 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
| Text of
Printed Hearing The Committee on Energy and Commerce Blackout 2003: How Did It Happen and Why? <DOC>
[108th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:89467.wais]
BLACKOUT 2003: HOW DID IT HAPPEN AND WHY?
=======================================================================
HEARINGS
before the
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
__________
SEPTEMBER 3 and SEPTEMBER 4, 2003
__________
Serial No. 108-54
__________
Printed for the use of the Committee on Energy and Commerce
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
__________
U.S. GOVERNMENT PRINTING OFFICE
89-467 WASHINGTON : 2004
_______________________________________________________________________
For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800, DC area (202) 512-1800 Fax: (202) 512-2250 Mail: stop SSOP, Washington, DC 20402-0001
COMMITTEE ON ENERGY AND COMMERCE
W.J. ``BILLY'' TAUZIN, Louisiana, Chairman
MICHAEL BILIRAKIS, Florida JOHN D. DINGELL, Michigan
JOE BARTON, Texas Ranking Member
FRED UPTON, Michigan HENRY A. WAXMAN, California
CLIFF STEARNS, Florida EDWARD J. MARKEY, Massachusetts
PAUL E. GILLMOR, Ohio RALPH M. HALL, Texas
JAMES C. GREENWOOD, Pennsylvania RICK BOUCHER, Virginia
CHRISTOPHER COX, California EDOLPHUS TOWNS, New York
NATHAN DEAL, Georgia FRANK PALLONE, Jr., New Jersey
RICHARD BURR, North Carolina SHERROD BROWN, Ohio
Vice Chairman BART GORDON, Tennessee
ED WHITFIELD, Kentucky PETER DEUTSCH, Florida
CHARLIE NORWOOD, Georgia BOBBY L. RUSH, Illinois
BARBARA CUBIN, Wyoming ANNA G. ESHOO, California
JOHN SHIMKUS, Illinois BART STUPAK, Michigan
HEATHER WILSON, New Mexico ELIOT L. ENGEL, New York
JOHN B. SHADEGG, Arizona ALBERT R. WYNN, Maryland
CHARLES W. ``CHIP'' PICKERING, GENE GREEN, Texas
Mississippi KAREN McCARTHY, Missouri
VITO FOSSELLA, New York TED STRICKLAND, Ohio
ROY BLUNT, Missouri DIANA DeGETTE, Colorado
STEVE BUYER, Indiana LOIS CAPPS, California
GEORGE RADANOVICH, California MICHAEL F. DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire CHRISTOPHER JOHN, Louisiana
JOSEPH R. PITTS, Pennsylvania TOM ALLEN, Maine
MARY BONO, California JIM DAVIS, Florida
GREG WALDEN, Oregon JAN SCHAKOWSKY, Illinois
LEE TERRY, Nebraska HILDA L. SOLIS, California
ERNIE FLETCHER, Kentucky
MIKE FERGUSON, New Jersey
MIKE ROGERS, Michigan
DARRELL E. ISSA, California
C.L. ``BUTCH'' OTTER, Idaho
Dan R. Brouillette, Staff Director
James D. Barnette, General Counsel
Reid P.F. Stuntz, Minority Staff Director and Chief Counsel
(ii)
C O N T E N T S
__________
Page
Testimony of:
Abraham, Hon. Spencer, Secretary, U.S. Department of Energy;
accompanied by Hon. Kyle McSlarrow, Deputy Secretary of
Energy..................................................... 33
Burg, H. Peter, Chairman and CEO, FirstEnergy Corp........... 195
Draper, E. Linn, Jr., Chairman, President and CEO, American
Electric Power............................................. 220
Durkin, Charles J., Jr., Chairman, Northeast Power
Coordinating Council....................................... 148
Eldridge, Brant H., Executive Manager, East Central Area
Reliability Council........................................ 142
Fleishman, Steven I., First Vice President, Merrill Lynch.... 358
Flynn, Hon. William M., Chairman, New York State Public
Service Commission......................................... 133
Gent, Michehl R., President, North American Electric
Reliability Council........................................ 138
Glauthier, T.J., President and CEO, The Electricity
Innovation Institute....................................... 367
Goulding, David, CEO, The Independent Market Operator of
Ontario.................................................... 309
Granholm, Hon. Jennifer, Governor, State of Michigan......... 87
Harris, Phillip G., PJM Interconnection, Inc................. 322
Kessel, Richard, Chairman and CEO, Long Island Power
Authority.................................................. 211
Kilpatrick, Hon. Kwame M., Mayor, City of Detroit............ 94
Lark, Hon. J. Peter, Chairman, Michigan Public Service
Commission................................................. 129
Makovich, Lawrence J., Senior Director, Americas Research,
Cambridge Energy Research Associates....................... 354
McGrath, Eugene R., Chairman, President and CEO, Consolidated
Edison Company of New York, Inc............................ 202
Moler, Elizabeth A., Executive Vice President for Government,
Environmental Affairs and Public Policy, Exelon Corporation 239
Museler, William J., President and CEO, New York ISO......... 299
Owens, David K., Executive Vice President, Edison Electric
Institute.................................................. 372
Popowsky, Sonny, Consumer Advocate of Pennsylvania........... 363
Schriber, Hon. Alan R., Chairman, Ohio Public Utilities
Commission................................................. 125
Taft, Hon. Bob, Governor, State of Ohio...................... 84
Torgerson, James P., President and CEO, Midwest ISO.......... 304
van Welie, Gordon, CEO, ISO, New England..................... 315
Welch, Joseph L., CEO, International Transmission Company.... 224
Winser, Nicholas P., Group Director Transmission, National
Grid Transco PLC........................................... 206
Wood, Hon. Pat, III, Chairman, Federal Energy Regulatory
Commission................................................. 120
Material submitted for the record by:
Durkin, Charles J., Jr., Chairman, Northeast Power
Coordinating Council, letter dated October 7, 2003, to Hon.
W.J. Tauzin................................................ 179
Flynn, Hon. William M., Chairman, New York State Public
Service Commission, letter dated October 6, 2003, to Hon.
W.J. ``Billy'' Tauzin...................................... 188
Gent, Michehl R., President, North American Electric
Reliability Council, letter dated October 2, 2003, to Hon.
John D. Dingell............................................ 181
Goulding, David, CEO, The Independent Market Operator of
Ontario, letter dated September 22, 2003, to Hon. John D.
Dingell.................................................... 387
Kilpatrick, Hon. Kwame M., Mayor, City of Detroit, letter
dated September 15, 2003, to Hon. W.J. Tauzin.............. 187
Pataki, George E., Governor, State of New York, prepared
statement of............................................... 183
Winser, Nicholas P., Group Director Transmission, National
Grid Transco PLC, letter dated September 9, 2003, to Hon.
W.J. Tauzin................................................ 389
Wood, Hon. Pat, III, Chairman, Federal Energy Regulatory
Commission, letter dated October 17, 2003, to Hon. W.J.
Tauzin..................................................... 190
(iii)
BLACKOUT 2003: HOW DID IT HAPPEN AND WHY?
