being here as well. In Washington State and in
Washington, D.C., Phil Moeller has built a repetition as
someone who knows energy issues, and as someone who people want
to work with to solve problems.
Personally, I am excited that Phil will bring a working
knowledge of hydropower systems and the perspective of the
Pacific Northwest to FERC. In the 10 years that he was a staff
coordinator for Washington State Senate committee on energy,
utilities, and telecommunications, Philip Moeller learned the
value of hearing all sides of an issue, and built an
understanding of how different policy issues are related.
When Phil served on the staff of Senator Slade Gorton, he
stood out as an example of what an excellent Hill staffer
should be. He was willing and open to working with anyone on
the issues. He operated in a bipartisan fashion while
protecting the positions of his boss. He spoke clearly and
intelligently on a wide variety of energy issues. That is why
Phil was one of the widely respected voices on Capitol Hill and
an assets for the Washington State delegation.
Phil has traveled far from the days of growing up on a
ranch in Washington State. He has dedicated his life to public
service, and he offers a perspective and expertise that is
badly needed on the Commission. Mr. Chairman, I am proud to
join with Senator Cantwell today to support the nomination of
Phil Mueller to the Federal Energy Regulatory Commission, and
know that his voice and his experience will serve our country
well.
The Chairman. Thank you very much, Senator.
Senator Cantwell.
STATEMENT OF HON. MARIA CANTWELL, U.S. SENATOR
FROM WASHINGTON
Senator Cantwell. Thank you Mr. Chairman. It is great to be
here with my colleague, Senator Murray, and I thank the
chairman and the entire committee for holding this hearing
today. And it is my pleasure to join with Senator Murray in
introducing the nomination of Philip D. Moeller to the Federal
Energy Regulatory Commission. It is hard to believe, but in
Washington State the Federal Energy Regulatory Commission has
actually become a household word. And so I actually want to
congratulate President Bush on this appointment and nomination
of Phil Moeller from the State of Washington.
As Senator Murray points out, Phil Moeller was raised in
the Northwest just outside of Spokane, Washington, I think in
the Freeman school district, probably just a few miles from the
State of Idaho, so all of eastern Washington is proud of Mr.
Moeller. All of the State of Washington is proud of Mr.
Moeller. And all of the Northwest is proud of Mr. Moeller.
I say that because as we talk about energy policy here in
the Northwest, and here in the U.S. Senate, I do not think we
have ever had a nominee to the Federal Energy Regulatory
Commission from the Northwest, so we think this is a very
important issue for us, and for energy issues that need the
emphasis of collaboration, consensus, and innovation.
In the rich tradition carried on by my Northwest colleagues
on this committee, Mr. Moeller I think represents the heritage
and fine tradition of being a good practitioner of these
Northwest traditions on the Commission. And I think that when
we talk about the energy crisis of 2001, and the voices from
the region, I think Mr. Moeller both represents good practical
experience here in Washington, D.C., and outside private-sector
experience as well.
I think it is very important, as Senator Murray pointed
out, that Mr. Moeller has a long and distinct career in public
service. Before his recent work in private-sector, Mr. Moeller
was a leader in Washington State energy policy with the
Washington State legislature on energy and telecom issues for
more than 10 years. He worked for the Senate energy
telecommunications committee. At the time of his departure from
the Legislature, began a wide involvement in a variety of
policy issues here at the Federal level, working with Senator
Slade Gorton on Federal legislation. I think Mr. Moeller's
approach is one of problem solving and I think one of the main
accomplishments that I think that Mr. Moeller in his tenure
here in Washington, D.C. was successful in first passing
legislation out of the Senate in 2000 on mandatory and
enforceable electricity reliability standards, something that
was then later passed by this committee again, and then adopted
into Federal policy legislation in 2005.
I want to note perhaps a little less known but important
achievement made during his working career. He has been quite
involved in groundbreaking policy as it relates to affordable
broadband telecommunication policy to rural communities, using
the Bonneville Power Administration backbone. Today, many local
exchanges in rural areas are strapped and challenged, and I
think this is another example of commonsense problem-solving
and leadership on public policy issues that I think are the
spirit of the execution and talent that Mr. Moeller brings to
this position.
In the Northwest, as I said, we understand that there are a
variety of views, but we think that there is a great deal of
sensibility that Mr. Moeller will bring to the Federal Energy
Regulatory Commission, so I hope that this committee and the
U.S. Senate will swiftly approve the nomination of Mr. Moeller
to the Federal Energy Regulatory Commission, and I thank the
Chairman.
[The prepared statement of Senator Cantwell follows:]
Prepared Statement of Hon. Maria Cantwell, U.S. Senator From Washington
Thank you Mr. Chairman and thank you committee colleagues. It is my
pleasure to join my friend from the State of Washington, Senator Murray
to introduce the nomination of Philip D. Moeller, to the Federal Energy
Regulatory Commission (FERC). I want to congratulate President Bush on
this appointment, and I am proud to join Senator Murray and many others
from the State of Washington in support of Phil's nomination.
As Senator Murray points out, Phil was raised in the Northwest,
just outside of Spokane, Washington. Throughout his career in both
public service and the private sector, he has earned an impeccable
reputation, not just for his knowledge of complex energy policy
issues--but also for his common-sense, proactive, balanced approach to
problem-solving.
These are the hallmarks of the way we consider energy policy in the
Pacific Northwest. For decades, the Northwest approach to energy issues
has emphasized collaboration, consensus and innovation.
It is a rich tradition, carried on by my Northwest colleagues on
this Committee today--and Phil is clearly a product of this heritage.
If confirmed, we are confident he will be an able practitioner of this
Northwest tradition when he reaches the Commission.
Now, I think we have reached an interesting milestone with these
nominations today. When I joined this Committee in 2001 in the midst of
the Western energy crisis, several of us in the Northwest delegation
got the idea that it was about time to add a voice from our region to
the Commission, and Phil was at the top of our list.
In fact, we've done a little research: since the DOE Organization
Act of 1977 created the Federal Energy Regulatory Commission as it
exists today, we have never had a Northwest FERC Commissioner.
So, to put that in some historical perspective: 1977 also happens
to be the Seattle Mariners' inaugural season, which brought Major
League Baseball back to the Pacific Northwest.
While we came close in 2001, the Mariners have yet to make it to
the World Series. I know Phil's an avid baseball fan, so he probably
looked at the standings himself this morning. This might not be the
Mariners' year, so Phil, I hope it's not too much pressure to suggest
that the Pacific Northwest is relying on you to break this other streak
this year.
On a more serious note, I mentioned at the outset that Phil has had
a long and distinguished career in public service, before his more
recent work in the private sector. Our paths initially crossed when
Phil worked in the Washington State Legislature on energy and
telecommunication issues. For almost ten years, he served as the staff
coordinator for the state Senate's Energy and Telecommunications
Committee.
Nor is Phil a stranger to my colleagues on this Committee. After
his time with the legislature, he served for four years as Senior
Legislative Assistant to my predecessor Senator Slade Gorton.
I noted at the outset Phil's proactive approach to problem-solving.
One of the major accomplishments that can be traced back to his work
with Senator Gorton is legislation to establish mandatory and
enforceable electric reliability standards, which first passed the
Senate in June 2000--that is, three years before the largest blackout
in U.S. history struck the Northeast and Midwest in August 2003. When I
got to the Senate, I was pleased to join that legislative effort and
last year, with the leadership of the Chairman, Ranking Member, and my
fellow committee members, the Energy Policy Act of 2005 included
provisions based on that original bill.
I want to note for the Committee one more, perhaps little-known,
but vitally important, contribution Phil made during his career working
for the people of Washington state. He was quite involved in
groundbreaking efforts to make broadband available to a number of our
most rural communities, using the Bonneville Power Administration's
fiber optic backbone. Today, many local exchanges in rural areas of our
state tap into this system, which is crucial for economic development.
I raise this issue as another example of the outstanding
leadership, vision, and spirit of innovation that Phil will bring with
him to the Commission.
In the Northwest, we understand the importance of affordable,
reliable energy. It's is in our blood, because it shaped our history.
It built our economy. And it is a key to our continuing prosperity. I
know Phil shares this view, and will bring this sensibility to FERC--
along with a wealth of experience in the public and private sectors.
So in closing, Mr. Chairman, I urge my colleagues to swiftly
approve the nomination of Phil Moeller to serve at the Federal Energy
Regulatory Commission.
The Chairman. Thank you very much, Senator.
With that, I welcome both of the nominees to the committee.
Senators, you are excused if you care to be, and would the two
nominees please assume their chairs.
If either of you have family members present, please
introduce them now if you would like.
Mr. Moeller, would you start.
Mr. Moeller. Thank you, Mr. Chairman. In addition to my
wife, my sister, Anne Marie Moeller is here, my wife's sister,
Tristan Vella is here, and I have a special friend, a college
roommate, Jim Illich and his son Colter, who are here from
Houston.
The Chairman. Would they at least stand up so we can see
they are. All right, thank you very much.
Now, Mr. Wellinghoff, do you have anyone you would like to
introduce?
Mr. Wellinghoff. Yes, Mr. Chairman, and thank you. I have
here what I consider to be one of the best attorneys in this
country, and who also happens to be my brother-in-law, Mr. Neal
Galatz.
The Chairman. Very nice having him here, thank you very
much. Now we are going to proceed with the hearing. Let me just
begin by noting that the Energy Policy Act that we passed last
year gave very broad authority to FERC, the Commission that you
are going to join if you succeed in what you have been
appointed for. Both in the areas of electricity and gas, great
new authorities were given to the Commission. These include
electric reliability provisions, removal of barriers to
competition, and the streamlining permitting of new facilities.
Thus far, FERC, through the superior leadership of Chairman
Kelliher, has done a fantastic job of moving forward on the
implementation of these provisions, but there is a lot of work
to be done. And I am hoping that if confirmed, the two of you
will use your expertise to assist the chairman in continuing to
shape the energy policy as we envisioned it in the Energy
Policy Act.
This is a very big job. I want to thank both of you, each
of you individually, for your willingness and devotion, and
commitment to your country, that brings you before us today,
having accepted the President's presentation to us for
acceptance to these two respective Commission positions.
Are there any Senators here on the dais who would like to
make opening statements.
Senator Bingaman.
STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR
FROM NEW MEXICO
Senator Bingaman. Thank you, Mr. Chairman. I would like to
welcome both nominees. I think the President has sent us two
very well-qualified nominees for the Federal Energy Regulatory
Commission and obviously, as you pointed out, there are some
very new and important responsibilities at the Commission. It
is a very important time in the history of the Commission, and
the full panoply of issues that are pending before the
Commission, so I look forward to supporting these nominees, and
look forward to their statements. I will have a couple of
questions once we get to that part of the hearing, thank you.
The Chairman. Thank you very much, Senator.
Any opening statement, Senator Thomas?
STATEMENT OF HON. CRAIG THOMAS, U.S. SENATOR
FROM WYOMING
Senator Thomas. Just very briefly, Mr. Chairman. I too
welcome the candidates and I am certainly pleased that we
nominated well-qualified individuals for these important
positions. Wyoming, of course as you know, produces a good deal
of energy, and the infrastructure to get that to the market is
one of the key issues before us. And so we are very hopeful
that we can continue to work on that, and FERC has done a good
job of adhering to our congressional intent in this bill, I
believe, and we look forward to working with you. Thank you for
being here.
The Chairman. Senator Wyden.
STATEMENT OF HON. RON WYDEN, U.S. SENATOR
FROM OREGON
Senator Wyden. Very briefly as well, Mr. Chairman. I think
we have two good people. I am going to be supporting them. I do
have some questions to ask. I think business as usual at FERC
is unacceptable. I think it is hurting the consumer in a number
of areas. That is what I will be asking about, and I look
forward to supporting both of the nominees.
The Chairman. Good.
Senator Smith.
STATEMENT OF HON. GORDON SMITH, U.S. SENATOR
FROM OREGON
Senator Smith. Thank you, Mr. Chairman. I join all of my
colleagues in expressing admiration for these two nominees.
They are excellent, and I intend to support them.
I want to note that Mr. Moeller is a native of the
Northwest, and a neighbor to Oregon. I am particularly pleased
with what he will obviously bring to FERC, which is an
understanding of hydropower and the unique challenges that we
have in generation and transmission of electricity. These are
challenges that frankly have not been very well reflected in
FERC rulemaking in the past, and I hope that he will be able to
add some understanding to that. Proposals like standard market
design and others have caused great angst in the Pacific
Northwest.
Mr. Wellinghoff obviously has a great background in
consumer protection, and I think Nevada, like the rest of the
West, is still recovering from the west coast energy crisis,
and I believe it will be very important for you, sir, to focus
on the criteria by which FERC will renew and improve BPA rates.
The administration in its 2000 budget proposal was going to
require BPA to prepay debt, which would have a very likely
consequence of keeping market rates higher in the Pacific
Northwest than they need to be, and therefore harmful to
consumers. So I believe it is very important that FERC ensures
that BPA power rates are not raised arbitrarily from such a
proposal, and I hope that you will be sensitive to that. With
that I look forward to supporting your nominations, and I will
have some questions for the record.
[The prepared statement of Senator Smith follows:]
Prepared Statement of Hon. Gordon Smith, U.S. Senator From Oregon
Mr. Chairman, I appreciate your willingness to hold this hearing on
the nominations of Philip Moeller and Jon Wellinghoff to be
Commissioners of the Federal Energy Regulatory Commission.
I intend to support both of these nominees, and believe they are
highly qualified to serve on FERC. Mr. Moeller is a native of the State
of Washington, and worked for several years on issues related to
northwest utilities and the Bonneville Power Administration. I think
that background will be helpful during his tenure on FERC. The Pacific
Northwest is the only region of the country where hydroelectricity is
the predominant resource for the generation of electricity. This
provides our region with unique challenges for both the generation and
transmission of electricity.
These challenges have not always been reflected in draft FERC
rulemakings, such as the Standard Market Design proposal. I'm pleased
that the current FERC leadership understands the unique nature of the
various regional electricity markets, and appears ready to allow for
regional flexibility in transmission organizations. I am confident that
Mr. Moeller will embrace this approach, and will add to FERC's
understanding of electricity issues facing the Pacific Northwest.
Mr. Wellinghoff, from your background, it would appear that you
bring a strong consumer protection background and a long-term knowledge
of utilities in the rapidly growing southwestern United States. For
those of us whose constituents are still paying for the West Coast
energy crisis of 2000-2001, we are seeking a strong FERC to ensure just
and reasonable rates for consumers.
One issue I will follow closely in the coming years is the criteria
by which FERC will review and approve BPA's rates. There is a long-
standing precedent, in accordance with the Transmission Act of 1974,
that requires the BPA Administrator to consider all revenues in the
aggregate when setting rates. In its fiscal year 2007 budget proposal,
the Administration has proposed to earmark BPA's secondary revenues in
excess of $500 million annually in order to pre-pay BPA debt. This
would require BPA to raise firm power rates in order to do so. We have
been able to stop this proposal for this fiscal year, but it is
important that FERC ensures that BPA power rates are not raised
arbitrarily to reduce the federal deficit.
I look forward to hearing from nominees, and will have a few
questions for the record for each of you.
The Chairman. Thank you, Senator.
Now, the rules of the committee which apply to all nominees
require that you be sworn in, in connection with your
testimony. Would you please raise your right hands.
[Witnesses sworn.]
The Chairman. Please be seated. Before you begin your
statements I will ask three questions addressed to each nominee
before this committee. Each of you please respond separately to
each question.
Would you be available to appear before this committee and
congressional committees to request departmental positions, and
respond to issues of concern to the Congress?
Mr. Moeller. I will.
Mr. Wellinghoff. Mr. Chairman, I will.
The Chairman. Are you aware of any personal holdings,
investments, or interests that could constitute a conflict or
create the appearance of such a conflict should you be
confirmed and assume the office to which you have been
nominated by the President? Each of you will answer that,
please.
Mr. Moeller. My investments, personal holdings and other
interests have been reviewed by both myself and the appropriate
ethics counselors within the Federal Government. I have taken
appropriate action to avoid any conflicts of interest. There
are no conflicts of interest or other appearances thereof, to
my knowledge.
Mr. Wellinghoff. My investments, personal holdings and
other interests been reviewed by both myself and the
appropriate ethics counselors within the Federal Government. I
have taken appropriate action to avoid any conflicts of
interest. There are no conflicts of interest or other
appearances thereof, to my knowledge.
The Chairman. I thank you very much. Now we will move to
your statements. Your statement will be made part of the record
as you read. We will start now--oh, I had one third question
about trusts that I forgot. Would you answer it now? Are you
involved with, or do you have any assets held in blind trusts?
Mr. Moeller, you first.
Mr. Moeller. No.
Mr. Wellinghoff. No, I do not.
The Chairman. All right. Now we will proceed. I encourage
you to summarize your statements. They will be made part of the
record in their entirety.
Please proceed, Mr. Moeller.
TESTIMONY OF PHILIP D. MOELLER, NOMINEE TO BE A MEMBER OF THE
FEDERAL ENERGY REGULATORY COMMISSION
Mr. Moeller. Mr. Chairman, Senator Bingaman, members of the
committee, it is a great honor to be before you today to be
considered to be a member of the Federal Energy Regulatory
Commission. I express thanks to President Bush for nominating
me to this position. Thank you for holding this hearing, and I
appreciate the compliments from Senators Murray and Cantwell,
as well.
I've been involved in energy policy for over 20 years. Most
of that, in my early career, was in Olympia, Washington, as the
head of the State senate energy and telecommunications
committee. There I saw firsthand the effects of Federal
decisions such as those from FERC to the State, both in good
ways and in challenging ways. First, really, in the 1980's with
the restructuring of the natural gas industry, and then in the
1990's as the competitive wholesale market in transmission
started to emerge.
I came to work here for the U.S. Senate for Senator Slade
Gorton in 1997. My primary responsibility was to work on a wide
array of energy policies that of course included not just
national policies, but a real focus on the Pacific Northwest
with its hydropower, its Bonneville issues, and a variety of
complicated matters that made life always very interesting.
We saw the Western energy crisis develop before our eyes in
the spring of 2000, May and June of 2000, and it was a
frustrating experience to see it unfold before us and to see
the devastating impacts that it had on the entire West,
particularly on the citizens of California and the Pacific
Northwest, as prices rose. I pledge to you that that will
always be a memory that will stay with me and will guide me in
terms of consumer protection, if I am confirmed to the FERC.
After leaving public service I worked in the private sector
both for a generating company and for a utility. This has given
me a broader range of experience, particularly as it pertains
to Midwest issues in the energy markets.
Thanks in large part to the efforts of Chairman Domenici,
Senator Bingaman, and the rest of the members this committee,
the provisions of EPAct 2005 are now law, and a lot of those
things that deal with both the supply side and the demand side
of energy will be positive for this Nation. You also gave FERC
a lot of things to do. Part of the provisions that you gave to
FERC include more consumer protection and an effort to make
markets more transparent, and to get the kind of fines and
penalties that FERC needs to hopefully prevent any kind of
market manipulation in the future. FERC has had a lot of these
things to do. As far as I know, Chairman Kelliher has done a
great job along with the rest of the staff and Commissioners in
making sure that they have been done on time and under budget,
and if I am confirmed, I will work to make sure that that
continues.
It's also essential that the FERC and Congress work very
closely together and maintain strong lines of communication. If
confirmed by the Senate, I think my experience working for a
member of this committee will enhance this relationship at a
critical time of energy policy implementation. It would be an
honor and a privilege to return to public service at the FERC,
and I appreciate the chance to testify before you and look
forward to answering any of your questions.
[The prepared statement of Mr. Moeller follows:]
Prepared Statement of Philip D. Moeller, Nominee to be a Member of the
Federal Energy Regulatory Commission
Chairman Domenici, Senator Bingaman and members of the committee,
it is a great honor to be before you today as a nominee to the Federal
Energy Regulatory Commission (FERC). I express thanks to President Bush
for nominating me to this position, and I thank you for holding this
hearing.
I have been involved in energy policy development for over 20
years. For much of my early career, I was the staff director for the
Washington State Senate Energy and Telecommunications Committee in
Olympia, where I saw firsthand both the positive and challenging
effects of decisions by FERC on my state of Washington and the Pacific
Northwest region--most notably with the restructuring of the natural
gas industry in the 1980s and the development of more competitive
interstate wholesale electricity markets in the 1990s.
I came to work here in the United States Senate for Senator Slade
Gorton of Washington State in 1997, where my primary responsibility was
to work on a wide range of energy policy legislation. In addition to
focusing on regional energy issues and hydropower policy, I spent a
great deal of time developing electric reliability legislation. As a
Senate office, we saw the Western electricity crisis develop in the
early summer of 2000 and witnessed the devastating impacts that high
prices had on the economy of the state and region, and on the lives of
the consumers and citizens of our state and the entire West. The
memories of that experience will always motivate me to work at assuring
that energy consumers are protected when energy policy is actually
implemented in the marketplace.
After leaving public service I have worked in the private sector on
energy policy, both with a generating company and a utility. This
experience has broadened my perspective, especially regarding energy
issues that are crucial to the Midwest states.
Thanks in large part to the efforts of Chairman Domenici, Senator
Bingaman and this entire committee, last year's Energy Policy Act is
now law. In addition to the law's wide range of policies promoting both
the supply side and the demand side of energy, EPACT 2005 also aided
energy consumers through new consumer protection mechanisms and
modernized authority for FERC to impose fines and penalties intended to
prevent market manipulation.