----------
WEDNESDAY, SEPTEMBER 3, 2003
House of Representatives,
Committee on Energy and Commerce,
Washington, DC.
The committee met, pursuant to notice, at 10:10 a.m., in
room 2123, Rayburn House Office Building, Hon. W.J. ``Billy''
Tauzin (chairman) presiding.
Members present: Representatives Tauzin, Barton, Upton,
Stearns, Gillmor, Greenwood, Cox, Burr, Whitfield, Norwood,
Shimkus, Blunt, Radanovich, Bass, Pitts, Walden, Terry,
Ferguson, Rogers, Issa, Otter, Dingell, Markey, Hall, Pallone,
Brown, Gordon, Deutsch, Rush, Eshoo, Stupak, Engel, Wynn,
Green, McCarthy, Strickland, DeGette, Capps, Doyle, Allen,
Davis, Schakowsky, and Solis.
Staff present: Jason Bentley, majority counsel; Sean
Cunningham, majority counsel; Mark Menezes, majority counsel;
Robert Meyers, majority counsel; Peter Kielty, legislative
clerk; Sue Sheridan, minority counsel; and Bruce Harris,
minority counsel.
Chairman Tauzin. I want to thank our guests for attending
today. I think we still have empty seats if folks want to get
comfortable.
Today we begin a series of 2 days of hearings. We have
three panels today, extensive panels tomorrow. So I would
invite everyone to get as comfortable as you can and ask
everyone to give each other the courtesy of your attention as
we go through a very hectic schedule for the next 2 days.
Let me welcome my colleagues back to the grist mill. I am
sorry we have to come together to examine such a tragic event
in our Nation's history as the huge Northeast blackout, but
obviously it is a critical time for us to review what happened
in that event so that we can make sure in the conference on
energy that we make all the right decisions to hopefully
prevent this in the future.
Let me again welcome our colleagues and guests and also
extend a special welcome to Secretary Abraham, our colleague
from his former Senate days, and Mr. McSlarrow, who is
accompanying him today in an effort to help us understand what
did occur in the Northeast blackout.
The Chair recognizes himself for an opening statement.
On August 14, we were painfully reminded of the importance
of electricity in our day-to-day lives. The scenes of the
blackout were everywhere: people milling around the streets,
sleeping on the steps of train stations, productivity shut
down. Routine activities like getting home from work, going to
the grocery store, picking up children from day care suddenly
became heroic tasks.
I think it was even worse than we thought. I talked to
people who were caught in the New York airport who told me that
it was bad enough sleeping in an airport at 130 degrees with no
electricity and no cooling, but what was even worse was the
commodes wouldn't flush because they are all electrically
flushed today. What was worse for folks in New York trying to
get home was when they found out they couldn't use the keys to
get in their apartments because now they are electronically
operated.
It became apparent to so many people caught in that awful
situation--my friend John Dingell in Michigan--how difficult
life is when this utility that we have come to expect to be
available to us whenever we need it, which is become more and
more important in our lives, is not available. A healthy,
secure, productive society simply can't afford to live in the
conditions like those of August 14. In some areas the--and in
the days that followed, it was an absolute mess on our hands.
The economy and our way of life demand affordable, reliable
electricity.
The purpose of our hearing today is to determine what
happened and why. I realize there have been a lot of attempts
to politically spin this event and create partisan arguments
about who may or may not be responsible for it here or there or
anywhere else. I hope we avoid that today. I am not terribly
interested in that. I hope you aren't either. I think the
American public wants us to examine what happened, why and what
we can do to make sure it doesn't happen again.
By all accounts, it was an otherwise average summer day.
Temperatures were not excessively high. Demand for electricity
was not unusually high. Power supplies in the Northeast that
day should have been adequate. But in a matter of minutes an
estimated 50 million people were suddenly left without power,
with 62,000 megawatts of consumer load in the dark.
So what went wrong? Why were we subjected to the single
largest blackout in the Nation's history? We are going to find
out from witnesses today a lot of different perspectives and
hopefully eventually find out what happened and why.
As we gain a better understanding, several things have
become evident to us. Congress obviously needs to enact as part
of a comprehensive energy bill legislation to modernize the
Nation's electric infrastructure.
To all opponents of electricity legislation, I hate to say
I told you so, but, well, I told you so. February 15, 2001,
more than 2\1/2\ years ago, at an electricity hearing on the
lessons learned from California, I sat on this dais and said
the following, ``If you are focusing today on California,
tomorrow we will be focusing on New York, we will be focusing
on Chicago, on Boston, on places we are told the energy grids
are too weak; and blackouts and brownouts are likely this
summer because of bottlenecks in those grids.'' And my
colleagues, who may not always agree on the need of electricity
legislation, may want to move it on a separate track.
Let me read the rest of that statement: ``We will be
focusing later on fuel supply problems the likes of which we
saw in Chicago and Milwaukee last year.'' That was in the year
2000, when fuel supplies were short, energy spikes, gasoline
prices hit consumers; and angry consumers wanted to know why,
what was going on, what was wrong with our supply situation in
America. In other words, modernizing our Nation's electric
transmission grid is pointless if we don't have the fuel to
power the electric power plants, if we don't modernize the
Nation's energy efficiency and conservation laws at the same
time.
Providing reliable electricity is only one component of the
Nation's future energy needs. So I hope today we can better
understand what happened on August 14, we can understand the
scope, the severity of the incident. Local blackouts from ice
storms and downed power lines will be a reality for years to
come, but we shouldn't have to worry about high voltage
interstate transmission lines blacking out large regions of the
country. That is unacceptable, and we need to make sure it
doesn't happen again.
Before I yield, let me ask unanimous consent the committee
proceed in accordance with the rule 4(e). Is there any
objection? Without objection, so ordered.
The Chair strongly encourages members to waive their
opening statements if they can so we can get to question the
witnesses as soon as we can, and without objection all members'
written opening statements will be made a part of the record.
It is now my pleasure to recognize one of the victims of
the blackout from Michigan, our dear friend, the ranking
Democrat of our committee, Mr. Dingell.
Mr. Dingell. Mr. Chairman, I thank you; and I commend you
for holding these hearings.
The blackout of 2003, as you have observed, did have
devastating consequences on many Americans; and the people in
my district had substantial suffering to report. It was bad up
there. It was not a mere inconvenience. Nearly every aspect of
the lives of the people of my district were disrupted.
Factories were closed, the economy suffered, and jobs were
lost. To those of us in Michigan, it was particularly
distressing. We had little control over a matter that appears
to have begun outside our State.
That said, the residents of Michigan have a lot to be proud
of. Citizens, public officials, local businesses, local power
companies, police, firefighters and public safety as well as
municipal and State government all pulled together to get us
through this crisis.
We must now begin the process of learning what went wrong
and how to prevent future widespread blackouts. That should be
our first priority.
My own view is that the Congress should take immediate
action to enact transmission reliability provisions that are
contained in both the House and Senate's comprehensive energy
bills. The staff on this side and the members have suggested
that this should be one of the things done in last year's
energy conference. A number of these very controversial issues
are contained in these bills, things which have unfortunately
made it difficult for early enactment of an overall energy
bill.