The law gave FERC a long list of responsibilities and tasks to
accomplish. Chairman Kelliher and the rest of the Commission have
worked diligently to assure that, to date, all of the tasks assigned to
FERC have been completed on time and under budget. Many of the tasks
assigned to FERC remain to be addressed, and if confirmed I would work
to assure that this trend continues. I would also closely follow
whether the provisions of EPACT 2005 are working to meet the intent of
Congress.
It is essential that FERC and Congress work closely together and
maintain strong lines of communication. If confirmed by the Senate, I
believe my experience working for a member of this committee will
enhance this relationship at a critical time of energy policy
implementation. It would be an honor and a privilege to return to
public service at the FERC. I appreciate the chance to testify before
you today and look forward to answering your questions.
The Chairman. Thank you very much.
Now we will have your statement, please, Mr. Wellinghoff.
TESTIMONY OF JON WELLINGHOFF, NOMINEE TO BE A MEMBER OF THE
FEDERAL ENERGY REGULATORY COMMISSION
Mr. Wellinghoff. Thank you, Mr. Chairman. Chairman
Domenici, Senator Bingaman, and distinguished members of the
committee, I'm honored to be considered today by you for
confirmation of my nomination to the Federal Energy Regulatory
Commission. I thank President Bush for my nomination, and I'm
also grateful for the trust and confidence placed in me by
Senator Reid, who recommended me for this position. Energy and
regulatory law and policy have been the primary focus of my
career for more than 30 years. I have worked in both the public
and private sectors, and I have supported business and public
interests advocating numerous energy issues over that time.
When I first got out of law school, my first job was with
the Nevada Public Utilities Commission. This was at the time of
the Arab oil embargo. I was there for approximately 2 years,
and in that 2 years I saw more rate increases than had been
seen in the previous 10 years. So I really definitely feel that
I earned my Ph.D. in utility regulation in that job. After
working for the Nevada Commission in the early 1980's, I held a
number of positions in the public sector. And then I worked
with the Nevada attorney general to create the first consumer
advocate office. I was appointed by the attorney general to
serve as Nevada's first consumer advocate, and in that office I
represented the interests of Nevada's utility ratepayers before
the Nevada commission, before the FERC, and other regulatory
agencies. In that position I managed and developed strategy for
multiple electric and natural gas proceedings in Nevada. I also
developed legislative policy and instituted a number of energy
policy initiatives during my two terms. The most important
initiative was drafting the first comprehensive integrated
resource planning act for Nevada's electric utilities.
In the 18 years since leaving the consumer advocate office,
I've been primarily in private practice, with a short stint
back at the Public Utilities Commission as a staff counsel to
the commission, and been working both as attorney and an energy
consultant. I've testified or consulted in numerous
jurisdictions including Colorado, New Mexico, Arizona, Texas,
Washington, Hawaii, Oregon, Nevada, and California, and on
various energy issues including integrated resource planning,
energy efficiency demand response, natural gas decoupling, and
others.
I have represented numerous clients in energy related
matters, including utility rate proceedings, integrated
resource planning cases, legislative proceedings, and power
contract negotiations.
My clients included the Department of Energy, the
Department of Defense, the Department of the Navy, Sandia
National Labs, major international corporations, utilities,
manufacturers of energy efficiency equipment, and renewable
resource developers.
I also, like Mr. Moeller, experienced firsthand the
challenges of electric market restructuring in representing
clients after the aftermath of the electric market failures in
the West during the 1999 to 2002 time frame. The FERC is an
important independent regulatory agency with an essential
mission. The Congress has placed even greater responsibility on
the agency with the enhancement to FERC's powers in EPAct 2005.
Resource adequacy, electric system reliability, demand
response and transmission planning are all integral to the
integrated resource planning process that I helped initiate in
Nevada in the early 1980's, and in numerous other States where
I acted as a consultant. These are also issues for which the
FERC has been given a the level of responsibility under the
energy act of 2005.
If confirmed, I will transfer my experience I've gained in
these areas working at the State level to my work at FERC. I
also plan to bring with me if confirmed my 30 years of
experience in regulation of electric and gas utilities and my
general philosophy of energy regulation, which is to keep it
efficient, effective, and responsive to the needs of consumers.
In closing, I want to acknowledge and thank my wife Karen
Galatz, who has been with me for over two thirds of my energy
law career. I could have accomplished little without her by my
side. She unfortunately could not be here today. She is with
our two sons who are taking their junior high and high school
exams in Nevada. I appreciate the opportunity to be here to
testify before you. I am honored to be considered, and I am
happy to answer any questions that you may have. Thank you, Mr.
Chairman.
[The prepared statement of Mr. Wellinghoff follows:]
Prepared Statement of Jon Wellinghoff, Nominee to be a Member of the
Federal Energy Regulatory Commission
Chairman Domenici, Senator Bingaman and distinguished members of
the Committee, I am honored to be considered today by you for
confirmation of my nomination to the Federal Energy Regulatory
Commission (FERC). I thank President Bush for nominating me. I am also
grateful for the trust and confidence expressed by Senator Reid who
recommended me for this position.
Energy and regulatory law and policy have been the primary focus of
my career for more than thirty years. I have worked both in the public
and private sectors. I have represented both consumers and utilities. I
have supported business and public interests advocating energy
efficiency, renewable energy, retail competition, and clean coal
technologies.
Like Chairman Domenici, I first worked as a junior high school math
teacher. Like Chairman Domenici, I too quickly turned to law. After law
school I became a legal assistant to Evo Granata, Commissioner of the
Nevada Public Utilities Commission (NPUC). This was the time of the
Arab oil embargo, and utility rates were rising faster than ever
before. In my two years at the Nevada Commission I saw more utility
rate cases compressed into that short period of time than in the
preceding ten years. I definitely felt as if I had earned my ``Ph.D.''
in utility regulation in that job under the expert tutelage of
Commissioner Granata and Chairman Noel Clark.
After working for the Nevada Commission, I held a number of
positions in the public sector including Deputy District Attorney in
Nevada and staff attorney for the U.S. Senate Commerce Committee and
the Federal Trade Commission in Washington, D.C. All of these positions
encompassed work on energy-related matters.
Returning to Nevada, I worked with the then Attorney General, later
Governor and U.S. Senator, Richard Bryan, and a private citizen,
Randolph Townsend, who would later become a prominent State Senator, to
create the first Consumer Advocate in Nevada for Customers of Public
Utilities. I was appointed by Attorney General Bryan to serve as
Nevada's first Consumer Advocate. In that office, I represented the
interests of Nevada's utility ratepayers before the Nevada Commission
and the FERC. I was Nevada's Consumer Advocate for seven years, serving
term appointments under both Democratic and Republican Attorneys
General. I managed and developed strategy for multiple electric and
natural gas proceedings in Nevada. I also developed legislative policy
and instituted a number of energy policy initiatives during my two
terms. The most important initiative was drafting the first
comprehensive integrated resource planning (IRP) act for Nevada's
electric utilities. Nevada's act was passed in 1983 and became a model
for similar acts that were subsequently passed in 17 other states.
After passage of the act, I participated in the IRP rulemaking process
before the NPUC and managed numerous related cases.
In the eighteen years since, with the exception of a short return
to the public sector as Staff Counsel to the Nevada Commission, I have
been in private practice as both an attorney and an energy consultant.
I have testified and/or consulted in various states including Colorado,
New Mexico, Arizona, Texas, Washington, Hawaii, Oregon, Nevada, and
California on the IRP process, energy efficiency, demand response,
natural gas decoupling, and other energy issues.
For the past six years I have been in private practice with the law
firm of Beckley Singleton in Las Vegas and Reno, Nevada. I have been a
Shareholder in the firm for the past four years. During my time at
Beckley, I have represented numerous clients in energy-related matters
including utility rate proceedings, IRP cases, legislative proceedings,
and power contract negotiations. My clients have included the
Department of Energy, DOD/Department of the Navy, Sandia Labs, major
international corporations, utilities, manufacturers of energy
efficiency equipment, and renewable resource developers. During this
period, one of the legislative energy policy initiatives I proposed on
behalf of my clients was Nevada's Renewable Portfolio Standard (RPS).
That RPS legislation originally created a market for the sale of 15%
renewable energy to Nevada's electric utilities as enacted in 2001 and
was then amended by a proposal I submitted to the legislature in 2005
to a 20% RPS market. Since the first enactment of an RPS in Nevada in
2001, I have consulted on RPS proposals in California, Oregon, Idaho,
New Mexico, Arizona, and Colorado. In addition to my policy work on RPS
legislation, I also experienced first hand the challenges of electric
market restructuring in representing clients in the aftermath of market
failures in the West during the 1999-2002 timeframe.
The FERC is an important independent regulatory agency with an
essential mission. The Congress has placed even greater responsibility
on the agency with the enhancements to FERC's powers in the Energy
Policy Act of 2005. Resource adequacy, electric system reliability,
demand response, and transmission planning are all integral to the IRP
process that I helped initiate in Nevada and numerous other states.
These are also issues for which FERC has been given a level of
responsibility under the Energy Policy Act of 2005. If confirmed, I
hope to transfer the experience I have gained in these areas working at
a state level to my work at FERC. I also hope to bring with me, if
confirmed, my thirty years of experience in the regulation of electric
and gas utilities and my general philosophy of energy regulation which
is to keep it efficient, effective, and responsive to the needs of the
energy consumer.
In closing, I want to acknowledge and thank my wife, Karen Galatz,
who has been with me through over two thirds of my career in energy
law. I could have accomplished little without her by my side. She could
not be here today at my confirmation hearing as she had to be with our
two sons who are taking their junior high and high school final exams
in Nevada.
I appreciate the opportunity to testify before you today and am
happy to answer any questions you may have.
The Chairman. Thank you very much. Thanks to both of you. I
have been told there will be a vote around 10:45, just for each
one's information.
I have a lead-off question. If I have any further ones
after the vote comes, I will submit them to you if I do not get
them in. My first one has to do with the energy reliability
organization, ERO. The new law directed FERC to ensure the
reliability and security of the Nations bulk power system.
Pursuant to the energy bill, a single electric reliability
organization, the ERO, will have the authority to establish and
enforce mandatory reliability standards. We are now in the
process, nationally, of transitioning from a system of
voluntary compliance to this new mandatory regime. In order to
avoid a one-size-fits-all approach, Congress carefully provided
a role for these regional reliability organizations, as it
called them. The national ERO, which set reliability standards,
must--and these are words from the act, quote, ``Arebuttably
presume that a standard proposed by a regional entity is
valid.`` As a commissioner, how will you address the issue of
regional flexibility? How will this fit into the ERO's national
standard, and their enforceability? We will start with you, Mr.
Moeller.
Mr. Moeller. Thank you, Mr. Chairman. As a commissioner of
course I would follow the law and give deference as the law
states to different regions. Different regions operate
differently in this country. The transmission system was not
set up as a national grid, even though in many ways it has
evolved into something close to that. But particularly in the
West, generation sources are often farther from the load
centers, and they have a very legitimate concern about having
their own regional differences. This is something I've heard
about for years, so I would plan to pay a lot of attention to
it, follow the law, be deferential, but ultimately we have to
make sure that we have a system that works coupled with
enforceability and reliability that works for the whole Nation,
but with a deference to the regions.
The Chairman. Thank you very much. Mr. Wellinghoff.
Mr. Wellinghoff. Mr. Chairman, yes, I would generally agree
with Mr. Moeller's response, and let me add to it that the
contracts between the ERO and the regional reliability entities
such as the WECC in the West are going to be essential, and I
think this rebuttable presumption that you mentioned is
essential as well, to ensure that entities like the WECC can in
fact run their region in a way to operate most efficiently and
best for that particular region. I will have to look with
respect to every region, and I think it will be essential to
have stakeholder meetings to ensure that those contracts
reflect what the regions need, to make sure there is
reliability there.
The Chairman. Thank you very much. With that, I will yield
to you, Senator Bingaman.
Senator Bingaman. Thank you very much, Mr. Chairman.
Let me ask about one of the sections in the Energy Act and
the way the Commission is proposing to implement it. This is
section 203. You know, one of the most important things we did
in the energy bill last year was to repeal the Public Utility
Holding Company Act. As we did that, we also gave FERC
additional responsibilities to approve mergers and
acquisitions. A specific part of what we tasked FERC with doing
was to make a determination that the proposed merger or
acquisition would not result in cost-subsidization of a non-
utility associate company, or the pledge or encumbrance of
utility assets for the benefit of an associate company.
This was of course in response to some abuses that had come
to light, in connection with inter-affiliate relationships. A
couple of utilities come to mind, Allegheny Electric and
WestStar were two examples.
My thought at the time we did that provision of energy
bill, was that in order for the Commission to implement it, the
Commission would probably need to, by rule, impose some strict
structural rules, that controlled any inter-affiliate
transactions and prohibited those, except in rare
circumstances.
The truth is the Commission's proposed rulemaking does not
do that. In its rulemaking implementing this subsection, it
requires something very different. It says that the applicant
must provide an explanation with appropriate evidentiary
support of how it is providing assurance that the proposed
transaction will not result in cross-subsidization. It sounds
to me as though it is going to be on a case-by-case basis, much
more than adhering to structural rules for ensuring that this
cross-subsidization not occur.
I would just be interested in whether either of you have
thoughts as to how this is going to work, whether this is going
to be adequate to protect consumers, whether just taking these
cases one at a time is really an adequate way to proceed to
deal with this possible problem. Mr. Moeller, do you have a
thought?
Mr. Moeller. Thank you, Senator Bingaman. I'll be a little
careful since it's a pending matter in my comments. But first
of all, thanks to the committee and the Congress for giving
FERC additional authority in this matter, through last year's
bill. Cross-subsidization is something that shouldn't just be
followed on a snapshot basis, for instance, in the case of a
merger or whatever, but it's something that the Commission
should keep their eye on constantly. That would be my
philosophy. I will study the merits of the proposal and get
back to you in writing, as appropriate, but it's a concept that
should be continuously observed and followed to make sure that
consumers are protected.
Senator Bingaman. Mr. Wellinghoff, do you have any thoughts
on this?
Mr. Wellinghoff. Yes I do, Senator Bingaman. Thank you.
Actually, I have more than thoughts, I have some experience in
the area. When I was consumer advocate, it was an issue
actually with telephone companies that were regulated in
Nevada, ones that were subsidiaries of major national
companies.
The cross-subsidization between the Nevada company and the
national company is a very difficult thing to deal with. Given
that it is a pending rulemaking for the Commission, I don't
want to comment specifically on the rule, but I will comment
generically on my view and philosophy of the cross-
subsidization issue. I think you may need more than strict
structural rules. In fact, you need the ability to fully audit,
and you have to have the ability to go in and determine where
the money is going, and I need to ensure that FERC does have
the authority. I haven't looked into this in detail, but I
assure you that I will if confirmed. Thank you.
Senator Bingaman. Thank you. Let me ask one more question.
This relates to this so-called Mobile-Sierra doctrine. It is an
issue that is complex, and has sort of gotten us wrapped around
the axle here in Congress, and in the administration as well,
in my view. As I understand, the Federal Power Act, it
essentially says that the Commission shall assure that the
rates that are charged are just and reasonable.
Under this proposed rule, again, talking about the proposed
rule that FERC has come out with, they have proposed to revise
the standard of review for modifications of jurisdictional
agreements. Essentially, what they have said that they are
doing there is to codify the Mobile Sierra doctrine. I am not
sure that that is what in fact is happening. The Commission
rule would provide that in cases where the contracting parties
did not explicitly agree to allow contract revisions, to
provide for changes in rates, or terms, or conditions of
service, then the standard of review is no longer whether those
rates are just and reasonable, but there is some other standard
which is a public-interest standard.
That concerns me somewhat. It seems to me that the effect
of what is going here is that FERC is in some ways delegating
to the contracting parties the responsibility for determining
whether rates are just and reasonable, and in some ways
stepping back and saying that it is no longer their
responsibility under the Federal Power Act, which is not my
understanding of the law. I do not know if that is something
you could comment on, if it is something you have looked into,
but it is an issue I am sure you will hear a lot about in your
new position, and let me just give you a chance to give any
comment that you want to on that. Mr. Moeller?
Mr. Moeller. Thank you, Senator. I'll be real careful,
because it is a pending matter. It seems to me you have a
couple things going on from a public policy perspective. You
want to assure that contracts remain--you want to encourage
contracts to be executed and respected. On the other hand, you
have the public interest involved, and those potentially can
collide. But FERC needs to maintain the ability to revisit
contracts in the event that they are not just and reasonable.
Senator Bingaman. Very good. Mr. Wellinghoff, did you have
any thoughts on this?
Mr. Wellinghoff. Yes, Senator Bingaman. I think--again, I
don't want to comment on the pending rule before the Commission
because I may have to vote on it, but as a general matter, the
law as you stated it says that rates should be ``just and
reasonable.'' That is fairly clear. The Mobile-Sierra doctrine
is a doctrine as I understand that--I read the case--applies to
a particular set of facts, a particular situation. So I think
what needs to be followed is the overall law; rates should be
just and reasonable.
Senator Bingaman. Well, thank you both for those responses,
thank you Mr. Chairman.
The Chairman. Senator Thomas.
Senator Thomas. Thank you.
Gentlemen, unfortunately in some parts of the country, the
necessary levels of partnership between the Commission and the
States is lacking. FERC has the authority to convene joint
boards with State regulators, but they do not do that. How do
you build a partnership with the States to ensure a reliable
power grid? How can States and State entities have better
interaction and contact with the Commission?
Mr. Moeller. Senator Thomas, the joint boards are a good
idea. I think particularly in electricity issues, it is
essential to keep the lines of communication open between FERC
and the States, particularly State utility commissions. There
are a variety of issues where you just have to have a good
working relationship to move forward, because States have a
duty to their citizens, but in many cases this is interstate
commerce, it is involved with putting electrons across State
lines. So maintaining and enhancing those relations would be a
priority of mine, if confirmed.
Mr. Wellinghoff. Senator Thomas, thank you. I would only
add to that that I think joint boards are an excellent idea,
and not only that but the participation I have had, for
instance, in the Western Governors' Association, activities
with the Frontier Line, for example, give some type of a
framework to the type of thing that FERC needs to get involved
in with respect to looking at these joint transmission issues
throughout the West and other parts of the country. I think
FERC definitely needs to be involved in those types of things.
Senator Thomas. Just a little follow-up. Seems pretty clear
that regional transmission organizations will not be
established in the West. How do you think it affects project
like Frontier Line?
Mr. Wellinghoff. Senator, I think we have a number of
different experiments going on in different parts of the
country. There are some places where RTOs seem to be working to
some degree. There are others where things are just fine
without them. I think we can do interstate agreements, in
essence, that would allow for the cooperation and collaboration
and development of things like the Frontier Line, and other
lines in the West, and other areas where there are not RTOs.
Without necessarily having an RTO there if the utilities and
the stakeholders in that region think they can operate
otherwise and think they can operate in a way collaboratively
and cooperatively to make those things possible, I think there
are opportunities to work with or without an RTO.
Senator Thomas. Any comment, Mr. Moeller?
Mr. Moeller. I think the Frontier Line, as Mr. Wellinghoff
said, is a good example. From my understanding, the Governors
of the various States have gotten together. They are working
toward a solution, a regional energy solution. FERC has to be,
if appropriate, a part of that, to make sure that it works as
well as possible. Wyoming has energy to export, and there are
other areas where the energy is needed.
Senator Thomas. Thank you, Mr. Chairman.
Senator Wyden. Thank you, Mr. Chairman, and I commend both
of you for your thoughtful responses and I think one of the
reasons you're getting these questions is because we have high
expectations for you both. And that is essentially what I am
going to be looking for, as well, in the areas I am going to
ask about now.
As you both know, Enron's former chief executives have now
been found guilty in their criminal trials. The bankruptcy case
has been wrapped up. And yet FERC continues to keep secret
evidence of Enron's manipulation of the energy markets. And I
just cannot come up with a logical reason why FERC should
continue to keep secret documents, trader tapes, and other
evidence of how Enron manipulated energy markets back in 2000,
2001. So 5 years has gone by and we have had the criminal
convictions, we have had the bankruptcy process go forward, and
yet still the State regulators and the public cannot get access
to critical information. My question for both of you, and why
not start with you, Mr. Moeller, is at what point should State
regulators and the public be able to get access to information
that in my view should have been out some time ago?
Mr. Moeller. Senator Wyden, thank you for the question. My
general feeling is that as much as can be legally released
should be, and I think that FERC is moving in that direction.
Generally, that applies to generally transparent issues, that
more is better.
Also, my understanding is that the Department of Justice
still has restricted a lot of that information because there
are more criminal prosecutions being investigated. So I think
that's the primary reason most of that haven't been released
yet.
Senator Wyden. Mr. Wellinghoff.
Mr. Wellinghoff. Senator Wyden, thank you. I have a similar
understanding. I certainly believe anything that would not
jeopardize a criminal investigation should be released to the
public, and/or to State regulatory agencies for access. And so
to that extent, I would support that.