While I will note that you, Mr. Chairman, and Mr. Domenici
are committed to bringing to a conclusion the conference in a
prompt fashion, the making of energy policy tends to defy the
best intentions and timetables and we have had some 8 years in
which we have made massive efforts without success in these
matters.
The goal of pursuing the energy conference with full vigor
is not at odds with my suggestion that the Congress separate
and pass consensus reliability provisions now. The reliability
bill may not provide the full answer to all the challenges in
the energy area which we confront, but there is broad consensus
that it is a necessary part of the response and one which
requires, I think, early attention. By all rights, this should
be a bill for the suspension calendar.
As the investigations proceed, we may learn more about the
remedies than may be possible to include them in a
comprehensive energy bill in which we now work. To that end, I
will be introducing reliability provisions of the energy bill
as a separate piece of legislation; and I urge my colleagues on
this committee, including you, Mr. Chairman, to join me in
ensuring that the bill is moved to the suspension calendar so
it can be speedily considered.
I am pleased that the Department of Energy moved promptly
to initiate an investigation into the causes of the outages and
actions necessary to prevent future blackouts, but I do have
some reservations about this undertaking. It appears that the
U.S.-Canada task force will involve participation by the North
American Electric Reliability Council, NERC, and the Federal
Energy Regulatory Commission, FERC. Certainly these two
entities have expertise, data and personnel that will assist in
such inquiry, but I am concerned that their involvement in the
task force should not preclude them from conducting their own
independent investigations and reaching their own conclusions
under the authorities and responsibilities which they have.
Indeed, under the Federal Power Act, FERC has the clear
authority and arguably an obligation to conduct its own
investigation and it is essential that it function as the
independent regulatory agency that the Congress intended it to
be.
I thank you, Mr. Chairman, and my colleagues for your
attention. I look forward to hearing from our witnesses, and I
welcome Secretary Abraham to the committee.
Chairman Tauzin. I thank my friend; and the Chair is
pleased to recognize for an opening statement the majority whip
of the House of Representatives, Mr. Blunt, for an opening
statement.
Mr. Blunt. Thank you, Mr. Chairman; and thank you for
holding this hearing. I will file an opening statement,
although I want to make a couple of comments.
One, as I look at the agenda today I certainly don't know
how it happened. I may not know how it happened after I
carefully study all the testimony because of the complexity of
the issue here, but you put together a tremendous set of panels
today, starting with Secretary Abraham. I so appreciate his
great leadership as the Secretary of Energy; and I am hopeful
that later this year he is able to begin the implementation of
a new energy policy.
Because I do think I have some sense of why it happened,
and why it happened is the failure to have an energy policy for
a decade. President Bush has called on this Congress over the
last 2 years to move forward with an energy policy. I think we
can't expect to see the investment and commitment we need to
have in power generation and power transmission unless we
create some sense of certainty about what the system is going
to look like for the next 15 to 20 to 25 years. Once we create
that certainty, to a great extent this problem will take care
of itself, but 10 years of no energy policy has created
problems on both coasts now and throughout the middle of the
country.
Having a policy in my view is actually more important at
this point than what the policy says. I hope we can work for
the best policy, but we need to get this job done and done now.
I am extremely optimistic that the topic of this hearing
today is the event that will force this Congress to move toward
a consistent energy policy. I am extremely hopeful that we do
that in the very near future and look forward to the evidence
that you and our committee will uncover in the next couple of
days about this important issue.
Chairman Tauzin. I thank the majority whip, and the Chair
is now pleased to recognize our friend from the State of
Massachusetts, the ranking member of the Telecommunications
Subcommittee, Mr. Markey.
Mr. Markey. Thank you, Mr. Chairman.
While I understand it may take some time to determine all
of the changes in electric utility industry policies and
practices in Federal utility regulations that might be needed
to prevent a repetition of the events of August 14, it is not
unreasonable for the American people to expect our Nation's
energy regulators to explain what caused the blackout to occur
in the first place and how it spread so quickly.
Unfortunately, from what I can see in the prepared
testimony submitted to the committee by the Department of
Energy and the Federal Energy Regulatory Commission, the Bush
Administration remains in the dark about the causes of the
blackout. At the same time, the Bush Administration continues
to press for the immediate adoption of an energy bill that
contains language that would make sweeping deregulatory changes
in electricity law and launch a wide-range assault on our
environment in the name of increasing gas and oil production.
The administration is essentially saying that these radical
proposals are needed to prevent the recurrence of an event
whose causes they say remain unknown. But if we don't know what
caused the blackout in the first place, how can we know whether
the proposed cure is worse than the disease? That is like a
doctor telling he had no idea what caused you to black out but
would like to see you in the morning for brain surgery. When
you hear that, you know it is time to get a second opinion.
That is why I support Congressman Dingell's proposal to
move a narrowly focused bill enacting electricity reliability
standards now. But when we solve the problems that occurred 2
weeks ago, then we can add those additional resolutions to the
final package in a separate bill.
Oil is for cars and trucks, not for air conditioners,
refrigerators, ovens or light bulbs. Only about 3 percent of
the oil our Nation consumes is used for electricity. What
stopped working during the blackout? Our lights, our cooling,
our refrigerators and our ovens. Our cars and SUVs ran just
fine.
It is ridiculous to use the blackout as an argument for
drilling in the Arctic Refuge and other pristine public lands
and exposes those who make the argument as desperate for an
outcome driven by ideology, not facts. The only relationship
between the electricity blackout and gasoline is that several
refineries shut down temporarily, which the oil industry used
as an excuse to raise the price of gasoline to record-breaking
levels Nationwide over the labor day weekend. I don't think
that was justified, but at least the relationship is clear.
Electricity doesn't depend on reliable oil. Oil depends on
reliable electricity. That is why we should stop searching in
Alaska for solutions to the blackout. The problem is not in
Alaska. It is in Ohio. The solutions won't be found above the
Arctic circle but below Lake Erie.
I don't think we should be satisfied with the we-will-get-
back-to-you-later response that I see in the prepared statement
submitted by the administration to the committee yesterday.
This $7 to $10 billion hit to the economy could happen again
tomorrow.
The American people have a right to know what caused the
blackout and who should be held accountable for the resulting
inconvenience and economic disruption. We have a right to know
what first energy, AEP and other utility companies did or did
not do on August 14--whether their actions or omissions caused
the blackout to occur or to spread, what their neighboring
utilities did or failed to do in response and what new
safeguards there are and should be adopting to prevent a
recurrence.
I look forward to hearing the testimony.
Chairman Tauzin. I thank the gentleman for his statement,
and I remind all members that six refineries went down which
were operating at the time that were operating at 95 percent
capacity. There was a huge effect on refinery production during
the blackout.
The Chair is pleased to recognize the chairman of the
Telecommunications Subcommittee, the gentleman also from
Michigan who also was a victim in this blackout, Mr. Upton.