Senator Wyden. My concern is that it does not seem that
FERC is striking the right balance between protecting
information for example which obviously is needed as it relates
to criminal prosecutions, certainly needed with respect to
legitimate reasons of business confidentiality, and yet at the
same time the public has a right to know. For example, I have
been getting recent reports that FERC is making additional
information secret under what is called a form one. This is a
privileged kind of document. Again, there can be business
grounds that are legitimate, but also the public has a right to
know in a lot of these instances.
I hope that the two of you will push FERC to strike a
better balance. Let us protect information where it is needed
for criminal prosecution, or other legitimate reasons of
business confidentiality, but let us also respect the public's
right to know. And I think you are two people who will do a
good job. Go in there and see if you can push the agency to
strike a better balance with respect to these concerns that I
am raising.
The other question that I had for both of you is, when
Chairman Domenici had the oil executives up last year,
ExxonMobil CEO Lee Raymond testified to our committee that
speculation in the oil markets raised the price by $20 per
barrel. Now, that is the oil sector, and obviously FERC does
not have jurisdiction over the oil markets. But there is some
authority over speculation in sales of electricity and natural
gas. Do you think it makes sense for the agency to do more to
watchdog speculative practices in areas where the agency does
have some jurisdiction?
Mr. Moeller.
Mr. Moeller. Yes.
Senator Wyden. Good answer.
Mr. Wellinghoff.
Mr. Wellinghoff. Senator Wyden, thank you. Yes, I would
also answer yes, and I would add to that a little bit in that I
think it actually goes somewhat to your previous question with
respect to information. I think transparency in these markets
is essential to the extent that we can get more data out and
have that available, not only for the public but for FERC to
review and analyze. It will help FERC stop speculation.
Senator Wyden. Well, I look forward to working with both of
you, and I think in a lot of these areas what has happened
particularly as relates to speculation is the public has gotten
very little information. Chairman Domenici, to his credit,
brought the executives up. Lee Raymond gave us information that
I found pretty amazing; that speculation in the oil market is
raising the price by such a large amount per barrel. It forced
me to start looking at speculation in other areas. I am glad
that you all want to see the Commission do more in this area,
and Mr. Chairman, I think it is been a good hearing, and we
have got two good people, and I look forward to moving ahead
with their nomination.
The Chairman. We were just looking at the clock and trying
to figure what we were going to do. Senator what are your
plans?
Senator Menendez. Well, I have two brief questions, Mr.
Chairman.
The Chairman. Two questions, and then you would go vote?
Senator Menendez. Yes, if I may.
The Chairman. Well, why do we not let you take over on the
understanding that you will proceed with two questions while I
go vote. We will be in recess until the Chair or a designee
returns to open the meeting, and that will be the
understanding. It will not be closed until either I or a
designee returns and closes it. Thank you.
Senator Menendez [presiding]. Thank you, Mr. Chairman.
Congratulations to both of you on your nominations, and I
look forward to the answers to these questions that I would
like to pose to you. The people of New Jersey, like so many
others around the country, are facing much higher electric
bills this year because of the high cost of natural gas and
other fuels. Just last week New Jersey ratepayers were told
that they would be paying over 12 percent more, which is bad,
but not as bad as it could have been, because of the State's
competitive auction, getting better prices than neighboring
States. But the auction system cannot work without a vibrant,
effective, and competitive regional power market.
So my question in this one set is will you work to ensure
that regional markets in the mid-Atlantic, Midwest, and
Northeast, all of which are critical to power consumers in my
State, grow and thrive? And can you help guarantee that as many
competitive generating companies as possible get access to a
reliable open transmission grid, so they can compete, to
provide my constituents with electric power?
Mr. Wellinghoff. Senator, if I may. Thank you for the
question. And I would only hope that we in Nevada can only have
a 12 percent increase. We just had a 23 percent one proposed
there, so I understand the difficulty of these types of
increases. And I would say these kinds of competitive regional
markets are essential. The more access we can have to
generators of all types, using all sources of fuel, and also
not only generators but other things we can do to help
consumers with respect to lowering overall costs in the market,
such as demand response, I think are essential things that we
need to look at.
So these will certainly be things that I would like to work
with, and work on when I'm at FERC, and I intend to do so if
confirmed. Thank you.
Mr. Moeller. Senator, I agree with most everything Mr.
Wellinghoff said, as well. We need to make sure that regional
markets work. The key to that is a vibrant and open
transmission system, and the Commission now is kind of taking
another look at those policies after they were initially
implemented about 10 years ago. I look forward to being part of
that to make sure that the system works as efficiently as
possible.
Senator Menendez. I appreciate those answers. I just want
to stress how important the open grid transmission system is to
a State like New Jersey, which is a net importer of
electricity. Our regional transmission organization, PGM, has
done an excellent job of operating a competitive market, and
maintaining the reliability of the grid. PGM is one of the
reasons that the blackout of 3 years ago did not affect New
Jersey as badly as it could have. So it's my hope that as the
Commission focuses on areas of the country that don't have
regionalized transmission organizations, that we don't
backslide on the gains we had made in New Jersey and in the Mid
Atlantic.
And my second question is, my State has an interest in
seeing the development of renewable sources such as solar power
and wind power, and demand-side resources such as energy
efficiency as a means to diversify our resources and reduce our
dependency on foreign oil. Now New Jersey has, on its own
initiative, helped create a huge boom in solar power, thanks to
a number of incentives to homes and businesses, and I am proud
to join Senator Smith, who introduced a bill that would extend
the Federal tax incentives for solar and fuel-cell
installations.
I've been told by a number of suppliers of energy
efficiency devices and renewable resources that a competitive
wholesale power market is key to stimulating new markets for
energy efficiency and renewable resources, and my question is
do you agree, and what will you do to spur development of
competitive markets that enable these alternative energy
sources to grow and develop in States like my own?
Mr. Wellinghoff. Senator, if I may. I would agree that
development of solar, wind, and demand-side resources is
essential for many different reasons. But one of the best
reasons is that it really does have the ability to drive down
prices and make markets work better, especially things like
demand-side resources, and demand response, where there have
been some studies that have shown that if you could just reduce
peak load by, say, 5 percent, you could reduce prices in that
market by 50 percent during that peak. You have tremendous
opportunities there, and I do agree that competition in those
markets will help those different resources participate.
You also have to look at market barriers to those
resources, though. I think it is an essential part. They have
to have equal access to the market. That is one thing I really
want to look at at FERC, to make sure that solar, wind,
geothermal--that we have a lot of in the Western United
States--biomass, DSM, demand response, all can participate in
that market equally. That is really essential to make those
markets work well and work effectively and efficiently.
Mr. Moeller. Senator, I would just add that the Commission
is, as a reference, taking a 10-year look-back on open access
of transmission. And one of the issues there is how to treat
intermittent generators--renewables sometimes fall into that
category. And so the Commission is looking forward,
specifically, on that aspect of renewables in a way that should
give it guidance to allow the industry to grow.
Senator Menendez. Thank you both.
[Recess.]
Senator Murkowski [presiding]. The meeting will be back in
order. Appreciate the opportunity for a little break there and
stretch while we took our vote. Welcome to both of you this
morning. I appreciated the opportunity that I had to meet with
both of you to discuss a little bit about your background and
some of the concerns, and the issues certainly before the State
of Alaska as they relate to the FERC. This is probably not
going to be any surprise to you this morning that I continue
with my questions as they relate to probably Alaska's leading
energy issue; that of supplying the rest of the United States
with our vast supplies of natural gas.
As you know, we have got about 35 trillion cubic feet of
proven reserves with hopefully another 150 trillion cubic feet
awaiting discovery up there on the North Slope. As you know,
the Alaska legislature is working to finish a special session
in fact they are supposed to conclude this evening to consider
the contract with the North Slope producers, intended to lead
to construction of this natural gas pipeline, a line that would
bring about 4.5 billion cubic feet a day of natural gas to the
market over the next decade.
So we are very hopeful that we will see passage of a
contract, perhaps sometime later this summer, and most
possibly, or most probably, a second special session. So I want
to ask both of you this morning to just speak to the
importance, if you will, the importance to the Nation for the
Alaska gas line to win approval now, could I speak to the
timing issue. And second, if there is anything that you might
consider that the FERC could do to perhaps facilitate
construction, or facilitate progress towards a natural gas
pipeline, to bring this very, very important resource to the
rest of the lower 48. I throw it out to both of you, and Mr.
Wellinghoff, you look like you are ready to take the question.
Mr. Wellinghoff. Senator, I'd be happy to take the
question, thank you very much. I think this pipeline is
critical to the Nation. I know it's very important to Alaska,
but it's also very important for the entire Nation's security.
We do need to absolutely increase our supplies of natural gas
in this country. The State I am from, Nevada, has a number of
very large natural gas generating facilities that depend upon
that gas resource, as do many places in the West, and I know
more and more generation in the recent times has been in the
area of natural gas.
So utilizing it is essential. Also, I think it can be
essential as a shaping resource for renewables, as well. So it
has a part to play there. And of course for natural gas, other
than generation, there are so many other essential uses in this
country.
So, I can't think of anything, can't imagine anything more
critical for this country. And as for timing and the ability to
facilitate it via FERC, I think we can just look at the
wellhead logs out of Canada, out of the Permian basin, and just
see that we are not in a situation of increasing supplies
there. We do have to accelerate supply from someplace, and this
seems to be the most promising location within our country.
To do so, I believe that FERC has in process, in place,
procedures with respect to accelerating pipeline permitting and
the environmental impact statement aspects of pipelines that I
am certain the FERC will do everything they can to facilitate.
I certainly, if I am confirmed, will be happy to participate in
that process in a way that will recognize my feeling that this
is a critical resource for the country. Thank you.
Senator Murkowski. Thank you.
Mr. Moeller.
Mr. Moeller. Senator Murkowski, I will echo Mr.
Wellinghoff's comments. I learned early in life the
relationship between the price of natural gas and the price of
fertilizer, for instance. It affects many aspects of our
economy, and we need more of it, and as you said in Alaska
there is an abundant supply of domestic natural gas. I would
work to ensure appropriately that if confirmed that
infrastructure be part of our Nation's supply of energy.
Senator Murkowski. Mr. Moeller, your background familiarity
with Midwestern natural gas, you know, you have mentioned the
connection there between fertilizer and natural gas, and the
significance there. We had a hearing yesterday in Foreign
Relations, and former Chairman Greenspan addressed the issue of
oil dependency in pretty general terms. And I asked him a
question about the natural gas picture, supply-demand picture.
And he really chose to focus on the importance of imported LNG,
to meet the Nation's demand for natural gas. I happened to
disagree with the chairman and expressed the concern that we
not go down the same path with natural gas that we are
currently with oil; in a place for we are some 57, 58 percent
dependent on foreign sources of oil, on countries that might
have been our friend a couple years ago, but are no longer our
friends now. It puts us in a very unstable position, a very
volatile position, if you will.
And my concern is that we don't want an energy policy that
guides us with natural gas in that same direction. Right now,
we are only importing about 3 percent of our natural gas, but
the increase over the past few years has been phenomenal,
because we are trying to meet that demand. So from the
perspective of certainly the Midwest, isn't getting gas to the
upper Midwest better for the Nation than relying solely on LNG
imports that are going to be arriving on our coasts, that will
require new infrastructure, new pipelines, new siding
terminals, which we have acknowledged is a difficult task right
now?
Can you just kind of speak to this direction of doing more
domestically, and of course I am coming from the advocacy
position of Alaska's natural gas because of those vast
quantities, but doing more domestically as opposed to a policy
direction that takes us to further imports of a resource that
is incredibly critical to the economic security of this nation?
Mr. Wellinghoff. Senator, I think that our demand is such
that we need to look frankly at all sources. But domestically,
it's closer. Sometimes we have challenges in terms of the
infrastructure--the pipeline that is not there, or needs to be
expanded--to take advantage of domestic and international
sources. Every aspect of the supply equation comes with its
trade-offs, both positive and negative. Sometimes there are
quality issues with LNG. But it all has to be part of the
picture. As does demand-side management, because that also,
although that often falls to the States, can be a part of
shaving that peak demand that then can benefit the marketplace.
I think everything has to be on the table, but domestic sources
are our own, and they're going to be naturally more secure if
we can get them to the market.
Senator Murkowski. Well, and that is certainly the
direction I think we should start first. Start domestically
first and then if you are not able to meet that demand, that is
when you look to the external. I do not disagree with you from
a comprehensive approach. We do need to be looking to all
sources because of the demand that we have, and we do need to
be looking to the conservation side.
Mr. Wellinghoff, I had an opportunity yesterday to talk
just very briefly about the renewable aspect of energy
development, and your interest in promoting electricity
development from renewable sources, and we spoke a little bit
about the geothermal, which I too believe has great potential,
as does ocean, energy, and wind.
Can you tell me your views about where you feel most of our
electricity in the future will come from, whether from natural
gas, from coal, ICGG development, or from other renewables?
Where do you see the direction that this Nation will take, in
terms of renewable development?
Mr. Wellinghoff. Well, Senator, if I may, thank you. I
believe it's going to have to come from many, multiple sources.
And I'll answer this question by somewhat going back to your
previous question to Mr. Moeller with respect to developing the
gas supplies in Alaska. We need to do the most efficient things
in this country first. And so one of the most efficient things
would be to develop the sources of gas supply in Alaska rather
than take LNG from Qatar. We may have to someday take LNG.
But let's do the most efficient things first. Certainly,
demand response and energy efficiency are traditionally usually
the least expensive things to do. There are advancing
technologies that are going to reduce our energy loads in this
country tremendously in the next 10 to 15 years in lighting, in
air-conditioning, and other end-use load areas. So that is
going to be one piece, and I think that is probably the most
efficient and least expensive piece.
Another piece is going to be renewables. That is going to
include a wide array of renewables. Regarding geothermal, as we
talked about yesterday, not only are there significant
geothermal resources in the West and in Alaska as well, but
there are also substantial geothermal resources, for example in
Texas in geopressure zones, that people aren't even aware of,
where we have oil and gas wells very deep in the earth, where
there is actually hot water that can be brought up and used to
produce electricity. Wind energy and solar energy have great
potential. We have advances in solar photovoltaic technology
such that once the price of a solar photovoltaic system, the
solar cells that you put on top of the roof of your house or a
business, is equal to the price of the retail price of
electricity--because they compete at the retail level and not
at the wholesale level--we are going to have a massive change
in what is happening in this country. People are just going to
roll into the mortgage the cost of putting a solar system on
their house. It is going to be much less expensive to do that
than to pay the utility company 15, 18 to 20 cents a kilowatt-
hour, to where we will get someday, or where we already are in
some parts of this country, in the price of electricity. That
is going to have a massive effect on how much transmission we
need in this country, on how much central generation we need in
this country. Other efficient ways to generate electricity
include combined heat and power, where I think we just
scratched the surface, where you can go into a large facility
and put in a co-gen system that provides electricity to the
facility and also provides waste heat out of backend that can
be used for hot water, be used for space heating, and can even
used for cooling, through absorption chilling. That is an
extremely efficient use of natural gas, for example. By using
natural gas in that manner, combined heat and power, you can
ultimately produce total energy at an efficiency level of 75 to
95 percent as opposed to producing it at the generating source
with the natural gas powerplant at 40 to 50 percent. So it's a
much, much more effective use of using natural gas.
We need to look at all of these things. We need to look at
them very hard, and we need to start doing the most efficient
things as quickly as we can.
Senator Murkowski. And again, it underscores the need to
get those domestic supplies down to the----
Mr. Wellinghoff. Absolutely.
Senator Murkowski. One very quick question for the two of
you, and then I will go over to my colleague here. Is there
anything more that the FERC should be doing to promote
renewable energy usage, or is this a policy direction that is
left to the Congress? Is there anything else that the
Commission should be moving forward with to get us further in
the direction of renewable usage?
Mr. Moeller.
Mr. Moeller. Senator, we spoke a little bit earlier about
the fact that the Commission is taking a look at its general
transmission policies, really kind of its first look-back after
10 years of Order 888. As part of that, intermittent generation
is being considered, and thoroughly analyzed, to see how it
should fit into the transmission grid. Typically, that's
something that's affecting renewable energy right now because,
usually, it's of intermittent nature. So clarifying that should
help the industry. At least give it direction for the future.
Senator Murkowski. Mr. Wellinghoff, anything to add to
that?
Mr. Wellinghoff. Yes, Senator Murkowski. Just a little, in
the sense that I think I would expand just a little bit. On
that intermittent issue with respect to wind. Some of the
penalties that are put on intermittent resources I think
inappropriately discriminate against those resources to
interconnect with the grid. I think this needs to be looked at,
and I believe the FERC is doing that. I hope to participate in
that process if confirmed. But beyond that, I think we need to
look at what are the market barriers to ensuring that both
renewables and energy efficiency; i.e., demand response, have
equal access to the grid--equal access in a way that they can
participate with other generating resources to provide for
overall supply.
It is not simply a matter of economics in some instances.
In some instances, there also are structural market barriers
that need to be looked at in the way that rules have been set
up either on a Federal level or a State level--and certainly
FERC has the primary jurisdiction on the Federal level. We need
to look at this type of thing and determine how we can better
integrate them into the overall grid system. That's one thing
I'd be very interested in doing if confirmed.
Senator Murkowski. Well, thank you, both of you, for your
responses, and for giving me the time yesterday to inquire a
little bit further. I appreciate your willingness to serve on
the Commission. I think we learned yesterday that you are
moving onto a Commission that is incredibly important,
certainly to my State, but to the entire country in terms of
how we move forward with the implementation of our energy
policy as a result of the Energy Policy Act last year. The FERC
has a lot more on its plate in terms of responsibilities and
tasks that we are looking for you to take up. And the reality
is that you have not been working with a full Commission for
some time. So the burden on you, should you be confirmed, which
we anticipate that we will move forward with this very shortly,
it is going to be a tall order, and we appreciate your
willingness to serve on this very, very important Commission.
Senator Alexander.
Senator Alexander [presiding]. Thank you, Senator
Murkowski. Senator Domenici said he would not be coming back to
the committee, and unless you have other questions you would
like to ask, what I am going to do is request to adjourn the
meeting unless other Senators are expected to have a question.
I want to thank our witnesses for being here, the nominees. I
enjoyed my visit with each of you, and appreciate your taking
the time to come by. I would like to say, at the chairman's
request, that any additional questions from Senators be filed
with committee staff by close of business today. Now I wonder
if either of you have any of the comment that you would like to
make before we close the hearing?
Mr. Wellinghoff. I just want to thank you, Senator, and
thank all the members of the committee for this opportunity.
Thank you very much.
Mr. Moeller. Same here. I appreciate your time, and having
us here today.
Senator Alexander. Thank you both very much for coming.
The hearing is adjourned.
[Whereupon, at 11:30 a.m., the hearing was adjourned.]
APPENDIXES
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Appendix I
Responses to Additional Questions
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Responses of Philip D. Moeller to Questions From Senator Domenici
ELECTRIC RELIABILITY ORGANIZATION
Question 1. EPAct directed FERC to ensure the reliability and
security of the nation's bulk-power system. Pursuant to the Energy
bill, a single Electric Reliability Organization--the ``ERO''--will
have the authority to establish and enforce mandatory reliability
standards. We are now in the process of transitioning from a system of
voluntary compliance to this new mandatory regime.
In order to avoid a ``one size fits all'' approach, Congress was
careful to provide a substantial role for regional reliability
organizations. The national ERO which sets reliability standards must
``rebuttably presume'' that a standard proposed by a Regional Entity is
valid.
As a Commissioner, how will you address the issue of regional
flexibility? How will this fit into the ERO's national standards and
their enforceability?
Answer. As a Commissioner, I would follow the law in regards to the
rebuttable presumption of a standard proposed from a Regional Entity.
Ultimately, the Commission must do all that it can to assure that
reliability standards are workable and enforceable for all regions and
the nation.
TRANSMISSION INVESTMENT
Question 2. There has been sustained underinvestment in
transmission in recent years. In order to encourage greater investment,
EPACT directed FERC to issue a transmission incentives rule to
establish incentives for greater investment. Do you think there is a
need for greater transmission investment, and if so, would you comment
on whether you believe transmission incentives are the way to secure
that investment? ? Do you think incentives should be extended to
vertically integrated utilities?
Answer. The nation needs significant investment in new electric
transmission infrastructure. Transmission rate incentives are one way
to help promote this-investment. Congress has also aided these
investments through tax depreciation policies. This is a serious issue
and one I would follow very closely as a Commissioner. As a general
matter, I support sufficient transmission incentives that will work to
assure more actual (as opposed to proposed) investment that leads to
open and non-discriminatory access regardless of its ownership
structure.
FERC-STATE RELATIONSHIP
Question 3. With FERC's new expanded responsibilities in the areas
of reliability and backstop transmission siting, there is the potential
for federal/state conflict. How do you propose to promote greater
cooperation and coordination with the states in these areas? How can
FERC best work with the states to identify and resolve congestion
issues?
Answer. With both reliability and backstop transmission siting,
FERC and the states must communicate effectively and frequently to
minimize any potential conflict. Active joint collaborative efforts
between FERC and the states is a good start to this process. Key to the
concept of ``backstop'' authority is that primary responsibility to
site transmission will remain with the states. These joint
collaborative efforts, with appropriate participation from USDOE,
should provide a good forum to identify and resolve congestion issues.
In addition, the Commission on June 15 issued proposed regulations on
this subject that should provide the necessary framework for a thorough
consideration of this issue.
Question 4. How would you suggest that FERC and the states better
coordinate to provide regulatory consistency on transmission expansion
issues such as cost allocation and cost recovery?
Answer. Coordination of these key principles is based on regional
recognition of costs and benefits. As stated above, joint collaborative
efforts between the Commission and states should provide a good forum
to address these issues.
COAL DELIVERY
Question 5. While FERC does not have direct statutory authority
pertaining to coal deliveries, coal constitutes approximately 50% of
the fuel for electric generation today, and utilities are seeking to
build more baseload coal plants in the future. Coal delivery issues,
then, can greatly impact electric reliability. FERC has scheduled a
meeting with utility and railroad representatives on June 15th to
discuss coal-delivery matters and their impact on markets and electric
reliability.
Do you think there is a regulatory gap in this area?
Answer. This is an extremely serious issue for the reliability,
cost and future of the nation's electricity system. The results of the
June 15th meeting should provide an answer to whether there is a
regulatory gap or whether existing regulatory authority should be
exercised in a different manner.
Question 6. Do you believe FERC should coordinate more closely with
the Surface Transportation Board to ensure adequate and timely coal
deliveries?
Answer. Yes.
REGIONAL TRANSMISSION ORGANIZATIONS (RTOS)
Question 7. RTOs are subject to FERC regulation, but have
independent boards, not shareholder boards like other utilities.
Independent RTOs presently serve about 2/3 of this country. What can
the Commission do to hold RTOs accountable for their costs like other
utilities? How do you measure ``reasonable'' charges?
Answer. Part of the challenge with developing RTOs is that they are
relatively new entities, and regional differences will be reflected in
some differences between RTOs. Startup costs should be ``one time'' in
nature, and the Commission needs to closely monitor these costs to
assure the benefits of RTOs flow to consumers. ``Reasonable'' charges
are those that are necessary to allow regional markets to work in an
efficient manner, and the concept is likely to evolve as the markets
mature.
Question 8. What do you see as the Commission's role in fostering
independent operation of the transmission grid?
Answer. The Commission should place a high priority on both
fostering independent operation of the transmission grid and constantly
monitoring operation to assure that open access to the grid is
maintained.
Question 9. How do you envision the new ERO working with the RTOs?
How do you envision the new Regional Entities working with the RTOs?
Answer. The Commission needs to assure that as the ERO is
developed, its structure allows for an extremely close working
relationship with the RTOs. Similarly, the new Regional Entities should
maintain open lines of communication with RTOs.
OPEN ACCESS TRANSMISSION
Question 10. Rather than pursue a Standard Market Design proposal,
which would have fundamentally restructured the electric power
industry, FERC is now focused on revising the Commission's open access
transmission policy under Order 888. How will you approach revision of
Order 888?
Answer. It's critical for the Commission to thoroughly review what
has worked with Order 888 and also identify any deficiencies. The
transmission system and the wholesale market have undergone truly
fundamental changes in a relatively short time frame, and the
Commission's goal should be to assure that wholesale markets are open,
non-discriminatory, and promote the interests of reliability and energy
consumers.
Question 11. In Section 1231 of EPAct, Congress gave FERC the
authority to require government-owned utilities and electric
cooperatives to provide open, non-discriminatory transmission access on
their systems in a comparable manner to that required for public
utilities. In its recent NOPR on Order 888, the Commission chose not to
propose a generic rule to implement Section 1231, but instead to apply
its provisions on a case-by-case basis. Do you agree with this
approach?
Answer. As part of its review of Order 888, the Commission needs to
examine the role of government-owned utilities and electric
cooperatives in the transmission system. The vast majority of these
utilities are small and are minor players in the transmission system. A
generic rule may not be necessary unless it is demonstrated that these
smaller utilities are behaving in a way that is counter to the
principles of open access. Until evidence is presented otherwise, a
case-by-case approach appears to be a good balance.
RELIABILITY INVESTMENT
Question 12. Reliability, of course, is one of FERC's top
priorities. The Commission had indicated that for prudent reliability
expenditures, such as vegetation management charges, it will consider
separate rate recovery mechanisms, such as surcharges. Consequently,
companies need not undertake a full blown rate case. When utilities
seek rate recovery for a reliability investment, do you agree that the
Commission should address this in a single issue rate case rather than
examine the utility's entire set of rates?
Answer. Yes. The Commission should take actions that encourage
these investments and expenses, and reliability should not be seen as a
profit center but rather as a vital and necessary activity.
NATIVE LOAD
Question 13. In EPAct, Congress provided that utilities with
service obligations to their native load customers are entitled to use
the transmission they own or hold under contract to meet these service
obligations. Do you agree that the statute makes clear that there is
nothing discriminatory about exercising this right?
Answer. I agree with the statue that protecting native load
customers is very important, and that the statute makes clear that
load-serving entities are entitled to use firm transmission rights to
deliver energy to meet their service obligations.
Question 14. Where there are competing uses of utility transmission
under the open access framework, do you believe that the Commission
must recognize the utility's statutory right to use its transmission to
serve its native load customers?
Answer. Yes, I believe that the Commission needs to follow the
statute and recognize the rights of load serving entities as they
pertain to native load customers.
NATURAL GAS
Question 15. Inadequate gas storage capacity contributes to
volatility of gas prices. In order to reduce volatility, the Energy
Policy Act of 2005 authorized FERC to grant market-based rates to gas
storage developers, even if they have market power, as long as a
proposal meets a three part test: (1) it is in the public interest, (2)
market based rates are needed, and (3) customers are adequately
protected. I recognize it is unusual for Congress to authorize market-
based rates to a company that has market power.
Are you prepared to support implementation of this provision and
authorize market-based rates, assuming the public interest, need, and
adequate protection criteria are met?
Answer. Yes, and I intend to follow the law.
Question 16. According to FERC, Liquified Natural Gas (LNG)
presently comprises 2% of the natural gas used in the Northeast and it
could provide up to 17% by 2025. Additionally, there are currently
about 40 LNG terminals either before FERC consideration or being
contemplated by the natural gas industry.
As we meet this growing trend toward LNG in the U.S., what do you
envision FERC's priorities should be and how do you think FERC can meet
these priorities?
Answer. FERC's highest priority has to be safety. Once safety is
adequately addressed, gas quality should be assured. LNG is not the
sole solution to the nation's natural gas supply needs, it is part of
the solution. FERC needs to assure that adequate pipeline and storage
capacity exists for existing and new sources of domestic and imported
natural gas.
Question 17. In the Energy Policy Act of 2005, Congress clearly
grants FERC exclusive authority to approve or deny an application for
the siting, construction, expansion, or operation of an LNG terminal.
Do you see any practical threats to this authority by those opposed to
the construction of LNG facilities through the use of other laws to
potentially place roadblocks (not intended by Congress) to the
construction and siting of LNG facilities?
Answer. I am not aware of any specific threats to this authority,
but if any develop I would be very interested in making certain that
the nation's infrastructure needs are not delayed by laws that are used
out of context.
Question 18. If so, how do you think this is best alleviated?
Answer. Both Congress and FERC should remain vigilant to assure
that needed infrastructure is constructed, and that unrelated laws are
not used to delay necessary investment.
NATURAL GAS MARKETS
Question 19. Please comment on what you think the impact of
commodities trading is on the price of natural gas. Do you believe that
executive branch currently has the appropriate authority to effectively
oversee the energy markets? Do you think that FERC has the appropriate
authority necessary?
Answer. As a general matter, I support the goal of additional
transparency in natural gas commodity trading. I believe that FERC has
been given appropriate authority, but some have suggested the.
Commodities Futures Trading Commission (CFTC) could benefit from
additional authority. I defer to the CFTC as to whether additional
statutory authority would be beneficial.
Question 20. In recent testimony before another Senate Committee,
Commissioner Brownell stated, ``The natural gas and electricity markets
are inextricably linked. . . . The emergence of renewable wind energy
as an important electricity supply alternative, for example, will have
a mitigating impact on natural gas prices.''
First, do you agree with this statement?
Answer. Yes.
Secondly, do you believe that the present authorities under current
law are effective with respect to advancing the production of renewable
energy on federal lands and federal submerged lands?
Answer. I am not aware of any changes that are needed in present
law in order to promote additional renewable energy development on
federal lands and federal submerged lands. However, I am aware that
when multiple federal agencies are landowners in a specific area, this
can present unique challenges to energy development.
Question 21. In the Commission's report to Congress in February on
the subject of bringing natural gas from Alaska's North Slope to the
lower 48 states, the Commission identified a number of obstacles that
have emerged over several years that have impeded the development of
the Alaska natural gas pipeline. Additionally, the report comments on
the wide-ranging federal and state cooperation, inter-agency
cooperation, and government and industry cooperation necessary to meet
this challenge. Please comment on what you think FERC's role in this
process is and how you think FERC can reasonably help to expedite the
resolution of these issues so that the American people can have the
benefit of Alaska's vast supply of natural gas?
Answer. Alaska's natural gas is an enormously valuable and needed
domestic source of energy. Although many of the specific policies are
currently being debated in the Alaska Legislature, FERC can play a
constructive role by acknowledging the benefits of this energy source
and by thoroughly examining any impediments to the project in its
regular reports to Congress on the project. Once the state of Alaska
has decided how to proceed, FERC can play a role in coordinating
appropriate federal cooperation.
Question 22. Without getting into the specifics of a matter
potentially before the Commission, I would like to ask you a question
on gas pipeline infrastructure. One of FERC's main priorities is the
expansion of U.S. domestic energy infrastructure. Do you think that a
mandated return on equity on a pipeline system that would be lower than
the return on equity of any pipeline in the past 40 years would be
consistent with FERC's priority of expanding energy infrastructure?
Answer. FERC needs to assure that returns are such that the
investment community continues to make these needed infrastructure
investments.
Question 23. I am fully aware that the United States consumes about
a 1/4 of the natural gas consumed worldwide. I am also aware that over
95% of the world's proven natural gas reserves lies outside of North
America. Additionally, I am concerned that a large portion of the
United States, specifically most of the OCS, remains currently off-
limits to exploration and production of natural gas. As such, LNG is an
important part of our energy mix in this country. However, how do you
think we avoid becoming reliant upon foreign sources of natural gas,
the same we are dependent upon foreign oil, from areas that are
unstable and unfriendly to U.S. interests?
Answer. The nation has to have a range of natural gas supply
options so that we do not become dependent on LNG. In addition to
existing and new sources of domestic gas, both additional gas storage
and additional gas pipeline capacity would help stabilize the market
and help prevent price spikes that could occur if foreign sources of
natural gas were disrupted.
Question 24. Recently, I have grown concerned about the potential
for LNG shipments to be diverted away from the U.S. markets to other
consuming nations. Can you comment on the state of this trend, the
future of this trend as you see it, and how we can mitigate this
potential diversion of significant natural gas supply?
Answer. LNG is a commodity, and the owner of the commodity is able
to move it to potentially more lucrative markets with willing buyers.
In addition to developing more domestic sources of natural gas,
additional natural gas storage and additional pipeline capacity would
allow for a more stable market that would in turn create more certainty
for sellers of the commodity.
Question 25. Pursuant to Section 316 of the Energy Policy Act, the
Natural Gas Act was amended and the Commission was directed to
facilitate price transparency in markets for the sale or transportation
of physical natural gas in interstate commerce. Further, the Commission
is granted the authority to prescribe such rules as the Commission
deems necessary and appropriate to carry out the purposes of Section
316. Have you had the opportunity to examine the question of
transparency in the natural gas markets? If so, have you drawn any
conclusions that you could share with this committee that could help us
promote and advance fair competition, market integrity, and ultimately
protect the consuming public?
Answer. Additional price transparency would help consumers and
regulators, and I support this general effort. If confirmed, I would
expect this is an issue that the Commission will spend a lot of time
considering, and I would welcome the opportunity to report to the
committee my thoughts on any policy recommendations that would further
protect the consuming public.
Question 26. Along those same lines, as mandated by EPACT, FERC and
the CFTC entered into a memorandum of understanding with respect to
information sharing to prevent procedural duplication in the oversight
of the commodity markets. Do you commit to working with the CFTC to
ensure that this issue of natural gas market transparency is given
continued attention at FERC?
Answer. Yes.
Question 27. FERC has a strategic plan and the first goal stated in
the plan is promote development of a robust energy infrastructure. I
think that's a critical mission statement for this agency. Through a
combination of legislation, regulation and litigation we've made it
very difficult to develop major new energy facilities in this country.
Do you share the vision that FERC's primary mission is to promote the
development of energy infrastructure for this country?
Answer. FERC's primary mission is to protect the consuming public;
part of that mission is to promote the development of energy
infrastructure, with safety, reliability, and consumer protection as
major components of that entire effort. I strongly support the
development of additional energy infrastructure in this country.
Question 28. What are the critical elements of a FERC policy that
will ensure that needed infrastructure is built and built in a timely
manner? How does an agency like FERC make sure that regulated companies
are allowed to a sufficient return to attract capital into that
business?
Answer. There are many critical elements to ensuring the
construction of critically needed infrastructure. Identifying the types
and locations of needed infrastructure, providing for investment
certainty through timely and sufficient returns on investment, and
assuring efficient and transparent energy markets are all necessary and
complicated components of this goal.
Question 29. You are both from the West and had the experience of
seeing the California energy crisis and its fallout for other Western
states first hand. One of the obvious lessons from that experience is
that electricity markets have to be structured properly if competition
is to benefit consumers. Do you agree that competitive wholesale
markets, properly structured, do benefit consumers and what about the
use of price caps, bid caps and similar price mitigation measures?
Answer. I agree that properly structured competitive wholesale
markets benefit consumers. Various price mitigation measures should
only be used in rare cases but need to remain an option when markets
have become dysfunctional.
Question 30. What more does FERC need to do so that consumers see
the full benefits of competitive markets? How would you proposed that
FERC work with the state regulatory authorities, RTOs and others to
advance fairness for merchant generators when it comes to access to the
grid and in bidding for new capacity?
Answer. In reviewing Order 888, FERC is taking the necessary action
to evaluate what is working and what needs improvement in open access
transmission policy. FERC needs to maintain a constant dialogue with
all the parties in wholesale transmission markets to assure that there
is open access to the grid and that consumers benefit from multiple
sources of new capacity.
Question 31. The Mobile Sierra doctrine and the public interest
standard were established by the U.S. Supreme Court in a series of
cases a half-century ago. The public interest standard does not protect
sellers, it protects contracts, it protects the agreement. Sometimes
the public interest standard works to the advantage of the seller,
sometimes to the advantage of the buyer. Recently, it has worked to the
advantage of the buyer. The power sales contracts between Calpine and
California are costing Calpine $1 billion, and helped drive it into
bankruptcy. Under the just and reasonable standard, there is little
doubt the contract would have been modified. Under the public interest
standard, Calpine continued to perform. So, the public interest
standard saved California consumers $1 billion. The Supreme Court is
presumed to be competent to read a statute. They read the Federal Power
Act and came up with the Mobile Sierra doctrine and the public interest
standard. What is your view of the Mobile Sierra doctrine? Is it good
law? Do you agree with the Supreme Court?
Answer. This specific issue is pending at the Commission as it
pertains to a default standard for future contracts, so my answer will
be guarded. In general, the primary task of the Commission is to guard
the consumer. Many wholesale power sales occur under contract, and
there is a benefit to encouraging this practice. At times it still may
be necessary for the Commission to modify a power sales contract.
Whatever approach the Commission takes should be consistent with the
law, including the Federal Power Act and decisions of the Supreme
Court.
Question 32. I want your views on FERC authority over buyer market
power. FERC has been encouraged to regulate buyer market power, by
forcing utilities to buy available lower cost power rather than self-
generate. I am not convinced FERC has legal authority in this area.
Also, there is serious potential for conflict with the states, since a
FERC order to a utility to buy power instead of self generating would
undercut state decisions on ratebasing generation. Do you think FERC
has this kind of legal authority and do you think it is good policy?
Answer. This is a complex area where FERC should be cautious in
setting policy. In addition to the questions about legal authority,
there are major questions about the need to put stable generating
sources into the ratebase and the role of the states in making these
decisions. Especially as it relates to the cost of fuel, the cost of
some power may be lower for some duration but not over the life of the
facility. For example, the cost of electricity generated from natural
gas has seen a steep rise in price in only a few years, and points to
the need for balance in sources of generation. Due to this complexity,
FERC must be very careful in attempting to regulate buyer market power.
Question 33. The market-based rate proposed rules FERC issued last
month ask questions about what happens when a utility loses market-
based rates. For example, if a utility loses market-based rates in some
markets, but retains it in other markets, should FERC force a utility
to sell at cost-based rates in lieu of making market-based sales? I am
concerned that such forced sales would hurt the native load customers
of the utility, by reducing wholesale revenues that would otherwise be
shared with native load. It also allows the buyer of the cost-based
power to resell it at a profit, so it could constitute a wealth
transfer. What is your view of such forced sales?
Answer. As a general matter, I do not prefer the option of forced
sales. This issue is part of what the Commission is presently
considering as part of its comprehensive review of Order 888. The
Commission needs to balance the needs of native load customers with
concern over the exercise of market power. Presumably, a utility would
only lose market-based rate authority if it is found to have market
power. If confirmed, I look forward to reviewing the range comments
that the Commission receives on this subject and having the opportunity
to thoroughly consider the Commission's alternatives.
Question 34. One of the obstacles in building transmission is cost
allocation. FERC has taken different approaches to this issue in
different regions, which seems appropriate. However, some have urged
FERC to roll in all transmission expansion costs. That seems very
unfair to me. Since most transmission is owned by vertically integrated
utilities, it would burden the native load customers of those
utilities, while the beneficiaries contribute nothing. Do you believe
FERC should roll in all transmission expansion costs?
Answer. FERC needs and has flexibility in dealing with assigning
transmission costs. In some cases the costs should be rolled-in, in
other cases these costs should be directly assigned, and in some cases
there should be a combination of both approaches.
Question 35. Under current law, the only way a licensee can
challenge an arbitrary condition included in a FERC hydro license
through exercise of mandatory conditioning authority is to seek
judicial review of the FERC license. That is true even when FERC
believes the mandatory condition is unsupported by the record or even
contradicted by the record. The EPAct alternative condition provisions
should reduce the prospect of arbitrary mandatory conditions, but they
may still be proposed. For reasons of comity FERC sometimes does not
highlight its disagreement with the federal or state agency when they
propose an arbitrary condition. I think that approach is fundamentally
unfair to licensees, since it deprives them of any prospect of
overturning an arbitrary condition through judicial review. I believe
FERC should make any disagreement with a conditioning agency plain in
its orders. Do you agree?''
Answer. Yes.
Responses of Philip D. Moeller to Questions From Senator Thomas
Question 1. Will you pledge to work closely with states to enable
the timely development of transmission that is needed to meet future
load growth?
Answer. Yes, that is a critical issue. If confirmed, it will be one
of my priorities.
Question 2. In Wyoming and elsewhere, it's not always easy to ship
our coal to customers. There are a number of proposals for mine-mouth
coal power plants in my state and others as a result. These projects
will benefit the communities by building a tax base, and the nation, by
diversifying our energy supply. They will not move forward without
access to competitive regional power markets through a strong, open
power grid. Can I count on you to support the development of these
strong regional markets and the open-access power grid that will be so
essential to their success? Will you make sure that new power plants
can connect with the interstate power grid at reasonable cost and have
the opportunity to reach the customers they need to succeed?
Answer. Yes, both transmission expansion and open access to the
grid are priorities of mine.
Question 3. In the Energy Bill, DOE was given authority to
designate National Interest Electric Transmission Corridors. If there
were a transmission project ready to move forward tomorrow, do you
think that those projects should have to wait for DOE to complete their
study and designations in order to benefit from the permitting
improvements that exist under EPACT?
Answer. It is in the nation's interest to assure that those
projects start as soon as possible.
Question 4. According to the Commission's current strategic plan,
FERC's highest priority goal is to ``Promote Development of Robust
Energy Infrastructure.'' Do you agree with that priority, and if so,
can you provide me with some detailed insights as to how you believe
FERC can best promote that objective?
Answer. Yes, I agree with that priority as long as consumer
interests, safety and reliability are part of that goal. I strongly
support the development of additional energy infrastructure in this
nation. There are many critical elements to ensuring the construction
of critically needed infrastructure. Identifying the types and
locations of needed infrastructure, providing for investment certainty
through timely and sufficient returns on investment, and assuring
efficient and transparent energy markets are all necessary and complex
components of this goal.
Responses of Philip D. Moeller to Questions From Senator Allen
Question 1. Virginia both produces electricity through coal,
nuclear and natural gas resources and also, at times, imports power
from the Midwest when the costs to generate electricity in that region
are lower than the costs to generate in Virginia. I have been
approached by constituents who are interested to know what assurance
you can provide the Committee that the region will not end up with
``least common denominator'' solutions that might work for other
regions of the country but work contrary to the wholesale competitive
market model that is in place in Virginia?
Answer. All the regional markets are going through some sort of
transition, and all need significant energy infrastructure investments,
whether it is in new generation, new transmission or both in order for
wholesale markets to work properly and provide consumer benefits. I am
very aware that each region has its differences, and each market will
reflect those differences.
Question 2. Do you believe that a competitive market model for
wholesale markets can stimulate new investment in transmission,
renewable resources and energy efficiency? If so, what can be done to
support development of such models? If not, why not?