Mr. Upton. Thank you, Mr. Chairman. We were a victim, and I
am pleased that our colleagues in the Senate have finally acted
to pass an energy bill. Now, as Congress comes back after Labor
Day, our first order of business is to in fact pass a
comprehensive energy bill. Congress by many pundits'
expectations is to adjourn in a little bit more than a month.
Last month's blackout impacted 50 million Americans and had
ramifications that we are still feeling with high gas prices
and productivity losses, and those are still rippling through
our economy today. But I have to tell you it could have been
worse.
I represent southwest Michigan. We had one of our coal-
fired plants, the Campbell plant in Grand Haven, Michigan, go
off line. Just south, I have two nuclear plants in my
congressional district. One of them, in fact, did experience
irregularities. This particular plant provides 18 percent of
the power for consumers' energy. I am led to believe that they
were--had the full right to in fact shut that plant down
because of the irregularities that were in the system. The
finger was actually poised at the button to shut down that
nuclear plant, like the Fermi plant that was closed on the
other side of the State. And had that plant closed down it
would have likely had again a rippling effect right around Lake
Michigan, probably closing the Cook nuclear plant which had one
of its reactors out already for maintenance, but in fact it
easily could have included Chicago and the greater Midwest. We
came within minutes, maybe even seconds of having a more
dramatic impact because of this blackout.
We have a responsibility in this committee to iron out the
differences between the two energy bills that have passed in
the House and the Senate so we can avoid another rippling
domino effect that will certainly affect tens of millions of
Americans. That responsibility starts today, and I hope we can
work together to pass a comprehensive energy bill, and I yield
back the balance of my time.
Chairman Tauzin. I thank my friend.
The Chair is pleased to recognize the gentleman from New
Jersey, Mr. Pallone, for an opening statement.
Mr. Pallone. Thank you, Mr. Chairman.
While we have discussed electricity policies for years in
this committee, today we clearly have been forced into a
position where inaction is unacceptable. Comprehensive
electricity policy should not be held hostage for another month
in the voluminous energy bill that will shortly go to
conference, nor should a comprehensive solution be crafted
solely by conferees behind closed doors, which is too often the
case here. We need to act on implementing the necessary changes
in this area immediately and without connection to
controversial issues that--clearly partisan--are likely to
reign in the conference.
Comprehensive electricity legislation should involve
several key provisions. First, we need to call for mandatory
regional transmission organization participation. Currently the
voluntary nature of RTOs allows shifting participation in the
organization on a day-to-day basis. Yet RTOs operate most
efficiently and cost effectively when they can count on
particular membership. The blackout demonstrated the need for a
flexible transmission system that can adjust to the needs of
its consumers on a second-by-second basis, and RTOs can meet
this need.
RTOs also necessitate a regional transmission planning
process, a process that incorporates a broad range of
stakeholders toward a single goal of reliable energy supplies;
and this approach should lead to vast improvements in
reliability.
Mr. Chairman, this brings me to another crucial component
of electricity policy, the need for mandatory and uniform
reliability standards for electric grid performance. In 1997,
this committee held a hearing on reliability. At that time, I
noted that voluntary reliability in a deregulated market could
create the potential for passing the buck should a problem in
the system arise. While the DOE investigates the blackout to
determine the cause of the system failure, I encourage this
committee to finally address and implement mandatory
reliability standards. Clearly, market forces alone cannot
preserve reliability of the system. Furthermore, it is unfair
to customers who expect a reliable supply of electricity not to
require industry participants to meet Federal reliability
standards that will ensure the customer's needs.
Finally, I hope we can move forward toward the approval of
FERC's rule on standard market design. Although outstanding
questions regarding technical issues remain, I trust that these
issues will be addressed prior to the final rulemaking and we
will come to the other side of this with improved opportunities
for competition that benefits electricity consumers.
There are additional issues that remain an important part
of the electricity debate, including the use of smart grid
technologies that have the potential to bring us into the 21st
century as well as a serious commitment toward the development
of renewable energy sources, energy efficiency and distributed
energy sources. However there is an immediate need to address
the gaping holes that were left in electricity policy that we
have ignored since the Energy Policy Act of 1992; and these
gaps should be filled by specific determinations regarding RTO
participation, grid performance requirements and standard
wholesale power market design.
Thank you, Mr. Chairman.
Chairman Tauzin. Thank the gentleman.
The Chair recognizes the gentleman from Pennsylvania, the
Chair of our Oversight and Investigations Subcommittee, Mr.
Greenwood.
The gentleman passes.
The Chair will move on to Mr. Cox from California for an
opening statement.
Mr. Cox. I thank the chairman----
Chairman Tauzin. I should point out to the audience Mr. Cox
serves another important role as chairman of the Select
Committee on Homeland Security. And, Chairman Cox, I understand
you will be holding some hearings or investigations as to the
homeland security response aspects of the blackout, and I want
to thank you for that effort.
The Chair recognizes Mr. Cox.
Mr. Cox. Thank you, Mr. Chairman.
I want to thank you for convening these 2 days of hearings.
I hope they will work in tandem with tomorrow's hearings on the
Homeland Security Committee, where we will focus on the
vulnerability of our Nation's power supply and distribution
system to deliberate attack as well as the catastrophic
secondary effects.
We still don't know exactly how and why the blackout of
2003 occurred, although today we expect to learn a bit more. I
think that we will have to await the conclusion of ongoing
investigations before we have answers that will satisfy not
just politicians and regulators but also the electrical
engineers who are responsible for constructing a system that
will work. What we do know and what we have learned as a result
of the events of last month is that the denial of electrical
service for an extended period of time causes a dangerous
ripple effect of death and destruction across virtually all of
our Nation's civic and economic sectors.
In the 21st century, America is more dependent upon
electricity than ever before in our Nation's history. In the
computer era, information systems and electronic controls
dominate every aspect of our economic life and the public's
health and safety. Lack of power can lead to significant
fatalities and wreak tremendous havoc on our economy. This is
certainly a desirable outcome to--and hence a goal of--our
terrorist enemies as well as an accident that can occur, as we
saw last month.
The economic implications of a blackout are thus even
greater than they might seem at first glance. It didn't take
even 4 days before the vultures started circling--in this case
trial lawyers rather than terrorists. On August 18th the first
lawsuit was filed, a class action lawsuit in Ohio on behalf of
all persons and entities residing in the United States who lost
electrical power during the blackout. We are still
investigating the causes of these events, but profiteers are
lining up to make sure that they get theirs.
The threat to the Nation is more complex than might appear
on the surface. Together, the Energy and Commerce Committee and
the Homeland Security Committee must determine accurately how
vulnerable our power system is to attack and sustain denial and
what steps we can take to reduce that vulnerability and
mitigate the potential damage through contingency planning.
We have an extraordinary 2 days, Mr. Chairman, during which
we will learn a great deal; and I look forward to moving the
energy legislation in this Congress which I strongly believe is
connected fundamentally to these issues.