Answer. Yes, I believe that properly constructed competitive
wholesale markets will provide the certainty that will lead to needed
incentives for investments in transmission, new generation--including
renewable resources--and energy efficiency. Various market models exist
and are being developed throughout the nation, and the Commission needs
to monitor the development of these different models to determine which
market characteristics best provide for the actual investment in energy
infrastructure.
Question 3. The Regional Transmission Organization that operates
the transmission grid in Virginia presently undertakes an independent
regional planning process to determine needed new transmission
infrastructure. All of the instate electricity producers, Dominion,
AEP, Allegheny and the municipal and cooperative utilities, participate
in that process which is open to the public. On the other hand,
Virginia borders other States that do not have similar processes. What
is the best way for the Commission to address the ``seam'' that is
created along the borders where regional planning is undertaken in some
regions and not others?
Answer. The Commission needs to closely follow seams issues
wherever they occur throughout the nation, as they are a critical
element of making markets work for consumers on both sides of the seam.
The FERC-State Joint Boards need to keep this a priority so that
states, regions, and the Commission remain informed of potential
planning deficiencies. Ultimately, greater transmission investment can
alleviate many of the problems that can occur at seams.
Responses of Philip D. Moeller to Questions From Senator Smith
Question 1. As you know, FERC has a statutory responsibility in
reviewing rates filed for approval by the Bonneville Power
Administration, to ensure that the proposed rate is sufficient to cover
its Treasury obligation. Do you agree that FERC would have to reject
any rate that ``walled off'' revenues from BPA secondary sales and
required such funds be used to pre-pay debt, rather than being used
consistent with established precedent?
Answer. It is my understanding that this latest proposal has been
resolved through recent Congressional action. However, any rate that
``walled off'' revenues would have to be examined very skeptically to
make certain that BPA retained needed flexibility and sufficient
revenue to assure that it could meet its ongoing Treasury obligation.
Question 2. Do you agree that the Federal Columbia River
Transmission System Act (P.L. 93-454) requires the BPA Administrator to
consider all revenue sources ``in the aggregate'' when setting rates?
Answer. I agree with the law.
Question 3. Are you aware that that CAISO has filed a Market
Redesign proposal (MRTU) with FERC and that a number of entities,
including other control areas, in the Western Interconnection have
objected to that filing? After seeing the impact on Nevada and the
Western markets of the 2000-2001 California energy crisis, are you
concerned about this? Do you plan to insist that no decision be made on
this filing until you are confirmed? Do you think the FERC has the
obligation to resolve the specific seams issues articulated by the
other western utilities before implementing such a dramatic market rule
change?
Answer. I am aware of the proposal, and the objections, and given
the severity of the Western energy crisis I can assure you that I will
do everything I can to promote policies that prevent anything
resembling a repeat of those events. I would hope to be a part of this
decision, and I agree that seams issues need resolution in the West and
the rest of the nation.
Question 4. I understand that there is significant concern at FERC
about development of the bulk transmission system and the failure of
organized markets to effectively encourage these investments.
Specifically, I understand that the Locational Marginal Pricing
mechanism used in organized markets has not resulted in substantial
transmission investment, however ISOs continue to try to implement
these mechanisms. Most recently, the CAISO, in its MRTU, is proposing
LMP for its members and in doing so, threatens to unwittingly bring in
the entire region. At the same time, the FERC's 2004 State of the
Markets Report clearly identifies that the stable markets in the West
generate more investment in transmission than in California or any
other region dominated by RTO-administered financial markets.
What are your thoughts on this subject? Should regions be forced to
embrace a mechanism that has not resulted in its promised benefits,
when what we are already doing is working better?
Answer. The Commission needs to determine which policies are
resulting in actual investment in new transmission infrastructure.
There are regional differences in both what is proposed and what is
resulting in transmission investment. I believe regional differences
should be embraced if they are working to get actual transmission
built.
Question 5. You are perhaps aware that many entities in the West
opposed the imposition of the FERC's version of Standard Market Design
or ``SMD,'' which included LMP. Some of the concerns raised by the West
involving SMD were the clear differences between Eastern pool-based
markets, with tightly clustered transmission systems and the
predominance of thermally-based generation and Western bilateral
markets, with long transmission systems (dispersed consumers) and vast
hydroelectric systems, particularly in the pacific northwest. In other
words, many entities in the West continue to be concerned about the
imposition of Eastern-style market designs in a vastly different, both
from a resource and system perspective, West.
What are your views on the significance of these East vs. West
distinctions? How heavily should the FERC weigh these distinctions when
evaluating current and future market design proposals, including MRTU?
Answer. As referenced in the preceding answer, I fully recognize
there are distinct differences in the physical and market structure of
regional markets, even within the East and the West, and these
differences should be reflected in the market designs in each of the
regional markets.
Responses of Philip D. Moeller to Questions From Senator Bunning
Question 1. A number of Kentucky electric distribution companies
(and other customers) signed new service agreements with the Tennessee
Valley Authority (TVA) in 1997. The agreements included provisions
under which the Kentucky distributors agreed to remain TVA customers
for another 10 years. However, the agreements also stated that the
Kentucky customers could provide TVA Notice of their intent to leave
TVA after five years and would then be allowed to leave TVA after an
additional 5 years. The contracts also specifically stated that any
departing customers would not be liable for any exit fees or stranded
costs. The agreements further contained language concerning services
(eg transmission) TVA would provide departing customers. Several
Kentucky customers (and a Tennessee customer) of TVA have exercised the
rights they have under these contracts and given Notice of their intent
to leave TVA. The Kentucky customers provided this Notice for, among
other reasons, their ability to secure much less expensive power for
their customers from sources other than TVA. Since giving Notice, these
Kentucky customers have attempted to negotiate with TVA on the rates
and terms of conditions of the requested transmission service. TVA has
been entirely unwilling to even discuss the transmission services the
departing customers are requesting.
Please provide your views on whether the FERC, as a matter of
public policy, should facilitate access to the interstate transmission
grid and encourage competition in the electric generation market by
ordering the wheeling of power for electric distribution companies that
wish to secure transmission service on our interstate transmission
grid. For purposes of this question, please assume that the FERC has
the legal authority to compel transmission on behalf of customers on
the TVA system (ie ``inside the fence'').
Answer. I believe FERC should facilitate access to the interstate
transmission grid. Specific to TVA customers, the Commission has shown
a willingness to address these concerns. Any major changes to
transmission policies related to TVA must be done carefully to assure
that any action does not threaten remaining TVA customers.
Question 2. Kentucky has the least expensive electric rates in
America. This is in large part due to the abundance of coal in Kentucky
and the use of this coal to generate power. The railroads play an
integral part in moving coal from the mine locations to the power
generating facilities. Recently, problems with the reliability of coal
deliveries and the rates railroads are charging for transporting coal
have begun to develop. These problems have the potential to impact the
ability of Kentucky to use its coal to generate reasonably priced power
in Kentucky and to send its coal to other markets.
I understand the FERC has recently scheduled a conference on these
coal issues. Please provide your views on what role the FERC's should
play in assuring an adequate, reliable supply of coal for our nation's
generating facilities.
Answer. This is a very serious issue that has reliability and cost
ramifications for Kentucky and much of the nation. Although FERC does
not have a statutory role in railroad issues, it should work closely
with the Surface Transportation Board to help facilitate a resolution
of delivery problems of coal via rail.
Question 3. As I noted above, Kentucky has the least expensive
power in the nation. Kentucky is anxious to make sure its citizens and
businesses continue to enjoy this reasonably priced power.
Please explain your views on the importance of the FERC recognizing
and respecting differences in regional energy markets as it makes
decisions on the structure of the interstate energy markets.
Answer. There are distinct differences between regional markets,
and those differences must be recognized and respected. The key issue
for FERC is determining what is working in each market to actually get
more infrastructure built. As long as these investments are being made
and that the investments facilitate competitive wholesale markets,
regional differences can be managed.
Question 4. The Energy Policy Act of 2005 (EPAct) gave the
Department of Energy authority to establish National Interest Electric
Transmission Corridors. EPAct further gave the FERC the authority to
authorize the construction of transmission lines in these corridors.
Please provide your views on the responsibility of the FERC to
consult and collaborate with states that may be impacted by the
construction of electric transmission lines in these corridors.
Answer. FERC must be extremely sensitive to the concerns of the
states involved, and must maintain frequent and open communication with
the states involved in any transmission corridor. Some type of formal
collaborative effort between FERC and the states should help in
facilitating this communication, but it must remain a priority for FERC
regardless of whether such collaborative effort is formalized. In
addition, the Commission on June 15 issued proposed regulations on this
subject that should provide the necessary framework for a thorough
consideration of this issue.
Question 5. Concerns have recently been raised that the operating
costs charged by Regional Transmission Organizations are excessive.
These costs can eventually be absorbed by residential and industrial
electricity consumers in states like Kentucky.
Please provide your views on the responsibility of the FERC to
oversee and review these types of RTO costs.
Answer. FERC has a responsibility to closely monitor these costs
and urge the RTOs to contain them. Many of these start-up costs should
be one-time expenditures, but FERC needs to work to assure that costs
are managed so that the benefits of more competitive wholesale markets
flow to actual consumers and are not eroded by unnecessary
expenditures.
Question 6. Transparency of energy markets and the availability of
timely information about costs and capacity in energy markets is
crucial for state commission to perform their duties.
Please provide your views on the FERC's responsibility and legal
authority to provide for transparency in energy markets and the timely
availability about conditions in the energy markets.
Answer. Market transparency is not only crucial to state
commissions, it is necessary for customers to feel confidence in the
markets in which they are participating. FERC was given new authority
in EPACT 2005 to require certain market transparency disclosures, and
is in the process of implementing this authority. I fully support these
efforts and would welcome any suggestions for improving market
transparency.
Responses of Philip D. Moeller to Questions From Senator Bingaman
HYDROPOWER
Question 1. Section 241 of the Energy Policy Act of 2005 amends the
Federal Power Act to modify some aspects of the hydroelectric
relicensing process with respect to conditions and fishway
prescriptions. I want to ensure that these modifications are
implemented in a manner that does not undermine protection of federal
reservations or Indian lands or trust resources.
Do I have your commitment that you will work to ensure that the
FERC staff coordinates closely with the resource agencies and takes
other steps necessary to ensure that these provisions are implemented
in a manner that protects federal reservations and Indian lands and
trust resources during the licensing process?
Answer. Yes.
Question 2. In 1986, the Federal Power Act was amended to require
the Commission, in addition to power and development purposes, to
``give equal consideration to the purposes of energy conservation, the
protection, mitigation of damage to, and enhancement of, fish and
wildlife . . ., the protection of recreational opportunities, and the
preservation of other aspects of environmental quality'' in deciding
whether to issue a hydroelectric license.
As a commissioner, will you ensure that environmental protection is
given equal consideration during the hydroelectric relicensing process?
Answer. Yes, environmental protection is critical in this process.
TRIBAL TRUST RESPONSIBILITY
Question 3. Do I have your commitment that you will carry out your
duties as Commissioner in a manner consistent with FERC's tribal trust
responsibility?
Answer. Yes.
Responses of Philip D. Moeller to Questions From Senator Dorgan
Question 1. In recent months, North Dakota oil producers have
experienced a marked price discount between the price of crude oil that
they produce and the prevailing West Texas Intermediate (WTI) price of
oil. Part of the reason for this price differential is a lack of
pipeline capacity to transport expanded North Dakota production out of
the region and to other refining markets.
I note that FERC's web site and its ``Strategic Plan'' emphasize
the Commission's role in the ``development of a robust energy
infrastructure.'' Do you see this as an important role for the
Commission?
Answer. Yes, developing energy infrastructure is essential to
allowing consumers to benefit from competitive markets.
Question 2. What can the Commission do to encourage construction of
energy infrastructure, including for pipelines serving constrained
markets?
Answer. There are many critical elements to ensuring the
construction of critically needed energy infrastructure. Identifying
the types and locations of needed infrastructure, providing for
investment certainty through timely and sufficient returns on
investment, and assuring efficient and transparent energy markets are
all necessary and complex components of this goal.
Question 3. Specifically, what can be done in establishing rate
structures that would encourage investment in new pipelines and ensure
that needed capacity is built in a timely manner?
Answer. Similar to other energy infrastructure, investment in new
pipelines is encouraged by certainty of the permitting process and
sufficient return on the investment.
Question 4. Is there additional legislative authority that Congress
should provide the Commission to encourage development of needed energy
infrastructure?
Answer. I am not aware of the need for any additional authority
that FERC has requested. Congress has addressed and can choose to
address in the future both environmental policy and tax policy in an
effort to encourage the development of energy infrastructure.
Responses of Philip D. Moeller to Questions From Senator Cantwell
Question 1. Under the Northwest Power Act, FERC has the final say
in approving the Bonneville Power Administration's rates provided that
the proposed rates are ``sufficient to assure repayment of the Federal
investment in the Federal Columbia River Power System over a reasonable
number of years after first meeting the Administrator's other costs . .
. and are based upon the Administrator's total system costs.''
When determining the definition of terms like ``reasonable number
of years'' and other terms in BPA's various organic statutes what
deference would you give to years of agency precedent and practice in
defining those terms?
Answer. I would give great deference to the agency's precedent. BPA
has a long history of managing the financial implications of weather
variations in the Pacific Northwest's hydro-dependent system.
Question 2. What deference would you give to federal statues that
define certain provisions in BPA's organic statutes?
Answer. I would follow the law and give appropriate deference.
Question 3. As a FERC Commissioner, would you rely on relevant
judicial precedent in order to define terms in BPA's organic statutes?
Answer. Yes.
Question 4. As you probably know, you will have a number of
applications for renewal of hydroelectric licenses before you in the
next few years. The Northwest is heavily reliant on hydroelectric
generating resources. In WA State alone some 13 projects representing
5,863 MW of generating capacity will be in various stages of the
relicensing process between now and 2015.
Can you provide the Committee with your perspective on
hydroelectric power and your thoughts on the relicensing process under
EPACT '05 and the Interim Final Rule published last year?
Answer. Hydroelectric power is essential not only to the state of
Washington, but to the Pacific Northwest and the entire West. Licensing
and relicensing of hydropower projects always entails the balancing of
various interests. It is my impression that most of the interested
parties have cautious optimism toward the new process that was included
in EPACT '05 and addressed in the Interim Final Rule, and that it will
be a fairer and more predictable process for most of,the parties. If
confirmed, I intend to monitor the process to assure that its
implementation meets the intent of Congress on this issue.
Question 5. The Northwest has spent more than a decade locked in
contentious debate over various forms of regional transmission
management. The region is currently looking at an option--known as
ColumbiaGrid--that appears very promising, both in its substance and
broad base of support. I will note, however, that it does not meet the
RTO standards of FERC Order 2000.
Do you think FERC should nonetheless encourage the development of
this region-specific development as it moves forward?
Answer. Yes. FERC should encourage regional solutions as long as
they appear likely to result in additional transmission investment and
the development of efficient wholesale markets.
Question 6. As you know, western energy markets and ratepayers in
WA State are still suffering negative effects of deregulation and
related market manipulation during the 2000-2001 energy crisis.
Ratepayers in the Northwest and the larger regional economy continue to
suffer the ill effects of related energy hikes--some as high as 50%.
The GAO noted in a report last November that ``. . . consumers in
California and across other parts of the West will attest, there have
been many negative effects [related to restructuring], including higher
prices and market manipulation.'' Has energy market restructuring been
successful?
Answer. Greater competition in the wholesale electric market has
clearly benefited consumers in the West and throughout the nation.
However, negative impacts of the 2000-2001 Western energy crisis
continue to affect the economies of Western states. The initial causes
of the crisis--high demand and short supplies combining to expose the
flaws of the California market--were exacerbated by regulatory inaction
and market manipulation. Restructuring of the energy market is an
ongoing process that if done correctly will be successful by providing
consumers with lower cost energy and more choices.
Question 7. Of those areas of the country that have not
restructured and have not deregulated retail rates, like the Pacific
Northwest, do you believe those regions should largely be left alone to
address the needs of their specific industry structure as they see fit?
If not, how far should FERC go in changing them?
Answer. States will continue to decide whether they want to
implement retail competition in their markets. FERC should allow
regions to develop markets based on regional characteristics, with the
recognition that regional markets affect each other. FERC needs to
assure that one region's market design does not negatively impact a
neighboring region.
Question 8. In recent press reports, the head of the California
Independent System Operator has suggested that the rest of the West
will simply have to comply with California markets and that the seams
created between California and other areas in the west is a failure of
the neighboring states to adopt compatible models. My region has
suffered once as a result of California's experiments, and stakeholders
throughout the west are very concerned by these comments.
Do you believe that FERC has a responsibility, when reviewing
filings for California's market redesign efforts, to assess the impact
and consequences for neighboring states?
Answer. As referenced in the preceding answer, yes.
Question 9. Last year's comprehensive energy legislation included a
broad ban on the market manipulation practices exercised by Enron. As
you know, the Northwest continues to suffer from the ill-effects of
Enron's market manipulation practices. I imagine you are acquainted
with the smoking-gun Enron memos, in which the company laid out
strategies such as `Fat Boy,' `Get Shorty,' `Death Star' and the like,
to drive up prices in the West.
I would like to know whether you believe there is any circumstance
in which a transaction resulting from manipulative market practices can
be ``in the public interest,'' or ``just and reasonable?''
Answer. It's theoretically possible that such a transaction is
somehow in the public interest. However, my real world focus would be
on enforcement of the ban on market manipulation practices.
Question 10. Under FERC's Notice of Proposed Rulemaking RM-05-35-
000, the Commission has proposed amending its regulations regarding the
standard of review that must be met to justify proposed modifications
to Commission-jurisdictional agreements. Essentially, with the
exception of transmission service agreements under the Open Access
Transmission Tariff and certain natural gas transportation agreements,
when proposed modifications to FERC jurisdictional agreements are not
agreed to be dealt with by contract signatories under the `just and
reasonable' standard, the Commission will review such agreements under
the `public interest' standard, in accordance with the Mobile-Sierra
doctrine. Most people believe that the ``public interest' standard is
practically insurmountable.
I know you can't tell me how you might vote as a Commissioner. I am
concerned about any diminishment of consumers ability to find relief
when they are exposed to rates, terms, and conditions of service that
are not just and reasonable--the standard found in the Federal Power
Act. However, can you tell me your views on the application of the
``public interest'' standard and how you think it should be applied in
contracts where there is no standard of review specified?
Answer. That question is at the heart of the matter that is now
under consideration at the Commission. The public policy questions
center on two issues. The Commission needs to encourage the use of
contracts, as contracts have been historically widely used in the
wholesale market. Secondly, the Commission needs to protect the public
interest. Ultimately, the Commission needs to retain the authority to
review contracts.
Responses of Philip D. Moeller to Questions From Senator Wyden
PROMOTING GREEN POWER
Question 1. Recently, the Federal Energy Regulatory Commission
certified an incremental hydroelectric upgrade for the first time under
provisions of the Energy Policy Act of 2005, allowing PacificCorp, an
Oregon energy company, to qualify for a renewable energy tax credit.
Are there other FERC policies and programs that can boost the
production, use and sales of renewable energy? What will you do as a
commissioner to encourage FERC to promote green power?
Answer. The position of commissioner can serve as a prominent voice
in promoting and encouraging green power development. I have worked
extensively on policies promoting both wind power and geothermal power,
in addition to policies related to hydropower. Specifically, FERC is
now reviewing the effects of its transmission policies under Order 888,
and one of the many issues related to that review pertains to the
question of how to deal with ``intermittent'' generation. Providing
more certainty on that issue--something that is especially important to
wind power and solar power--will help encourage the development of
these forms of renewable energy.
CONSUMER ADVOCATE
Question 2. Chairman Kelliher and Commissioner Kelly both support
my proposal to create a Federal consumer advocate at FERC similar to
what more than 40 states currently have. My proposal to create this
position was unanimously agreed to during consideration of the Senate
Energy Bill. Will you support creating a Federal ratepayer advocate at
FERC?
Answer. I feel that the primary job of the Commission is already to
protect ratepayers, so any consumer advocate position would need to be
carefully structured. If the roles and responsibilities of the consumer
advocate position can be structured in an acceptable manner, I would
support the creation of the position.
RESPECT FOR STATE/LOCAL VIEWS IN LNG LICENSING
Question 3. As you know, the Energy Bill gave FERC exclusive
authority over siting, construction and operation of liquefied natural
gas (LNG) import facilities. The role of states and local communities
is limited to making suggestions to FERC during the licensing process.
What will you do to ensure that the views of states and local
communities are not only considered but given deference in the
licensing process? Will you support licensing of facilities over the
strong objections of the state and local community?
Answer. FERC needs to assure that states and local communities are
given opportunities throughout the process to express their views and
concerns about any LNG facilities, and I will commit to that premise.
It is in the interest of all the parties that state and local community
concerns be heard throughout the process. I will give those concerns
careful consideration and deference to the extent authorized by law. I
would expect that there would be at least some opposition to nearly
every proposed energy-related project in this nation, including LNG
facilities. With LNG facilities, FERC needs to make public safety its
primary goal.
HYDRO RELICENSING SETTLEMENTS
Question 4. I understand the Commission's practice has generally
been to encourage hydro relicensing settlement agreements, but that the
Commission has never addressed in a comprehensive manner the question
of what kinds of settlement provisions may be incorporated into license
conditions. As a result, similar proposed conditions have been accepted
in some cases and rejected in others. This has caused confusion among
parties to these settlements as to how FERC draws these distinctions.
There appears to be a growing recognition within the Commission that
additional guidance is needed and that prompt agency action is
necessary to provide negotiating parties the regulatory certainty and
clarity they've been lacking. Do you share that view, and if so, would
you agree that the Commission's treatment of proposed hydro licensing
conditions ought to be consistent and predictable for all parties
involved?
Answer. As a general matter, I strongly support providing entities
more certainty in hydropower relicensing, as the lack of certainty was
one of the major complaints that led to legislative changes of the
relicensing process in EPACT 2005. My impression is that most entities
are guardedly optimistic that those changes in the relicensing process
will provide that certainty, but I will commit to following this area
very closely and working to assure that conditions are consistent and
predictable for the parties involved.
______
Responses of Jon Wellinghoff to Questions From Senator Domenici
ELECTRIC RELIABILITY ORGANIZATION
Question 1. EPAct directed FERC to ensure the reliability and
security of the nation's bulk-power system. Pursuant to the Energy
bill, a single Electric Reliability Organization--the ``ERO''--will
have the authority to establish and enforce mandatory reliability
standards. We are now in the process of transitioning from a system of
voluntary compliance to this new mandatory regime.
In order to avoid a ``one size fits all'' approach, Congress was
careful to provide a substantial role for regional reliability
organizations. The national ERO which sets reliability standards must
``rebuttably presume'' that a standard proposed by a Regional Entity is
valid.
As a Commissioner, how will you address the issue of regional
flexibility? How will this fit into the ERO's national standards and
their enforceability?
Answer. I agree that new Section 215 does not contemplate a `one
size fits all' approach to reliability standards. I recognize that
there are circumstances under which regional differences are
appropriate, such as to reflect physical differences in the grid, and
if confirmed, I intend to carefully consider any requests for regional
differences, particularly from regional entities that are organized on
an interconnection-wide basis.
TRANSMISSION INVESTMENT
Question 2. There has been sustained underinvestment in
transmission in recent years. In order to encourage greater investment,
EPACT directed FERC to issue a transmission incentives rule to
establish incentives for greater investment. Do you think there is a
need for greater transmission investment, and if so, would you comment
on whether you believe transmission incentives are the way to secure
that investment? Do you think incentives should be extended to
vertically integrated utilities?
Answer. Yes, I believe there needs to be greater investment in more
efficient electric grid infrastructure both at the transmission level
(primarily FERC jurisdiction) and at the distribution level (primarily
state jurisdiction). Incentives are usually a preferred method of
spurring investment (as opposed to fines or penalties or mandates).
However, it is important to have properly structured incentives to
ensure that the most efficient investments are pursued. Efficient
alternatives to grid infrastructure investments should also be
encouraged so that we do not have stranded transmission investments if
alternatives to transmission prove to be more economically viable and
efficient. Distributed generation and demand response are two possible
examples.
FERC-STATE RELATIONSHIP
Question 3. With FERC's new expanded responsibilities in the areas
of reliability and backstop transmission siting, there is the potential
for federal/state conflict. How do you propose to promote greater
cooperation and coordination with the states in these areas? How can
FERC best work with the states to identify and resolve congestion
issues?
Answer. FERC should collaborate with the states in electric grid
efficiency improvements to the extent practicable and appropriate
through coordination of reliability requirements with the regional
reliability organizations and state commissions. As for congestion and
other transmission planning issues, FERC again should collaborate to
the extent practicable and appropriate with state commissions, regional
planning organizations (Southwest Area Transmission, for example), and
RTOs/ISOs to identify electric grid infrastructure efficiency
improvements (increasing reliability and/or economic grid operation)
that would include identification of areas of congestion.
Question 4. How would you suggest that FERC and the states better
coordinate to provide regulatory consistency on transmission expansion
issues such as cost allocation and cost recovery?
Answer. To the extent new transmission expansions are in the
planning stages, it may be appropriate to open a dialog with the
appropriate state commission(s) involved to discuss cost allocation and
cost recovery issues.
COAL DELIVERY
Question 5. While FERC does not have direct statutory authority
pertaining to coal deliveries, coal constitutes approximately 50% of
the fuel for electric generation today, and utilities are seeking to
build more baseload coal plants in the future. Coal delivery issues,
then, can greatly impact electric reliability. FERC has scheduled a
meeting with utility and railroad representatives on June 15th to
discuss coal-delivery matters and their impact on markets and electric
reliability.
Do you think there is a regulatory gap in this area?
Answer. I have not studied this issue in any depth and do not know
if there is a regulatory gap in this area. If confirmed, I look forward
to reading the information developed from the June 15th meeting and
exploring this issue further.
Question 6. Do you believe FERC should coordinate more closely with
the Surface Transportation Board to ensure adequate and timely coal
deliveries?
Answer. I would include this question among those to consider when
I have had an opportunity to explore the issue in more depth.
REGIONAL TRANSMISSION ORGANIZATIONS (RTOS)
Question 7. RTOs are subject to FERC regulation, but have
independent boards, not shareholder boards like other utilities.
Independent RTOs presently serve about 2/3 of this country. What can
the Commission do to hold RTOs accountable for their costs like other
utilities? How do you measure ``reasonable'' charges?
Answer. I believe expenses incurred by the RTOs should be held to
the high standard required of other utility expenses. First, the costs
must be ``used and useful''. That is, the costs must be incurred for
the purpose of carrying out the utility responsibilities of the entity.
Second, the costs must be prudently incurred. That is, those costs must
be comparable to costs incurred in the industry for similar services.
Thus, costs need to be compared across RTOs and with other non-RTO
entities that may provide similar services and incur similar costs.
These two tests should be used by independent auditors that audit RTO
costs and recommend approval of cost recovery for these expenses.
Question 8. What do you see as the Commission's role in fostering
independent operation of the transmission grid?
Answer. I see the Commission as an enabler and overseer of grid
independence. This can in part be accomplished with greater
transparency in grid operation and with oversight and enforcement of
equal/open access to the grid by all resource providers including
renewable energy, distributed generation, demand response, and other
demand-side measures. This can be done in the context of RTOs,
independent transmission owner/operators, and vertically integrated
utilities.
Question 9. How do you envision the new ERO working with the RTOs?
How do you envision the new Regional Entities working with the RTOs?
Answer. I hope that these relationships can be collaborative rather
than confrontational and punitive. That collaboration needs to be
fostered, however, by the Commission.
OPEN ACCESS TRANSMISSION
Question 10. Rather than pursue a Standard Market Design proposal,
which would have fundamentally restructured the electric power
industry, FERC is now focused on revising the Commission's open access
transmission policy under Order 888. How will you approach revision of
Order 888?
Answer. See response to Question 8 above.
Question 11. In Section 1231 of EPAct, Congress gave FERC the
authority to require government-owned utilities and electric
cooperatives to provide open, non-discriminatory transmission access on
their systems in a comparable manner to that required for public
utilities. In its recent NOPR on Order 888, the Commission chose not to
propose a generic rule to implement Section 1231, but instead to apply
its provisions on a case-by-case basis. Do you agree with this
approach?
Answer. Given that, if confirmed, I will be asked to vote on this
pending NOPR, it would not be appropriate for me to comment regarding
this issue. It is my understanding, however, that there currently is
some level of reciprocity required of government-owned utilities and
co-ops regarding open access. In general if a government-owned or
member owned utility is currently benefiting from open access use of
utility lines under FERC jurisdiction, there should be reciprocity with
respect to open access on the lines owned by the government-owned or
member-owned utility by investor owned utilities within the constraints
of the native load requirements of EPAct.
RELIABILITY INVESTMENT
Question 12. Reliability, of course, is one of FERC's top
priorities. The Commission had indicated that for prudent reliability
expenditures, such as vegetation management charges, it will consider
separate rate recovery mechanisms, such as surcharges. Consequently,
companies need not undertake a full blown rate case. When utilities
seek rate recovery for a reliability investment, do you agree that the
Commission should address this in a single issue rate case rather than
examine the utility's entire set of rates?
Answer. I believe that single issue rate cases should only be used
in very limited circumstances. Such circumstances may include, for
example, where the expense is volatile and a large proportion of total
cost of service such as fuel, or the expense is one that is essential
to reliable service. Vegetation management may fall into the latter
category.
NATIVE LOAD
Question 13. In EPAct, Congress provided that utilities with
service obligations to their native load customers are entitled to use
the transmission they own or hold under contract to meet these service
obligations. Do you agree that the statute makes clear that there is
nothing discriminatory about exercising this right?
Answer. Sec. 1233 of EPAct 2005 states in part: ``(k) Effect of
Exercising Rights--An entity that to the extent required to meet its
service obligations exercises rights described in subsection (b) shall
not be considered by such action as engaging in undue discrimination or
preference under this Act.'' Yes, the statute makes clear that an
entity exercising the right shall not be consider as engaging in undue
discrimination.
Question 14. Where there are competing uses of utility transmission
under the open access framework, do you believe that the Commission
must recognize the utility's statutory right to use its transmission to
serve its native load customers?
Answer. Yes, generally. That does not, however, give that utility
the right to use the transmission system in a manner that is unduly
discriminatory or preferential. The system should be used efficiently.
NATURAL GAS
Question 15. Inadequate gas storage capacity contributes to
volatility of gas prices. In order to reduce volatility, the Energy
Policy Act of 2005 authorized FERC to grant market-based rates to gas
storage developers, even if they have market power, as long as a
proposal meets a three part test: (1) it is in the public interest, (2)
market based rates are needed, and (3) customers are adequately
protected. I recognize it is unusual for Congress to authorize market-
based rates to a company that has market power.
Are you prepared to support implementation of this provision and
authorize market-based rates, assuming the public interest, need, and
adequate protection criteria are met?
Answer. If all the statutory criteria are met, if confirmed, I
would support the implementation of this provision.
Question 16. According to FERC, Liquefied Natural Gas (LNG)
presently comprises 2% of the natural gas used in the Northeast and it
could provide up to 17% by 2025. Additionally, there are currently
about 40 LNG terminals either before FERC consideration or being
contemplated by the natural gas industry.
As we meet this growing trend toward LNG in the U.S., what do you
envision FERC's priorities should be and how do you think FERC can meet
these priorities?
Answer. FERC's priority should be to maximize the efficient
production, distribution, and use of energy consistent with its
statutory authority. FERC can meet these priorities by considering
applications for LNG terminals in the context of the storage and
delivery of other natural gas options and alternatives.
Question 17. In the Energy Policy Act of 2005, Congress clearly
grants FERC exclusive authority to approve or deny an application for
the siting, construction, expansion, or operation of an LNG terminal.
Do you see any practical threats to this authority by those opposed to
the construction of LNG facilities through the use of other laws to
potentially place roadblocks (not intended by Congress) to the
construction and siting of LNG facilities?
Answer. I have not participated in the siting, construction,
expansion, or operation of an LNG terminal. Thus, I am not aware of any
practical threats to FERC's authority in this area.
Question 18. If so, how do you think this is best alleviated?
Answer. See response to Question 17 above.
NATURAL GAS MARKETS
Question 19. Please comment on what you think the impact of
commodities trading is on the price of natural gas. Do you believe that
executive branch currently has the appropriate authority to effectively
oversee the energy markets? Do you think that FERC has the appropriate
authority necessary?
Answer. I am not familiar with the impact of commodities trading on
the price of natural gas. I also am not aware of the extent of
oversight by the executive branch regarding energy markets. I do
believe, however, that the expanded authority that the Congress has
conferred on FERC through EPAct 2005 may provide sufficient authority
to the Commission to effectively oversee energy market activity. It is
my understanding that market oversight is an area in which FERC is
currently placing a great deal of effort. To the extent that any
deficiencies exist they should be readily revealed in FERC's monitoring
of that oversight activity. To the extent that commodity trading
influences energy and specifically gas markets, this is an area that
FERC should review and suggest to Congress, if necessary, additional
authority.
Question 20. In recent testimony before another Senate Committee,
Commissioner Brownell stated, ``The natural gas and electricity markets
are inextricably linked. . . . The emergence of renewable wind energy
as an important electricity supply alternative, for example, will have
a mitigating impact on natural gas prices.''
First, do you agree with this statement?
Secondly, do you believe that the present authorities under current
law are effective with respect to advancing the production of renewable
energy on federal lands and federal submerged lands?
Answer. Natural gas and electric markets are currently linked to
some degree, given the level of electric generation from natural gas.
To the extent that renewable energy sources can be increased in
proportion to the total load serving resource portfolio, the linkage
will be reduced. Similarly, independent studies have indicated that to
the extent that more electric load requirements are met with renewable
energy resources, pressure on gas demand will decline and with that
decline in demand there may be a commensurate decline to real gas
prices. Electric markets are also linked to other factors such as
weather and peak demand. These factors are independent of natural gas
markets.
Present authority under current law provides for mechanisms to site
renewable systems on federal lands and federal submerged lands. Whether
these authorities are effective to advance production of renewable
energy on federal lands is in question. For example, the Geothermal
Steam Act was significantly revised in EPAct 2005. Whether these
revisions will effectively advance the development of geothermal energy
on federal lands has not yet been determined. It is hoped that they
will. Similarly, the BLM has recently completed a programmatic EIS on
the siting of wind systems on BLM lands. Again, whether this authority
and new regulatory initiative will effectively advance wind energy
production on federal lands has not been determined.
Question 21. In the Commission's report to Congress in February on
the subject of bringing natural gas from Alaska's North Slope to the
lower 48 states, the Commission identified a number of obstacles that
have emerged over several years that have impeded the development of
the Alaska natural gas pipeline. Additionally, the report comments on
the wide-ranging federal and state cooperation, inter-agency
cooperation, and government and industry cooperation necessary to meet
this challenge. Please comment on what you think FERC's role in this
process is and how you think FERC can reasonably help to expedite the
resolution of these issues so that the American people can have the
benefit of Alaska's vast supply of natural gas?
Answer. FERC has taken an active role in advancing this project. As
stated in their February report to Congress:
The Commission has been actively preparing to meet its
responsibilities in the authorization process for any Alaska
natural gas pipeline project. To this end, the Commission's
activities have included: (1) entering into memoranda of
agreements with the Regulatory Commission of Alaska and the
National Energy Board of Canada; (2) working on a memorandum of
understanding with 13 federal agencies and the Office of
Federal Coordinator to establish a project management framework
that ensures early coordination and compliance with the many
deadlines and procedures that will attach to the process; (3)
touring the pipeline routes; and (4) conducting meetings with
federal and Alaska agencies, prospective sponsors, and other
Alaskan stakeholders as recently as January 2006.
Additionally, the Commission's new open-season rules
governing any Alaska natural gas pipeline should be beneficial
to the overall development of the project in several ways.
First, the rules provide the sponsors with important
flexibility to design open seasons that could help yield firm
transportation contracts needed to secure the capital to
develop and construct the project. Second, the ability to
secure the significant capital required to develop and
construct the project has been enhanced by the rules' allowance
of pre-subscriptions of reserved capacity. Third, the
regulations provide that a presumption of rolled-in rate
treatment will attach to voluntary expansions of the Alaska gas
pipeline.
FERC needs to continue this effort and seek other possible roles
including the development of analyses that would demonstrate the
urgency for the project and economic benefits to the nation from its
construction. Such analyses should be communicated to project
stakeholders and state officials in order to provide those decision
makers with the necessary information to reach expeditious and informed
decisions.
Question 22. Without getting into the specifics of a matter
potentially before the Commission, I would like to ask you a question
on gas pipeline infrastructure. One of FERC's main priorities is the
expansion of U.S. domestic energy infrastructure. Do you think that a
mandated return on equity on a pipeline system that would be lower than
the return on equity of any pipeline in the past 40 years would be
consistent with FERC's priority of expanding energy infrastructure?
Answer. Such a return, absent other mitigating circumstances, would
seem to be inconsistent with a goal of expansion of domestic energy
infrastructure. Again, such infrastructure should be expanded in an
efficient manner that promotes reliability and considers alternatives
that may result in lower societal costs.
Question 23. I am fully aware that the United States consumes about
a 1/4 of the natural gas consumed worldwide. I am also aware that over
95% of the world's proven natural gas reserves lies outside of North
America. Additionally, I am concerned that a large portion of the
United States, specifically most of the OCS, remains currently off-
limits to exploration and production of natural gas. As such, LNG is an
important part of our energy mix in this country. However, how do you
think we avoid becoming reliant upon foreign sources of natural gas,
the same we are dependent upon foreign oil, from areas that are
unstable and unfriendly to U.S. interests?
Answer. Reliance on LNG poses several concerns. One certainly is
the issue of unstable and unfriendly interests controlling our energy
future. Other concerns include the economic instability of reliance on
a fuel whose supply, and therefore price, may depend on alternative
uses of the base resource, such as conversion of natural gas to liquid
fuel instead of LNG. This could result in not only disrupted supplies
of LNG, but also stranded investments in infrastructure that may be
born by utility ratepayers in this country. These concerns can be
alleviated to the extent we can balance our resource mix with renewable
energy, energy efficiency, and more efficient means of using fossil
fuels such as combined heat and power systems, and the use of
indigenous fuels for generation such as coal in advanced clean coal
technologies like IGCC.
Question 24. Recently, I have grown concerned about the potential
for LNG shipments to be diverted away from the U.S. markets to other
consuming nations. Can you comment on the state of this trend, the
future of this trend as you see it, and how we can mitigate this
potential diversion of significant natural gas supply?
Answer. I, too, think this is a serious concern and see no real
answer except to diversify our portfolio as I have suggested in my
response to Question 23 above.
Question 25. Pursuant to Section 316 of the Energy Policy Act, the
Natural Gas Act was amended and the Commission was directed to
facilitate price transparency in markets for the sale or transportation
of physical natural gas in interstate commerce. Further, the Commission
is granted the authority to prescribe such rules as the Commission
deems necessary and appropriate to carry out the purposes of Section
316. Have you had the opportunity to examine the question of
transparency in the natural gas markets? If so, have you drawn any
conclusions that you could share with this committee that could help us
promote and advance fair competition, market integrity, and ultimately
protect the consuming public?
Answer. I have not had the opportunity to examine this question
with reference to natural gas markets. I have had experience in the
electric markets. With respect to those markets, there is some question
as to whether transparency promotes or inhibits competition. Some
market analysts claim that transparency may lead to market collusion
and ultimately price uniformity rather than true price competition. My
experience indicates that transparency should promote fair competition
and assist in protecting consumers. If confirmed, I look forward to
exploring these issues at FERC with respect to both gas and electric
markets.
Question 26. Along those same lines, as mandated by EPACT, FERC and
the CFTC entered into a memorandum of understanding with respect to
information sharing to prevent procedural duplication in the oversight
of the commodity markets. Do you commit to working with the CFTC to
ensure that this issue of natural gas market transparency is given
continued attention at FERC?
Answer. Yes, if confirmed, I do.
Question 27. FERC has a strategic plan and the first goal stated in
the plan is promote development of a robust energy infrastructure. I
think that's a critical mission statement for this agency. Through a
combination of legislation, regulation and litigation we've made it
very difficult to develop major new energy facilities in this country.
Do you share the vision that FERC's primary mission is to promote the
development of energy infrastructure for this country?
Answer. With the caveat that the Commission's mission is to promote
the development of efficient energy infrastructure I would generally
agree. Promoting such development may entail promoting efficiency
improvements to distribution infrastructure rather than transmission
infrastructure where such development may be more cost effective and
provide higher societal benefits. See also my responses to Question 2
and Question 16 above.
Question 28. What are the critical elements of a FERC policy that
will ensure that needed infrastructure is built and built in a timely
manner? How does an agency like FERC make sure that regulated companies
are allowed to a sufficient return to attract capital into that
business?
Answer. FERC's rate-setting authority for infrastructure
investments is the key policy that will drive such investments.
Sufficient returns are those that allow companies that invest in
efficient infrastructure project returns commensurate with those earned
by companies that experience similar levels of business risk. If
confirmed, I would support providing those companies that make such
investments a return at that level.
Question 29. You are both from the West and had the experience of
seeing the California energy crisis and its fallout for other Western
states first hand. One of the obvious lessons from that experience is
that electricity markets have to be structured properly if competition
is to benefit consumers. Do you agree that competitive wholesale
markets, properly structured, do benefit consumers and what about the
use of price caps, bid caps an similar price mitigation measures?
Answer. Properly structured competitive wholesale electric markets
may benefit retail consumers to the extent that those consumers have
sufficient choices in those markets and can also respond to retail
price signals. The choices I refer to include access to capital and
information that would allow those consumers options including
enhancing energy efficiency of their end-use consumption, considering
distributed generation, having the option to participate in and be
compensated adequately for demand response activities. Price mitigation
measures may be appropriate as market oversight tools in markets that
are not fully competitive or properly structured.
Question 30. What more does FERC need to do so that consumers see
the full benefits of competitive markets? How would you proposed that
FERC work with the state regulatory authorities, RTOs and others to
advance fairness for merchant generators when it comes to access to the
grid and in bidding for new capacity?