I would merely add to what the chairman mentioned a moment
ago. That is, that all of our electric power systems, save for
nuclear and hydro, operate on sources of energy that are not
included in the electricity title of the energy legislation;
and we have got to take a look at the entire picture. Simply
put, in the 21st century we are using so much power for
computers and new electric technology that the system that we
have built is going to break down unless we invest.
Thank you, Mr. Chairman.
Chairman Tauzin. I thank my friend.
I should also remind the members that as this investigation
goes forward, as our committee and Mr. Cox's committee goes
forward, we also have a task force at work looking at the
natural gas crisis that we also predicted is going to occur
very soon because of the shortage of natural gas to power
plants and to operate the chemical industry in our country. I
had meetings in my district over the break on that subject, and
there are some pretty serious problems there.
I also want to comment before we move on to Ms. Eshoo, I
hope you all had the same sense I had watching the citizens of
New York walking the streets and the eerie reminder of 9/11;
and I want to encourage Mr. Cox in examining how exactly the
Nation responded to this crisis because I think it teaches us a
lot of lessons about how we can better prepare ourselves for
hopefully something we don't have to see again but could happen
again, some other strike against our country.
The Chair is pleased to welcome and recognize the
gentlewoman from California, Ms. Eshoo, for an opening
statement.
Ms. Eshoo. Thank you, Mr. Chairman, for holding this
important public inquiry into the Northeast blackout of August
14.
The joint U.S.-Canadian inquiry that got off the ground on
August 19 is reportedly making progress, but the investigators
are still churning through data. Before the committee draws
conclusions and makes sweeping policy decisions, I think we
have the responsibility to know the results of that inquiry.
Unfortunately, in the absence of fact, theories and rumors
are ruling the day. A few energy companies have developed time
lines and theories to put themselves in the best light and put
the blame on others. Everyone is denying responsibility. The
House leadership has brought out the familiar theories that
were advanced during the California energy crisis: blaming
environmental rules, consumer protection laws, transmission
constraints and the law of supply and demand.
Back in 2001, these theories were the justification for
passing the highly flawed national energy policy which did
nothing to solve the price gouging and market manipulation that
I and other members of Western States asked for help in
stopping. When we began learning the facts about the California
crisis after the release in May, 2002, of internal Enron
numbers that detailed how the market was manipulated, the
silence was deafening on the part of the administration and the
House leadership. Our calls for hearings were completely
ignored. The facts were too inconvenient. Now this blackout,
the Northeast blackout, like the western energy crisis, is
serving as justification for passing a national energy policy
that has little to do with the underlying causes of the power
outage.
We have to know the facts. The Bush Administration, known
for its coziness with oil and energy interests, has to stretch
itself to move to the public interest. So I not only look
forward to hearing the testimony today, but also hope that this
committee, where the policy responsibility lies squarely with
the Energy and Commerce Committee, will come up with a policy
that directs itself toward the real issues and not to paper
over and to force through a national energy policy that really
does not fit with the facts.
Thank you, Mr. Chairman.
Chairman Tauzin. The Chair thanks the gentlelady; and the
Chair is pleased to recognize the gentleman, Mr. Whitfield, for
an opening statement.
Mr. Whitfield. Mr. Chairman, thank you very much; and I
want to thank those people attending from all three panels
today. Secretary Abraham, we are glad you are here, and we will
have local and State officials as well as those people from the
various commissions that regulate the utilities.
The blackout that swept across much of the Northeastern
United States and parts of Eastern Canada we know can happen
again almost at any time because the 150,000 miles of
transmission lines are simply not adequate. The load growth has
been more than 60 percent in the last 20 years, and yet the
high voltage transmission lines have increased by only 20
percent during that time.
Now some people seem to think that moving quickly on a
stand-alone reliability piece of legislation is the best way to
proceed. That may be true, but I think everyone understands
that isn't going to be easy either because of the complex
issues involved here.
We have a myriad of competing interests. We have low-cost
States that are very much concerned about having to pay to
upgrade transmission lines in other parts of the country. We
have concerns about some strong environmental States who don't
want coal plants built in their area, but they want to import
electricity produced by coal from other areas of the country.
We also know that power was available east of California
during the energy crisis in California in 2000 and 2001, but
there were simply not adequate transmission lines to get that
power out there. We know that the power traders could not have
manipulated the markets if there had been adequate transmission
lines into California.
So all of us want to address this issue and do everything
that we possibly can to solve it, but I think it is naive for
any of us to think that it is going to be very easy to do. And
while I certainly would be willing to work with those wanting
to move a stand-alone reliability legislation, I don't think
that is going to be easy either. It is going to be complex, and
I am delighted you are having this hearing today.
Chairman Tauzin. Would the gentleman yield for a second?
I want to point out to all my friends who are listening on
this side, as you know, the other Chamber was not even able to
pass a new bill and gave up trying to pass a new bill. They
ended up by unanimous consent adopting the bill of last
Congress so at least we could go to conference and try to work
this out.
The good news, of course, is that, in the conference,
reliability provisions are already in the mix. So whether we
have a separate stand-alone bill or not, it is before the House
and the Senate. And the gentleman is right. We at least have a
chance in the conference to complete that work. We ought not to
miss that chance.
I thank the gentleman for yielding.
The Chair recognizes the gentleman from Florida, Mr.
Deutsch, for an opening statement.
Mr. Deutsch. Thank you, Mr. Chairman.
I think all of us in our own life experience know that
things happen that we don't plan for but that create
opportunities. And how we respond to those changes and
challenges defines us as individuals, but I think this
challenge will define us in many ways as a country as well.
Others have spoken to this, but I think it is important to
focus that there is really this consensus point that exists in
terms of what we need to do with the electric grid in the
United States of America.
I think each of us understands that it is our job to fight
for what we believe in but also to represent our constituents
and the entire country, and we need to take politics out of
many of these decisionmaking processes, which is exactly what
the country needs for us to do. For that reason, I think the
focus really is and we will be judged on our ability to really
support and pass separate legislation to specifically deal with
the grid issue, which there is a consensus both from the
Democrats and the Republicans outside of the body of the entire
bill. I think America is focused, and America is watching, and
I believe we are up to that challenge.
I also want to mention another issue which is hopefully
this will be really an opportunity and view this as an
opportunity for us collectively as a Congress and the country
to really take the energy bill and--not in the bill itself but
maybe in other legislation in this Congress a step further. We
are still at a point where effectively the largest tax in the
history of the world continues to take place because of the
power of OPEC over ourselves and other oil-consuming nations,
and there needs to be a concerted effort.
If we acknowledge that the greatest challenge facing our
country is the threat of terrorists having weapons of mass
destruction, which I believe there is a consensus on, and the
greatest challenge of our country is our macroeconomy, which we
can't defend ourselves unless our macroeconomy is strong, then
our inability to address what is in fact the greatest threat to
both our economy and our security, which is the threat of
OPEC's power over us and the inability not just of this
administration but really of the prior administration as well
to challenge, that is really a question that I hope that this
Congress and this country uses this opportunity, uses this
crisis to change.
Mr. Secretary, as you probably are aware, your department
supported a conference on this, actually, this past week in
Israel, which I heard about. I have read some of the documents
presented there, and I hope it is something we can address in a
larger setting.
Chairman Tauzin. The Chair thanks the gentleman for his
statement and recognizes the gentleman from Illinois, Mr.
Shimkus, for an opening statement.
Mr. Shimkus. I apologize for taking the 5 minutes.
We have New Yorkers here, and I want to send word to them--
I know Mr. Engel and Mr. Towns--I think the Nation was really
impressed by the way the folks of New York City handled the
blackout in a calm demeanor. There were some great stories out
of that. I think the folks in the Midwest were really pleased
and honored by that response.
I do also want you to know that most people in my district
understand that I serve on this committee, and so right
afterwards I got a lot of questions where are you at, what have
you done and how soon can you get something moved. And I said,
well, we are at a great time because we passed a bill both in
the House and the Senate, and we are moving the conference.
These hearings are designed for us to get the final bits of
information that we can go and insert them into a national
energy plan.
So what do we have in there? Well, we have the repeal of
PUHCA, which could bring more capital to expand the
transmission grid. We have accelerated depreciation from 20 to
15 years for electric transmission assets. We need in the
bill--Congress--we need to be stepped up and ensure that the
expansion of the grid is not slowed down by State regulators.
So that is empowering the FERC on siting.
The reliability issues have been addressed, and that is
part of the bill.
I am a big proponent of standard market design. Whether
that gets part of the final part or not I am not sure, but I do
think that is important if you are going to have a national
transmission system, a national grid.
We have a critical moment in time to move this bill. The
public expects us to have success. We need to get our two final
FERC commissioners at least up for a vote on the Senate floor.
They have been delayed. How can you have the FERC fully vent
out a problem when you only have three of the five seats
filled?
So if you have some of the highest natural gas prices that
we have seen in a long time--and I am on the Natural Gas Task
Force and we had hearings. We had no industry producing--only
one industry in this country producing fertilizer, and that is
a farmer-owned co-op. And if you have some of the highest gas
prices that you seen in years and you have 50 million people
without power, if you can't move a national energy plan bill
now in this environment, my fear is we will never do it. The
time is ripe.
Thank you for coming.
Chairman Tauzin. Just yield, the CF industries in my
district laid off a bunch of workers again as they are shutting
down more production at the chemical plants, fertilizer plants
and basic building blocks of fertilizer because of the high
price of natural gas. This is more than just a electricity
problems.
I thank the gentleman.
The Chair now recognizes another gentleman from Michigan
who also experienced a blackout, Mr. Stupak, for an opening
statement.
Mr. Stupak. Mr. Chairman, I will pass, but we didn't
experience blackouts because I come from the best part of
Michigan.
Mr. Shimkus. You don't have power up there.
Chairman Tauzin. The Chair thanks the gentleman for passing
and understands his pride in his district.
The Chair recognizes the gentlelady from California, Mrs.
Capps, for an opening statement.
Mrs. Capps. Thank you, Mr. Chairman; and thank you to
Secretary Abraham for testifying today.
I have a great deal of sympathy for the 50 million citizens
who lost power last month. As many here remember, millions of
businesses and families in California faced rolling blackouts a
couple of years ago. These rolling blackouts inconvenienced
millions and cost businesses billions, and the impacts are
still being felt today. California was robbed of $9 billion by
energy companies that illegally drove up electricity and
natural gas prices. I am relieved that the long-term
implications in the blackouts in the Midwest, Northeast and
Canada will not be so dire.
I wish to make a couple of points this morning. First,
there is an eerie similarity in the reactions to the blackouts
and to California's situation. California's troubles were used
as an excuse to push through an energy bill that really had
very little to do with the problems in California, and the same
is happening today.
Two-and-a-half years ago charges were made that the energy
crisis was because California hadn't built enough power plants
to meet growing demand or the Endangered Species Act was
delaying new construction or the Clean Air Act was shutting
down existing plants. And of course it wasn't any of these
things. It was Enron, El Paso Natural Gas and other energy
companies exploiting a badly written law and ripping off
California. FERC's subsequent investigations have uncovered the
market manipulation in case after case after case.
The congressional response at the time, however, was to
push through a bill which had nothing to do with what caused
California's problems. The bill subsidized energy companies,
opened more public lands to drilling and a host of industry
goodies.
Today we are not exactly sure what happened last month, but
we are pretty sure it wasn't about the need to drill in the
wildlife refuge or with big ethanol mandates or with more
subsidies for nuclear power. And yet, like 2 years ago, the
call goes out again for passage of a controversial energy bill,
most of which has nothing to do with the issue at hand, the
reliability of the electricity grid.
So I agree with Mr. Dingell's call for quick passage of the
energy bill's bipartisan reliability standards. These
provisions have been agreed to by all parties for a number of
years now. We know we need to make these changes, and we are
pretty sure they factored into the blackouts. So I hope we
won't let them get bogged down in the bill's other more
controversial measures.
In addition, I would like to bring to the members'
attention an observation. The day after the blackout, political
leaders in the affected areas made public calls for everyone to
conserve energy to make sure the system wasn't overloaded when
the lights came back on. It was a very smart call. People will
pull together to conserve energy consumption if they are called
upon, and conservation does work. In California, consumers cut
consumption by 10 percent 2 years ago, and it helped to stop
our energy crisis. But we should be making every effort to
conserve energy every day, not just when there is a crisis; and
yet the energy bill takes only baby steps to make sure air
conditioners, buildings and cars are as efficient as possible.
This committee even voted down some sensible conservation
amendments.
As the bill moves through conference, we should revisit the
conservation measures and do more, much more. The blackout
showed us again the instinct in our fellow Americans to do the
right thing. We in Congress need to show some leadership on
this issue, and the country will respond.
Thank you. I yield back.
Chairman Tauzin. I thank the gentlelady.
The Chair is now pleased to recognize the gentleman from
Georgia, Mr. Norwood, for an opening statement.
Mr. Norwood. I will file an opening statement but just have
a couple of remarks.
Thank you, sir, for having this very important hearing; and
I thank Secretary Abraham for being here and for your
leadership in energy matters.
As bad as everything was for the Northeast during the
blackout, and I won't reiterate, everybody knows how terrible
it is to be without electricity in the 21st century, as bad as
you know all of that was, there was a real possibility here, a
real potential here that Congress might actually do what it
should do and pass a comprehensive energy bill. I think the
House has done a pretty good job and has fought it out real
well, and I hope the other body now will get serious about
producing a comprehensive energy bill, not simply about
electricity, although that is the subject today. The other
parts of energy required by this country need to be dealt with,
too; and let us hope that the Senate will finally wake up and
come to conference and let us get serious about it.
Mr. Secretary, I know the task force is working hard; and
it is very important in my opinion for us to have a clear
understanding of exactly what caused this blackout for two
reasons. When we understand that, we may be able to put things
in legislation that would prevent it in the future.