Answer. Many of the things that need to be done for consumers to
see the full benefits of competitive markets are within the
jurisdiction of the states and not FERC. To the extent that FERC can
collaborate with state commissions to determine what federal barriers
exist to state implementation of effective markets for consumers, FERC
should do so. FERC should work within its statutory authority with all
parties mentioned to provide all resources--merchant generators,
renewable generators, providers of energy efficiency and demand
response resources, and distributed generators--equal and fair access
to consumers in order to establish truly competitive markets.
Question 31. The Mobile Sierra doctrine and the public interest
standard were established by the U.S. Supreme Court in a series of
cases a half-century ago. The public interest standard does not protect
sellers, it protects contracts, it protects the agreement. Sometimes
the public interest standard works to the advantage of the seller,
sometimes to the advantage of the buyer. Recently, it has worked to the
advantage of the buyer. The power sales contracts between Calpine and
California are costing Calpine $1 billion, and helped drive it into
bankruptcy. Under the just and reasonable standard, there is little
doubt the contract would have been modified. Under the public interest
standard, Calpine continued to perform. So, the public interest
standard saved California consumers $1 billion. The Supreme Court is
presumed to be competent to read a statute. They read the Federal Power
Act and came up with the Mobile Sierra doctrine and the public interest
standard. What is your view of the Mobile Sierra doctrine? Is it good
law? Do you agree with the Supreme Court?
Answer. In general I believe that regulators should be retain the
power necessary to carry out their statutory responsibilities. The
requirements of sections 205 and 206 of the Federal Power Act require
that all rates, charges, terms, and conditions be just and reasonable
and not unduly discriminatory or preferential. The Commission should
have full authority to implement the provisions of the statute.
Therefore, the Commission must, in determining how or whether to apply
the Mobile Sierra doctrine, consider whether the full requirements of
the statute are being met.
It should be noted that the Mobile Sierra doctrine was applied by
the Supreme Court to rates. Thus, there remains a question whether the
doctrine also applies to non-rate terms and conditions such as
termination clauses. The First Circuit has held that FERC has
substantial discretion in determining how or whether to apply the
Mobile Sierra doctrine to ensure that customers are adequately
protected. Specifically, several years ago, Judge Boudin, writing for
the First Circuit in a Mobile-Sierra case, noted that,
``whether and when Mobile-Sierra applies in varying contexts is
going to remain in confusion unless and until the FERC makes up
its mind and squarely confronts the underlying issues. It is
not at all clear to us that FERC, which is now becoming hostile
to Mobile-Sierra, needs to tolerate it at all. FERC has broad
powers to regulate the substantive terms of filings that it
accepts and allows to become effective, whether they are
ordinary tariffs or contracts, [. . .]; and such powers may
include the power to require prospectively by regulation, that
all contracts set their rates subject to the FERC's just and
reasonable standard.'' . . . Alternatively, if FERC were
neutral to or opposed to such clauses but wanted to eliminate
much of the existing uncertainty as to the parties intent, it
might prescribe prospectively the terms the parties would have
to use to invoke Mobile-Sierra protection.''
[Boston Edison Co. v. FERC, 233 F.3d 60, 68 (1st Cir. 2000)]
Question 32. I want your views on FERC authority over buyer market
power. FERC has been encouraged to regulate buyer market power, by
forcing utilities to buy available lower cost power rather than self-
generate. I am not convinced FERC has legal authority in this area.
Also, there is serious potential for conflict with the states, since a
FERC order to a utility to buy power instead of self generating would
undercut state decisions on ratebasing generation. Do you think FERC
has this kind of legal authority and do you think it is good policy?
Answer. I do not believe FERC has jurisdiction in this area either.
I would need to see the authority under which it ordered a retail
utility to buy in a specific market from a specific seller rather than
self-generate. If lower cost power was available in the market to that
utility, however, I do not see any prohibition in FERC informing the
appropriate state regulatory agency that would have jurisdiction over
recovery of the costs associated with the ultimate retail sale. Thus,
FERC may have an impact on the buying decisions of retail distribution
companies, but not in a direct regulatory manner. The general policy is
to encourage the utility to make efficient purchasing decisions that
minimize total societal costs. FERC may play some role in this, but the
primary role is for the state commissions. And a state commission may
have a valid rationale, based on a state policy such as a renewable
portfolio standard that produces lower societal costs, to allow a
utility under its jurisdiction to self-generate higher cost power than
can be purchased in the market.
Question 33. The market-based rate proposed rules FERC issued last
month ask questions about what happens when a utility loses market-
based rates. For example, if a utility loses market-based rates in some
markets, but retains it in other markets, should FERC force a utility
to sell at cost-based rates in lieu of making market-based sales? I am
concerned that such forced sales would hurt the native load customers
of the utility, by reducing wholesale revenues that would otherwise be
shared with native load. It also allows the buyer of the cost-based
power to resell it at a profit, so it could constitute a wealth
transfer. What is your view of such forced sales?
Answer. Given that, if confirmed, I will be asked to vote on this
pending NOPR, it would not be appropriate for me to comment regarding
this issue. Further, the questions presume a number of assumptions that
make it difficult to provide an useful answer. If confirmed, I would
commit to carefully review this issue and be open to all views
presented.
Question 34. One of the obstacles in building transmission is cost
allocation. FERC has taken different approaches to this issue in
different regions, which seems appropriate. However, some have urged
FERC to roll in all transmission expansion costs. That seems very
unfair to me. Since most transmission is owned by vertically integrated
utilities, it would burden the native load customers of those
utilities, while the beneficiaries contribute nothing. Do you believe
FERC should roll in all transmission expansion costs?
Answer. Transmission expansion costs should generally be allocated
to those entities who either cause the costs to be incurred--a
generator or large load on a radial line necessary to interconnect to
the transmission provider's network--or to those customers who benefit
from the expansion via reliability improvements and/or direct or
indirect economic benefits. So to the extent that ``rolling in''
transmission costs as defined in the question would result in
``beneficiaries'' contributing nothing to the expansion costs, I do not
believe that it is appropriate regulatory policy.
Question 35. Under current law, the only way a licensee can
challenge an arbitrary condition included in a FERC hydro license
through exercise of mandatory conditioning authority is to seek
judicial review of the FERC license. That is true even when FERC
believes the mandatory condition is unsupported by the record or even
contradicted by the record. The EPAct alternative condition provisions
should reduce the prospect of arbitrary mandatory conditions, but they
may still be proposed. For reasons of comity FERC sometimes does not
highlight its disagreement with the federal or state agency when they
propose an arbitrary condition. I think that approach is fundamentally
unfair to licensees, since it deprives them of any prospect of
overturning an arbitrary condition through judicial review. I believe
FERC should make any disagreement with a conditioning agency plain in
its orders. Do you agree?''
Answer. Yes.
Responses of Jon Wellinghoff to Questions From Senator Thomas
Question 1. Will you pledge to work closely with states to enable
the timely development of transmission that is needed to meet future
load growth?
Answer. Yes. I have extensive experience working with state
commissions and agencies. If confirmed, I will work with them within
the statutory authority of FERC to enable the timely development of
efficient electric grid enhancements and demand-side measures to meet
load requirements.
Question 2. In Wyoming and elsewhere, it's not always easy to ship
our coal to customers. There are a number of proposals for mine-mouth
coal power plants in my state and others as a result. These projects
will benefit the communities by building a tax base, and the nation, by
diversifying our energy supply. They will not move forward without
access to competitive regional power markets through a strong, open
power grid. Can I count on you to support the development of these
strong regional markets and the open-access power grid that will be so
essential to their success? Will you make sure that new power plants
can connect with the interstate power grid at reasonable cost and have
the opportunity to reach the customers they need to succeed?
Answer. I believe that mine-mouth coal base generating facilities
using advanced clean coal technologies are an essential and integral
part of this nation's energy future. If confirmed, I will work within
the statutory authority of FERC to provide for open, fair, and
reasonably priced access to all efficient load serving resources
including mine-mouth clean coal facilities.
Question 3. In the Energy Bill, DOE was given authority to
designate National Interest Electric Transmission Corridors. If there
were a transmission project ready to move forward tomorrow, do you
think that those projects should have to wait for DOE to complete their
study and designations in order to benefit from the permitting
improvements that exist under EPACT?
Answer. No. If there is a project ready to move forward tomorrow,
it should be allowed to proceed in parallel to the DOE study.
Question 4. According to the Commission's current strategic plan,
FERC's highest priority goal is to ``Promote Development of Robust
Energy Infrastructure.'' Do you agree with that priority, and if so,
can you provide me with some detailed insights as to how you believe
FERC can best promote that objective?
Answer. With the caveat that the Commission's mission is to promote
the development of an efficient as well as a robust energy
infrastructure, I would generally agree. Promoting such development may
entail promoting efficiency improvements to distribution infrastructure
rather than transmission infrastructure where such development may be
more cost effective and provide higher societal benefits. It also may
entail promoting demand response and demand measures to the extent
appropriate within the statutory authority of FERC. In any case, FERC
can promote this objective by providing equal, fair, and reasonably
priced access to all resource providers that meet load requirements in
an efficient and effective manner. Promoting an efficient expanded
energy infrastructure would also apply to the delivery of natural gas
and the provision of hydro services. In the natural gas arena for
example, gas compressor stations on interstate pipelines can be made
more efficient through the use of heat recovery systems that generate
electricity from what would otherwise be waste heat. FERC should
encourage such efficiency improvements.
Responses of Jon Wellinghoff to Questions From Senator Allen
Question 1. Virginia both produces electricity through coal,
nuclear and natural gas resources and also, at times, imports power
from the midwest when the costs to generate electricity in that region
are lower than the costs to generate in Virginia. I have been
approached by constituents who are interested to know what assurance
you can provide the Committee that the region will not end up with
``least common denominator'' solutions that might work for other
regions of the country but work contrary to the wholesale competitive
market model that is in place in Virginia?
Answer. I firmly believe that the states and regional stakeholders
should determine their own regional energy solutions. I hope that FERC
can provide Virginia with information as to ``best practices'' that may
be considered for adoption in your region, however, to improve
efficiency and lower total bills. But I am not a proponent of imposing
uniform solutions on states or regions.
Question 2. Do you believe that a competitive market model for
wholesale markets can stimulate new investment in transmission,
renewable resources and energy efficiency? If so, what can be done to
support development of such models? If not, why not?
Answer. Yes, possibly. That model must be properly structured and
provide consumers with appropriate access to information and capital to
make the most efficient decisions. Support of such a model will require
collaboration and cooperation among FERC, the states, utilities,
transmission operators, market operators, and other stakeholders.
Investors will need to be provided assurances of a reasonable return
and a tolerable level of business risk. These conditions can be met,
but cross-jurisdictional cooperation is essential. A number of states
have in place mechanisms to stimulate investment in renewable energy
development and energy efficiency. FERC needs to review its statutory
authority in these areas and determine within the boundaries of that
authority how it may collaborate with the states to stimulate these
investments.
Question 3. The Regional Transmission Organization that operates
the transmission grid in Virginia presently undertakes an independent
regional planning process to determine needed new transmission
infrastructure. All of the instate electricity producers, Dominion,
AEP, Allegheny and the municipal and cooperative utilities, participate
in that process which is open to the public. On the other hand,
Virginia borders other States that do not have similar processes. What
is the best way for the Commission to address the ``seam'' that is
created along the borders where regional planning is undertaken in some
regions and not others?
Answer. Within the boundaries of its statutory authority, the
Commission should encourage the type of regional transmission planning
that is conducted by the RTO that operates in Virginia and in other
areas that border Virginia. To the extent that those jurisdictions do
not choose to engage in such regional planning, it may be appropriate
to institute a dialog to provide information as to how such planning
may be beneficial to consumers in those jurisdictions. Once such data
is provided to them, consumers, utilities, commissions, and other
stakeholders in those border regions can make an informed decision as
to the efficacy of such regional transmission planning activities.
Responses of Jon Wellinghoff to Questions From Senator Smith
Question 1. During your testimony, you stated your support for the
development of more renewable energy resources to meet the nation's
electricity needs. However, you did not include hydropower in your
response. Do you believe that hydropower is a renewable energy
resource? What are your views regarding its contribution and value to
the country's energy mix?
Answer. Large hydropower (> 30 MW) is not defined as a renewable
resource in the Nevada portfolio standard. Certainly the currently
installed hydropower generation is a valuable asset to our country's
energy portfolio. As for new hydropower, it is my understanding that
there are not significant sites for new hydropower development.
Question 2. Hydropower has significant potential for new
development at traditional sites and with emerging hydro technologies.
This growth potential includes capacity and efficiency gains at
existing hydro facilities, installing hydro generation at non-hydro
dams, and development of in-stream, ocean/tidal and conduit power.
Given the energy problems the country currently faces, the growing
demand for electricity, and the need for clean energy sources, would
you support policies at FERC that encourage and facilitate development
and licensing of these hydropower resources?
Answer. Yes, to the extent that they improved efficiency of
hydropower production or utilized new technologies such as in-stream or
ocean/tidal and conduit power, these are new energy sources that should
be pursued.
Question 3. As you know, FERC has a statutory responsibility in
reviewing rates filed for approval by the Bonneville Power
Administration, to ensure that the proposed rate is sufficient to cover
its Treasury obligation. Do you agree that FERC would have to reject
any rate that ``walled off'' revenues from BPA secondary sales and
required such funds be used to pre-pay debt, rather than being used
consistent with established precedent?
Answer. I am not familiar enough with the BPA rate setting
requirements to offer an opinion. If confirmed, I would be open to
consider the rejection of such a restricted rate if one was proposed
consistent with the evidence presented and the law governing the BPA
rate setting authority of FERC.
Question 4. Do you agree that the Federal Columbia River
Transmission System Act (P.L. 93-454) requires the BPA Administrator to
consider all revenue sources ``in the aggregate'' when setting rates?
Answer. I am not familiar with the Act. If confirmed, I would
intend to review the statute in preparation for participation in BPA
rate setting proceedings.
Question 5. Are you aware that that CAISO has filed a Market
Redesign proposal (MRTU) with FERC and that a number of entities,
including other control areas, in the Western Interconnection have
objected to that filing? After seeing the impact on Nevada and the
Western markets of the 2000-2001 California energy crisis, are you
concerned about this? Do you plan to insist that no decision be made on
this filing until you are confirmed? Do you think the FERC has the
obligation to resolve the specific seams issues articulated by the
other western utilities before implementing such a dramatic market rule
change?
Answer. Yes, I am aware of the filing and the concern expressed by
certain entities. If confirmed, I may be required to rule on this
pending matter, and so it would not be appropriate for me to comment on
my position with respect to the filing or the objections to it. If
confirmed, I will give the matter every consideration and review the
evidence presented and concerns expressed by all parties prior to
rendering my decision.
Question 6. I understand that there is significant concern at FERC
about development of the bulk transmission system and the failure of
organized markets to effectively encourage these investments.
Specifically, I understand that the Locational Marginal Pricing
mechanism used in organized markets has not resulted in substantial
transmission investment; however, ISOs continue to try to implement
these mechanisms. Most recently, the CAISO, in its MRTU, is proposing
LMP for its members and in doing so, threatens to unwittingly bring in
the entire region. At the same time, the FERC's 2004 State of the
Markets Report clearly identifies that the stable markets in the West
generate more investment in transmission than in California or any
other region dominated by RTO-administered financial markets.
What are your thoughts on this subject? Should regions be forced to
embrace a mechanism that has not resulted in its promised benefits,
when what we are already doing is working better?
Answer. No, I do not believe that regions should be forced to
embrace mechanisms that are not efficient in producing intended
results. We must look also to the results we are trying to encourage.
Transmission investment in and of itself should not be a goal. The goal
should be the investment in efficient energy infrastructure that
produces the greatest societal benefits at the least societal cost.
This may entail implementing demand response in some instances instead
of making transmission investments or encouraging investments in
distributed generation. We must look at the energy problem from an
integrated perspective of optimizing overall efficiency. So what is
being done in areas outside the CAISO with respect to transmission
investment may not be ``working better'' if the metric used to measure
``better'' is simply new transmission miles installed.
Question 7. You are perhaps aware that many entities in the West
opposed the imposition of the FERC's version of Standard Market Design
or ``SMD,'' which included LMP. Some of the concerns raised by the West
involving SMD were the clear differences between Eastern pool-based
markets, with tightly clustered transmission systems and the
predominance of thermally-based generation and Western bilateral
markets, with long transmission systems (dispersed consumers) and vast
hydroelectric systems, particularly in the pacific northwest. In other
words, many entities in the West continue to be concerned about the
imposition of Eastern-style market designs in a vastly different, both
from a resource and system perspective, West.
What are your views on the significance of these East vs. West
distinctions? How heavily should the FERC weigh these distinctions when
evaluating current and future market design proposals, including MRTU?
Answer. FERC needs to carefully consider regional differences when
reviewing market structures and appropriate mechanisms to encourage
efficient markets. The West's electric system is distinct from that
operating in the East, and FERC should give careful consideration to
the characteristics of each region and the policies within each state
within the regions (such as renewable portfolio standards) when
evaluating proposals that are being considered for implementation in
those markets.
Responses of Jon Wellinghoff to Questions From Senator Bunning
Question 1. A number of Kentucky electric distribution companies
(and other customers) signed new service agreements with the Tennessee
Valley Authority (TVA) in 1997. The agreements included provisions
under which the Kentucky distributors agreed to remain TVA customers
for another 10 years. However, the agreements also stated that the
Kentucky customers could provide TVA Notice of their intent to leave
TVA after five years and would then be allowed to leave TVA after an
additional 5 years.
The contracts also specifically stated that any departing customers
would not be liable for any exit fees or stranded costs. The agreements
further contained language concerning services (eg transmission) TVA
would provide departing customers. Several Kentucky customers (and a
Tennessee customer) of TVA have exercised the rights they have under
these contracts and given Notice of their intent to leave TVA. The
Kentucky customers provided this Notice for, among other reasons, their
ability to secure much less expensive power for their customers from
sources other than TVA. Since giving Notice, these Kentucky customers
have attempted to negotiate with TVA on the rates and terms of
conditions of the requested transmission service. TVA has been entirely
unwilling to even discuss the transmission services the departing
customers are requesting.
Please provide your views on whether the FERC, as a matter of
public policy, should facilitate access to the interstate transmission
grid and encourage competition in the electric generation market by
ordering the wheeling of power for electric distribution companies that
wish to secure transmission service on our interstate transmission
grid. For purposes of this question, please assume that the FERC has
the legal authority to compel transmission on behalf of customers on
the TVA system (ie ``inside the fence'').
Answer. It is not clear to me that FERC has sufficient jurisdiction
to effectuate a resolution to the controversy you have described, and
it is not an issue that I have researched. If I assume that FERC does
have authority to compel TVA to wheel power for the distribution
customers, then public policy would favor allowing the distribution
customers to access the most efficient resources to meet their demand.
Question 2. Kentucky has the least expensive electric rates in
America. This is in large part due to the abundance of coal in Kentucky
and the use of this coal to generate power. The railroads play an
integral part in moving coal from the mine locations to the power
generating facilities. Recently, problems with the reliability of coal
deliveries and the rates railroads are charging for transporting coal
have begun to develop. These problems have the potential to impact the
ability of Kentucky to use its coal to generate reasonably priced power
in Kentucky and to send its coal to other markets.
I understand the FERC has recently scheduled a conference on these
coal issues. Please provide your views on what role the FERC's should
play in assuring an adequate, reliable supply of coal for our nation's
generating facilities.
Answer. I have not studied this issue in any depth. If confirmed, I
look forward to reading the information developed from the June 15th
FERC conference on this matter and exploring this issue further.
Question 3. As I noted above, Kentucky has the least expensive
power in the nation. Kentucky is anxious to make sure its citizens and
businesses continue to enjoy this reasonably priced power.
Please explain your views on the importance of the FERC recognizing
and respecting differences in regional energy markets as it makes
decisions on the structure of the interstate energy markets.
Answer. It is important for FERC to both recognize and respect the
regional differences in energy markets. This is necessary to not only
preserve regional autonomy, thereby producing alternative models that
can produce data for the benefit of all regions, but more importantly
it is necessary to structure markets in the most efficient manner
possible by considering the particular characteristics of a region and
tailoring the region's market structure to optimize those
characteristics.
Question 4. The Energy Policy Act of 2005 (EPAct) gave the
Department of Energy authority to establish National Interest Electric
Transmission Corridors. EPAct further gave the FERC the authority to
authorize the construction of transmission lines in these corridors.
Please provide your views on the responsibility of the FERC to
consult and collaborate with states that may be impacted by the
construction of electric transmission lines in these corridors.
Answer. FERC has a responsibility to consult and collaborate with
the states regarding the construction of transmission lines in
designated corridors. In addition to review and analysis of the most
efficient options to line construction, that collaboration should
include consultation on efficient siting and construction alternatives,
generation alternatives, demand response, and distributed generation.
Question 5. Concerns have recently been raised that the operating
costs charged by Regional Transmission Organizations are excessive.
These costs can eventually be absorbed by residential and industrial
electricity consumers in states like Kentucky.
Please provide your views on the responsibility of the FERC to
oversee and review these types of RTO costs.
Answer. FERC has the responsibility to oversee and review these
costs. I believe expenses incurred by the RTOs should be held to the
high standard required of other utility expenses. First the costs must
be ``used and useful.'' That is, the costs must be incurred for the
purpose of carrying out the responsibilities of the entity. Second, the
costs must be prudently incurred. That is, those costs must be
comparable to costs incurred in the industry for similar services.