But, second, until we hear from your task force, for some
people it will be an excuse for us not to move forward on a
comprehensive energy bill; and I encourage you and the Canadian
members and U.S. Members of this task force to act with some
haste and get us that information as soon as you can so that at
the end of this first year of this Congress we won't be sitting
there saying, well, we can't bring a bill up because we don't
know what the cause of this issue was. So it clearly is pretty
important that you folks act as quickly as you can; and, Mr.
Chairman, I look forward to a conference so that we can come up
with a comprehensive energy bill, not just an electricity
title, although it is vital to our subject, too.
Chairman Tauzin. I thank my friend; and I want to, for
purposes of information, inform the audience that while we have
not had official appointment of conferees on the energy bill
with the Senate, staffs of House and Senate have been talking
and isolating areas of agreements and disagreements and we have
made a lot of progress during the month of August. We are going
to move as fast as we can as soon as the Speaker makes the
announcement of the conferees.
I thank the gentleman.
The Chair now recognizes the gentleman from Florida, Mr.
Davis, for an opening statement.
Mr. Davis. Thank you, Mr. Chairman. I will waive my time.
Chairman Tauzin. The gentleman waives; and the Chair
recognizes the gentlelady from California, Ms. Solis, for an
opening statement.
Ms. Solis. Thank you, Mr. Chairman.
I would like to thank the Secretary for being here.
As a Californian, I understand the importance of trying to
make sure that we address our energy issues. I am not going to
read through my statement but just point out that we need to
address this energy shortage and there are some elements that I
think we should consider.
In my opinion, something that we should have kept in both
the House and Senate energy bills was the protection of
consumers, specifically consumer protection under the PUHCA law
as it is stated to provide some kind of reliability and
accountability to consumers. California went through a
devastating crisis, and we are hopeful that this kind of
language will be kept in whatever bill comes before the
conference committee.
As someone who has looked at how we can better
systematically improve our conservation efforts in California,
we know what it means to roll up our sleeves and conserve. We
have done it. We were also victimized by unscrupulous
businesses like Enron and others that came in and gouged the
system.
We still need FERC to come in and do some work, some heavy
lifting for Californians, because many of our small businesses
and in particular, minority businesses went under because of
the increase in electricity bills that they were faced with and
we have yet to see any remedy. When we talk about reforming
this reliability plan for energy usage, we should look at
renewables and conservation and above all protection for
consumers, and I would leave it at that.
Chairman Tauzin. The Chair thanks the gentlelady; and the
Chair recognizes another member from the State of Michigan, Mr.
Rogers.
Mr. Rogers. Thank you, Mr. Chairman. I have a written
statement for the record.
Mr. Secretary, I just wanted to welcome you here today. As
I am sure you can see, the political funny season has begun,
and whatever action that you are to take or have taken is
exactly wrong. I want to thank you for taking a thoughtful
approach to what you have done and resisting the temptation to
ready, shoot, aim.
I am looking forward to your testimony. If we are going to
respond in a manner that is consistent with what consumers
want, need and should have, we have got to know the facts. The
investigation that you have undertaken in your testimony today
has shed a lot of light here, and thank you for the work did
you have done so far.
Chairman Tauzin. The Chair thanks the gentleman and
recognizes the gentlelady, Ms. McCarthy, for an opening
statement.
Ms. McCarthy. I thank you, Mr. Chairman, and Ranking Member
Dingell for holding this hearing to discuss the causes of the
massive power failure that affected parts of the U.S. Midwest,
eastern seaboard and Eastern Canada. During this hearing it is
imperative that we address reliability issues, energy
efficiency as well as problems related to the transmission
grid.
I look forward to hearing from you, Mr. Secretary, and from
our panel of expert witnesses today and tomorrow. The 2003
blackout shut down cities, airports, trains, subways,
businesses, disrupted hospitals and dramatically changed the
lives of millions of people who were unable to lead their daily
routines. It is apparent from these events that our electricity
grid needs to be modernized and upgraded in order to meet our
growing power demands.
We also need to reevaluate the reliability requirements on
utility companies and ensure that provisions in our PUHCA law
remain so that unfair pricing does not occur in the future. It
is highly critical that we also invest in a reliable,
affordable and cleaner energy system that increases
conservation and efficiency. Giving power companies more
authority to upgrade their facilities while allowing them to
override environmental regulations should not be the way we
lead our Nation.
I am pleased that the legislation under consideration
includes Federal penalties if companies fail to detect and
isolate problems or, if they do not know, notify neighboring
power systems of problems in order to avert future events such
as we experienced. We can aggressively reduce demand by
employing energy efficient technologies and encouraging sound
conservation measures as an essential component of our energy
policy. Utilizing more kinds of energy sources and using
smaller, more distributive installations for peaking power will
reduce the impact of system failures. Renewable energy sources,
including wind, biomass and solar, lend themselves to these
smaller energy generation installations.
We as a Nation need to invest in more energy efficiencies
since this is the fastest, cheapest and cleanest way to reduce
the strain on our electrical system so it will save consumers
money, reduce pollution and the need to ship power from region
to region.
Mr. Chairman, our strategy to address energy policy can
produce a reliable supply of diverse fuels that minimize
greenhouse gases and secure our leadership in energy technology
to benefit our consumers and to export around the world.
It is imperative that we invest in alternative fuels and
reduce carbon emissions when considering a national energy
proposal. We can do much more with the energy sources we
already have by pursuing energy efficiency in our buildings,
appliances, office equipment and industrial equipment and
processes.
Energy efficiency helps keep the money in our economy for
productive purposes. It lessens the strain on electricity
generation and transmission systems, while helping to reduce
the impact of system failures and future blackouts.
Thank you. And I look forward to working with my colleagues
to address these critical issues. I thank every one of the
panelists today for sharing their expertise in these matters. I
yield back.
Chairman Tauzin. The Chair thanks the gentlelady. I
recognize the gentleman from Oregon, Mr. Walden, for an opening
statement.
Mr. Walden. Thank you very much, Mr. Chairman. Well, here
we are again with another crisis that hopefully will prompt
Congress to act. But I am disturbed by some of the comments
from my colleagues on the other side of the aisle today, that
just because we had a blackout means we shouldn't deal with the
natural gas crisis that the Chairman of the Federal Reserve
told us is upon us, or that we shouldn't deal with the gasoline
problem that I will tell you, my constituents in Oregon are
objecting to $2.09 gas.
There are a lot of issues that need to be dealt with on a
comprehensive plan as put forth by this administration and this
Secretary and by this committee, that I think we ought to get
ahead of the problem rather than wait until the crisis forces
Congress to act.
And, Mr. Chairman, I commend you for your efforts,
especially as it relates to the Pacific Northwest. You see, 7
years and 4 days before the upper part of our country in the
Northeast suffered a blackout Bonneville Power Administration
suffered a blackout. You know what they found there? Overloaded
lines, sagging lines into brush, problems that eventually they
figured out how to resolve.
But from 1987 until this summer no new transmission lines
were constructed. Why? In large part because of a lack of
financial resources. Mr. Chairman, I want to thank you and I
want to thank the Bush Administration and Secretary Abraham for
working with us in the Northwest to secure $700 million in new
bonding authority for the Bonneville Power Administration.