Thus, costs need to be compared across RTOs and with other non-RTO
entities that may provide similar services and incur similar costs.
These two tests should be used by independent auditors that audit RTO
costs and recommend approval of cost recovery for these expenses.
Question 6. Transparency of energy markets and the availability of
timely information about costs and capacity in energy markets is
crucial for state commission to perform their duties.
Please provide your views on the FERC's responsibility and legal
authority to provide for transparency in energy markets and the timely
availability about conditions in the energy markets.
Answer. EPAct 2005 provided FERC with the authority to provide for
transparency in energy markets. This information is not only necessary
for state commissions to perform their duties, but transparency can
assist consumers in making informed decisions with respect to
alternative investments in energy efficiency, distributed generation
and demand response. Thus, transparency is not only essential for state
regulators, it is one of the precepts to an efficient market structure.
Responses of Jon Wellinghoff to Questions From Senator Bingaman
HYDROPOWER
Question 1. Section 241 of the Energy Policy Act of 2005 amends the
Federal Power Act to modify some aspects of the hydroelectric
relicensing process with respect to conditions and fishway
prescriptions. I want to ensure that these modifications are
implemented in a manner that does not undermine protection of federal
reservations or Indian lands or trust resources.
Do I have your commitment that you will work to ensure that the
FERC staff coordinates closely with the resource agencies and takes
other steps necessary to ensure that these provisions are implemented
in a manner that protects federal reservations and Indian lands and
trust resources during the licensing process?
Answer. Yes, if confirmed, I will, to the extent possible and
consistent with statute, request that FERC staff coordinate closely
with the resource agencies and take other steps necessary to provide
for the protection of federal reservations and Indian lands and trust
resources during the hydroelectric licensing process.
Question 2. In 1986, the Federal Power Act was amended to require
the Commission, in addition to power and development purposes, to
``give equal consideration to the purposes of energy conservation, the
protection, mitigation of damage to, and enhancement of, fish and
wildlife . . ., the protection of recreational opportunities, and the
preservation of other aspects of environmental quality'' in deciding
whether to issue a hydroelectric license.
As a commissioner, will you ensure that environmental protection is
given equal consideration during the hydroelectric relicensing process?
Answer. If confirmed, I will to the extent of my authority and
consistent with other statutory provisions, give equal consideration to
the purposes of energy conservation, the protection, mitigation of
damage to, and enhancement of, fish and wildlife . . ., the protection
of recreational opportunities, and the preservation of other aspects of
environmental quality in deciding whether to issue a hydroelectric
license
TRIBAL TRUST RESPONSIBILITY
Question 3. Do I have your commitment that you will carry out your
duties as Commissioner in a manner consistent with FERC's tribal trust
responsibility?
Answer. Yes. If confirmed I will do so to the extent of my
authority consistent with other statutory requirements.
Responses of Jon Wellinghoff to Questions From Senator Dorgan
Question 1. In recent months, North Dakota oil producers have
experienced a marked price discount between the price of crude oil that
they produce and the prevailing West Texas Intermediate (WTI) price of
oil. Part of the reason for this price differential is a lack of
pipeline capacity to transport expanded North Dakota production out of
the region and to other refining markets.
I note that FERC's web site and its ``Strategic Plan'' emphasize
the Commission's role in the ``development of a robust energy
infrastructure.'' Do you see this as an important role for the
Commission?
Answer. Yes, I do.
Question 2. What can the Commission do to encourage construction of
energy infrastructure, including for pipelines serving constrained
markets?
Answer. It can ensure that under its rate-setting authority it
provides for a return on investment commensurate with the risks
involved in developing and operating the infrastructure project.
Question 3. Specifically, what can be done in establishing rate
structures that would encourage investment in new pipelines and ensure
that needed capacity is built in a timely manner?
Answer. Alternative rate structures may encourage investments in a
more timely manner if those rate structures provided for some method of
accelerated recovery of investment. I have not investigated the
feasibility of such rate structures, but if confirmed, I would be open
to considering such mechanisms to the extent they encouraged efficient
infrastructure investments. Also, as noted above, the Commission can
ensure that under its rate-setting authority it provides for a return
on investment commensurate with the risks involved in developing and
operating the infrastructure project.
Question 4. Is there additional legislative authority that Congress
should provide the Commission to encourage development of needed energy
infrastructure?
Answer. I am not aware of the need for additional legislative
authority from Congress to encourage development of needed energy
infrastructure.
Responses of Jon Wellinghoff to Questions From Senator Cantwell
Question 1. Under the Northwest Power Act, FERC has the final say
in approving the Bonneville Power Administration's rates provided that
the proposed rates are ``sufficient to assure repayment of the Federal
investment in the Federal Columbia River Power System over a reasonable
number of years after first meeting the Administrator's other costs . .
. and are based upon the Administrator's total system costs.''
When determining the definition of terms like ``reasonable number
of years'' and other terms in BPA's various organic statutes what
deference would you give to years of agency precedent and practice in
defining those terms?
Answer. If confirmed I would give a great deal of deference to the
agency's precedent and practice in defining those terms.
Question 2. What deference would you give to federal statues that
define certain provisions in BPA's organic statutes?
Answer. I would give a great deal of deference to federal statues
that define certain provisions in BPA's organic statutes.
Question 3. As a FERC Commissioner, would you rely on relevant
judicial precedent in order to define terms in BPA's organic statutes?
Answer. Yes, I would rely on relevant judicial precedent in order
to define terms in BPA's organic statutes.
Question 4. As you probably know, you will have a number of
applications for renewal of hydroelectric licenses before you in the
next few years. The Northwest is heavily reliant on hydroelectric
generating resources. In WA State alone some 13 projects representing
5,863 MW of generating capacity will be in various stages of the
relicensing process between now and 2015.
Can you provide the Committee with your perspective on
hydroelectric power and your thoughts on the relicensing process under
EPACT '05 and the Interim Final Rule published last year?
Answer. I believe that hydroelectric power is an integral part of
our nation's resource portfolio. It is my understanding that EPACT 2005
and the Interim Final Rule provide for procedures for relicensing that
are anticipated to streamline the process. If confirmed, I will review
that process to determine if it is operating efficiently and take
appropriate action within my statutory authority, if in my opinion, the
process is not operating efficiently.
Question 5. The Northwest has spent more than a decade locked in
contentious debate over various forms of regional transmission
management. The region is currently looking at an option--known as
ColumbiaGrid--that appears very promising, both in its substance and
broad base of support. I will note, however, that it does not meet the
RTO standards of FERC Order 2000.
Do you think FERC should nonetheless encourage the development of
this region-specific development as it moves forward?
Answer. Yes, I support region specific transmission management, and
I believe it should be encouraged by FERC.
Question 6. As you know, western energy markets and ratepayers in
WA State are still suffering negative effects of deregulation and
related market manipulation during the 2000-2001 energy crisis.
Ratepayers in the Northwest and the larger regional economy continue to
suffer the ill effects of related energy hikes--some as high as 50%.
The GAO noted in a report last November that ``. . . consumers in
California and across other parts of the West will attest, there have
been many negative effects [related to restructuring], including higher
prices and market manipulation.''
Has energy market restructuring been successful?
Answer. No, energy market restructuring has not been successful in
many respects. Therefore, the Commission must, in regulating wholesale
markets, seek to ensure that any jurisdictional market rules or tariffs
are designed to provide effective protection to customers. Competition
can serve to lower prices and benefit consumers only if competition is
effective and markets are structured efficiently.
Question 7. Of those areas of the country that have not
restructured and have not deregulated retail rates, like the Pacific
Northwest, do you believe those regions should largely be left alone to
address the needs of their specific industry structure as they see fit?
If not, how far should FERC go in changing them?
Answer. Each region of the country should decide, based on the
characteristics of the electric system in that region, the appropriate
market structure for the region. FERC should provide market oversight
and assistance to convey ``best practices'' and ``lessons learned''
from other regions so that efficiencies can be gained in all regions
from the experiences of others. In addition, FERC has the statutory
responsibility to provide for open access to the transmission system in
those areas where it is given jurisdiction and to oversee reliability
and resource adequacy to the extent of its statutory authority. FERC
also has authority to oversee markets to determine if there is market
manipulation occurring and take appropriate action consistent with its
statutory authority.
Question 8. In recent press reports, the head of the California
Independent System Operator has suggested that the rest of the West
will simply have to comply with California markets and that the seams
created between California and other areas in the west is a failure of
the neighboring states to adopt compatible models. My region has
suffered once as a result of California's experiments, and stakeholders
throughout the west are very concerned by these comments.
Do you believe that FERC has a responsibility, when reviewing
filings for California's market redesign efforts, to assess the impact
and consequences for neighboring states?
Answer. Yes.
Question 9. Last year's comprehensive energy legislation included a
broad ban on the market manipulation practices exercised by Enron. As
you know, the Northwest continues to suffer from the ill-effects of
Enron's market manipulation practices. I imagine you are acquainted
with the
smoking-gun Enron memos, in which the company laid out strategies
such as `Fat Boy,' `Get Shorty,' `Death Star' and the like, to drive up
prices in the West.
I would like to know whether you believe there is any circumstance
in which a transaction resulting from manipulative market practices can
be ``in the public interest,'' or ``just and reasonable?''
Answer. I cannot think of an example where such a practice would
either be consistent with the public interest or be just and
reasonable.
Question 10. Under FERC's Notice of Proposed Rulemaking RM-05-35-
000, the Commission has proposed amending its regulations regarding the
standard of review that must be met to justify proposed modifications
to Commission-jurisdictional agreements. Essentially, with the
exception of transmission service agreements under the Open Access
Transmission Tariff and certain natural gas transportation agreements,
when proposed modifications to FERC jurisdictional agreements are not
agreed to be dealt with by contract signatories under the `just and
reasonable' standard, the Commission will review such agreements under
the `public interest' standard, in accordance with the Mobile-Sierra
doctrine. Most people believe that the `public interest' standard is
practically insurmountable.
I know you can't tell me how you might vote as a Commissioner. I am
concerned about any diminishment of consumers ability to find relief
when they are exposed to rates, terms, and conditions of service that
are not just and reasonable--the standard found in the Federal Power
Act.
However, can you tell me your views on the application of the
``public interest'' standard and how you think it should be applied in
contracts where there is no standard of review specified?
Answer. First, I am also concerned about the consumers' limited
ability to be afforded relief when rates, terms, and conditions of
service clearly are not just and reasonable. The Commission is provided
with the statutory responsibility to ensure that rates, charges and
conditions of service are just and reasonable. The Mobile-Sierra
doctrine's test of public interest was applied by the Supreme Court
specifically to rates. Thus, it may not be applicable to all contract
terms such as termination clauses. The doctrine also was applied by the
Supreme Court in situations where there were arms length transactions
that did not involve fraud, or market manipulation. So, these would
seem to be situations where the public interest test may not be
appropriate and the statutory standard of just and reasonable would
apply. With respect to the issue of the application of the public
interest standard, the courts could not have intended it to be an
insurmountable test because it would then become no test at all but
rather a barrier to ever reforming a contract. Thus, there are
certainly circumstances where if the application of the test fits the
criteria of the Mobile-Sierra cases, the public interest would dictate
modifying the contract terms.
Responses of Jon Wellinghoff to Questions From Senator Wyden
PROMOTING GREEN POWER
Question 1. Recently, the Federal Energy Regulatory Commission
certified an incremental hydroelectric upgrade for the first time under
provisions of the Energy Policy Act of 2005, allowing PacificCorp, an
Oregon energy company, to qualify for a renewable energy tax credit.
Are there other FERC policies and programs that can boost the
production, use and sales of renewable energy? What will you do as a
commissioner to encourage FERC to promote green power?
Answer. Yes, there are a number of policies and programs where FERC
can assist in integrating renewable energy into the nation's energy
resource portfolio and thereby boost renewable energy production. Chief
among these are FERC policies regarding open access transmission. If
confirmed as a FERC commissioner, I would support policies that
recognize the unique characteristics of renewable resources such as
size, location, efficiency, and in some cases intermittency, to insure
that those attributes are considered in a manner to reduce and
hopefully eliminate any discriminatory treatment of renewable resources
when interconnecting with the transmission grid. Another area where
FERC may be in a position to act to boost production of renewable
energy is consideration of the role of renewable energy in maintaining
and augmenting the reliability of the transmission grid. For example,
in certain instances it may be more efficient (and less expensive) to
improve grid reliability by the encouragement of additional distributed
generation such as solar photovoltaic systems rather than solely
through transmission upgrades. If confirmed as a FERC commissioner, I
intend to investigate these opportunities to enhance the use of
renewable energy while making our grid system more efficient.
CONSUMER ADVOCATE
Question 2. Chairman Kelliher and Commissioner Kelly both support
my proposal to create a Federal consumer advocate at FERC similar to
what more than 40 states currently have. My proposal to create this
position was unanimously agreed to during consideration of the Senate
Energy Bill. Will you support creating a Federal ratepayer advocate at
FERC?
Answer. Retail utility ratepayers who are not otherwise represented
at FERC should have an opportunity to advocate their positions before
the Commission. Whether the creation of a Federal ratepayer advocate is
the most effective way to accomplish this is not clear. As you
indicate, at least 40 states now have a utility consumer advocate
incorporated into the structure of each state's regulatory system. I
was the first utility consumer advocate appointed in Nevada. From that
perspective, I would suggest that those individual state advocates are
best equipped to represent the interests of their retail constituents
before FERC in contested matters. So if the goal is to enable retail
utility consumers to be adequately represented before FERC, I would
suggest it may be appropriate to consider the creation of a statutory
right to be awarded attorney's fees and costs for state consumer
advocates that intervene in FERC proceedings to represent the rights of
their retail utility consumers. This would guarantee adequate
representation of retail consumers in most states for the majority of
matters before FERC. This should be limited to contested cases where
FERC determines retail ratepayers have a substantial interest in the
outcome of the proceeding. Cases that immediately come to mind are the
Enron contract termination cases. A Federal ratepayer advocate may
provide some benefit, however, in the instance of more generic
proceedings such as rulemakings and other investigations of more
general applicability.
RESPECT FOR STATE/LOCAL VIEWS IN LNG LICENSING
Question 3. As you know, the Energy Bill gave FERC exclusive
authority over siting, construction and operation of liquefied natural
gas (LNG) import facilities. The role of states and local communities
is limited to making suggestions to FERC during the licensing process.
What will you do to ensure that the views of states and local
communities are not only considered but given deference in the
licensing process? Will you support licensing of facilities over the
strong objections of the state and local community?
Answer. Under the Energy Bill, the exclusive authority of FERC to
site LNG facilities is subject to applicable federal environmental
statutes such as the Coastal Zone Management Act (CZMA), the Clean Air
Act, and the Federal Water Pollution Control Act, and applicable
states' rights thereunder. Thus the views of states and local
communities must be considered in the siting process and given
deference to the extent that they raise legitimate issues under those
Federal acts where they are given specific rights. If confirmed, I
intend to follow the law in this regard and give deference to those
views where appropriate. If states and/or communities raise strong
objections to the siting of such facilities due to the inability of the
project to meet Federal statutory requirements, I will give those
concerns due consideration and deference to the extent of my statutory
authority.
HYDRO RELICENSING SETTLEMENTS
Question 4. I understand the Commission's practice has generally
been to encourage hydro relicensing settlement agreements, but that the
Commission has never addressed in a comprehensive manner the question
of what kinds of settlement provisions may be incorporated into license
conditions. As a result, similar proposed conditions have been accepted
in some cases and rejected in others. This has caused confusion among
parties to these settlements as to how FERC draws these distinctions.
There appears to be a growing recognition within the Commission that
additional guidance is needed and that prompt agency action is
necessary to provide negotiating parties the regulatory certainty and
clarity they've been lacking. Do you share that view, and if so, would
you agree that the Commission's treatment of proposed hydro licensing
conditions ought to be consistent and predictable for all parties
involved?
Answer. I am unfamiliar with the details of the settlement process
before FERC on hydro relicensing. If confirmed, I would be open,
however, after learning more about the history and issues involved, to
considering the need for additional guidance in this area. I would
certainly agree that the treatment of licensing for hydro projects
should be consistent and predictable.
Appendix II
Additional Material Submitted for the Record
----------
TAPS,
June 1, 2006.
Chairman Pete Domenici,
Senate Energy and Natural Resources Committee, U.S. Senate, Washington,
DC.
Dear Mr. Chairman: I am writing on behalf of TAPS to support the
confirmation of the President's nominees for FERC Commissioner, Philip
D. Moeller and Jon Wellinghoff, and to encourage the Energy and Natural
Resources Committee to quickly approve the two nominees so that the
full Senate may vote on their confirmation as soon as practical.
TAPS is an informal association of transmission-dependent electric
utilities located in more than 33 states. Its members are utilities
that must rely on transmission facilities owned by others to serve
their loads. TAPS' focus is on transmission and market power issues
that are crucial to the competitive viability of small systems and to
creation and maintenance of truly competitive wholesale markets.
The FERC is currently undertaking multiple initiatives that will
shape the future of the electric markets including, implementing the
provisions of EPAct 2005, considering updating policies related to open
access for transmission through revising Order 888, and, guiding the
development of regional markets. During this period, it is imperative
that the FERC have a full compliment of commissioners to participate in
the process.
Phil Moeller and Jon Wellinghoff are both very well qualified to
serve on the FERC. On behalf of the TAPS membership, I encourage rapid
action to confirm these nominees.
Sincerely,
Roy Thilly,
TAPS Chair.
______
Preston Gates & Ellis LLP,
Seattle, WA, June 5, 2006.
Hon. Pete V. Domenici,
Chairman, Energy and Natural Resources Committee, Washington, DC.
Re: Phil Moeller
Dear Pete: It would be difficult for me to endorse anyone more
highly for a position than I do Phil Moeller as the current nominee for
a position on FERC. As I believe you know, Phil worked for me as my
L.A. for energy for several years, after a number of years in a similar
position for the Washington state legislature.
He was a hard working and invaluable assistant to me in all of the
issues that has come before your committee.
Since leaving my staff, as you know, he has held a number of wide
ranging and important positions outside of the federal government, all
adding to his background in energy policy and energy regulatory issues.
He would make a magnificent addition to the Commission.
Sincerely,
Slade Gorton.
______
American Public Gas Association,
Washington, DC, June 6, 2006.
Hon. Pete V. Domenici,
Chairman, U.S. Senate Energy and Natural Resources Committee,
Washington, DC.
Dear Chairman Domenici: On behalf of the American Public Gas
Association (APGA), I want to express our strong support for the
confirmation of Mr. Philip D. Moeller to the Federal Energy Regulatory
Commission (FERC) seat vacated by former FERC Chairman Patrick Wood.
APGA is the national association for approximately 650 public gas
distribution systems operated by municipalities, counties and utility
districts in thirty-six states. Our members are owned by, and
accountable to, the communities they serve. Nationwide, there are about
1,000 publicly-owned gas utilities in this country serving almost 5
million natural gas customers.
Mr. Moeller's experience as a Senior Legislative Assistant to
Senator Slade Gorton provides him with a strong background in energy
policy issues. In addition, his experience as a utility employee has
given him an excellent perspective on the gas and electric operations
of a utility. APGA believes that this work experience will be of great
value to Mr. Moeller in his deliberations as a FERC Commissioner. We
also believe that Mr. Moeller will be a strong champion for consumer
interests during his service on the Commission and will maintain the
balance of regulatory oversight for all.
Prompt attention to the filling of the vacancy created by former
Chairman wood will put the FERC back in balance with its defined
organizational structure. We strongly urge the Committee's thorough and
quick action towards the confirmation of Mr. Moeller.
Sincerely,
Bert Kalisch,
President & CEO.
______
American Public Gas Association,
Washington, DC, June 7, 2006.
Hon. Pete V. Domenici,
Chairman, U.S. Senate Energy and Natural Resources Committee,
Washington, DC.
Dear Chairman Domenici: On behalf of the American Public Gas
Association (APGA), I want to express our strong support for the
confirmation of Mr. Jon Wellinghoff to the Federal Energy Regulatory
Commission (FERC) seat vacated by former FERC Commissioner William
Lloyd Massey.
APGA is the national association for approximately 650 public gas
distribution systems operated by municipalities, counties and utility.
districts in thirty-six states. Our members are owned by, and
accountable to, the communities they serve. Nationwide, there are about
1,000 publicly-owned gas utilities in this country serving almost 5
million natural gas customers.
Mr. Wellinghoff's span of three decades of broad experience in
energy industry advocacy that includes state and regional energy
legislation, consumer fraud, power contracting, renewable energy
resource development and public utility law practice provides him with
a strong background in energy policy issues suitable to the nominated
position. In addition, his experience heading the Nevada Attorney
General's Consumer Advocate Division has given him an excellent
perspective on the gas and electric operations of a utility. APGA
believes that this work experience will be of great value to Mr.
Wellinghoff in his deliberations as a FERC Commissioner. We also
believe that Mr. Wellinghoff will be a strong champion for consumer
interests during his service on the Commission and will maintain the
balance of regulatory oversight for all.
Prompt attention to the filling of the vacancy created by former
Commissioner Massey will put the FERC back in balance with its defined
organizational structure. We strongly urge the Committee's thorough and
quick action towards the confirmation of Mr. Wellinghoff.
Sincerely,
Bert Kalisch,
President & CEO.