As a result, this summer, new construction began in
multiple locations to address the problem of adequate
transmission and reliability standards for the future, and I
think it is important to point out that the head of the
Bonneville Power Administration, Steve Wright, said in an
opinion piece of August 15, he really summed it up, and I think
this says it all: We need to make the reliability standards for
market participants mandatory and we need to enhance our
electricity infrastructure. That is pretty much it. The rest is
trying to sort out what happened in a matter of minutes or
seconds, a matter of milliseconds in some cases with date
stamps that don't add up, depending upon which computer they
are on.
It is going to take a lot of work. And Bonneville is
putting forth a rule guru in the industry, Bill Middlestead, to
help in this bi-country investigation.
So, Mr. Secretary, I commend you for undertaking this
effort to try and figure out what went wrong, and further for
continuing to push forward on a comprehensive energy reform
plan that includes conservation and includes our ability to get
electricity where we need it, that includes trying to develop
additional national gas resources, gasoline and oil resources,
and clean coal technology.
So, Mr. Chairman, I thank you for your help with bonding
authority. I hope that we can move forward with the additional
authority Bonneville says it needs to stay ahead of the curve
as we move forward. Thank you.
Chairman Tauzin. I thank the gentleman for his kind words.
And the Chair yields to the gentleman from Tennessee, Mr.
Gordon, for an opening statement.
Mr. Gordon. Thank you, Mr. Chairman. Honoring your earlier
request, I will make my formal remarks part of the record, and
just quickly say that as important as this issue is a bad bill
is worse than no bill. We have got a unique opportunity we need
to get right.
Chairman Tauzin. Thank the gentleman. And the Chair
recognizes the gentleman from North Carolina, the vice chairman
of our committee, Mr. Burr, for an opening statement.
Mr. Burr. I thank the Chair. I welcome all Members back,
and I especially welcome the Secretary back, who is a dear
friend of this committee.
Mr. Chairman, it is not difficult if we are looking for an
answer to the question of what happened. Many Members of
Congress got on the talk shows days and weeks after the
blackout, and they suggested that they knew what happened. They
were very specific in a wide range of reasons as to why a
blackout happened in the Northeast.
The unfortunate thing is that as we are challenged to write
good policy that leads us into the next decade with an honest
energy blueprint we have got to understand what really
happened. We have got to understand where we really want to go.
We have got to understand what our real needs are. And to do
that, I think it is important that we stop and take a deep
breath and that we spend more time listening over the next 2
days than we do talking as members of this committee.
I want to take this opportunity to applaud Mr. Wynn and
others who have consistently, as we have talked about the need
for energy policy and electricity legislation, never let us
forget that the transmission grid deserves and requires a
tremendous upgrade for us to go into the future.
At the end of the day, regardless of what we find the
reasons to be for the blackout, this has been a preview of
potentially what could happen if we don't make the investments
for our future and for the future needs of the infrastructure
in this country.
Mr. Chairman, I want to urge you and whoever are in fact
the conferees at the time to fight in conference for the
language that we need to make sure that the transmission grid
is upgraded, that it is not forgotten, and I want to encourage
you to remember that to accomplish this we have to have the
confidence of the financial markets that there is a return that
is predictable for them to finance what could be an asset
outlay as large as what the current value of our transmission
grid is.
Mr. Chairman, I thank you for this hearing. Mr. Secretary,
again, we thank you for your insight. I yield back.
Chairman Tauzin. Thank the gentleman for those comments.
They are absolutely valid. And the Chair recognizes the
gentleman he just referred to, our friend from Maryland, Mr.
Wynn, for an opening statement.
Mr. Wynn. Thank you very much, Mr. Chairman. Let me begin
by thanking you for moving expeditiously and aggressively in
addressing this issue. Mr. Secretary, welcome, we look forward
to your testimony.
I would like to note that this hearing is not taking place
in isolation; we have a product on the table--an energy bill.
And I think that this committee should be a driving force to
make sure that the conferees meet quickly to address the
issues. If the desire is for a comprehensive bill, lets move
forward and conclude this business before we go home.
If we reach a conclusion that we cannot in fact do that, we
ought to move forward on those areas of consensus. I think
reliability is such an area as indicated by our ranking member,
Mr. Dingell.
I have had the pleasure of working with Mr. Burr on the
issue of reliability over several years, and we think we have a
product in the form of H.R. 1370 that would have addressed some
of the concerns that we are talking about here today. The
bottom line is that our electricity grid, transmission grid is
not up to snuff. It is outdated, overburdened, and should be
addressed with mandatory reliability standards. Our legislation
does that. It provides for the establishment of an electric
reliability organization with the Federal Energy Regulatory
Commission providing oversight.
This would facilitate the development and enforcement of
mandatory reliability rules and standards that are binding on
all electric companies and market participants. These standards
would include technical standards relating to the maintenance
and operation of electrical systems, performance standards for
electrical systems and preparedness standards. Critically, we
need preparedness standards related to the ability of those
managing the electrical system to respond to anomalies or
unexpected events in the grid.
What we need is a system in place today that would provide
the Federal Government with the authority and tools to sanction
companies that don't comply with reliability standards. Another
area of concern as Mr. Burr mentioned, is a lack of investment
in the transmission system. Our bill would require the FERC to
adopt transmission rules to promote capital investment. That is
what we need in the system to improve the operation and allow
for returns to investors reflecting the financial, operational
and other risks inherent in transmission investment.
And, finally, our legislation would address the issue of
siting. We need to expedite siting. H.R. 1370 would give the
FERC the ability to site transmission if State or local
governments aren't able to do so. This is a serious problem. We
are all talking about it now, but the problem has existed for
some time. We need to take the responsibility to act, either
comprehensively and address all of our issues in energy needs
or to address those issues that we can agree on and make sure
we do something before we go home. I hope we will be able to do
that.
Thank you very much, Mr. Chairman.
Chairman Tauzin. I thank my friend. The Chair is now
pleased to welcome the gentleman, the former lieutenant
Governor of the great State of Idaho, Mr. Otter.
Mr. Otter. Thank you, Mr. Chairman. It is well known that
the United States must maintain an abundant and reliable supply
of energy to keep our economic recovery on track.
We saw earlier this month in the Northeast what can happen
when energy supplies are disrupted. The potential cost is
enormous, both in economic and in human terms. I am pleased
that the chairman is holding this hearing today to look into
exactly what happened in the Northeast and why it happened.
Were we truly the architects of our own disaster?
We also need to determine what can be done to prevent this
type of disruption from happening in the future. However; as we
move forward, we need to be careful not to rush to a one
national, one size fits all approach in response to what
happened in the Northeast. While there is obviously need to
improve transmission across the country, any proposal to do so
must take into account regional differences.
I believe we need to work to remove unnecessary
bureaucratic impediments to site transmission, as well as
electrical generation. We need to streamline State and Federal
siting processes and look into the NIMBY, not in my back yard,
problem. I also believe we need more investment in the
electrical industry, and should make sure that Congress is
giving the right signals to encourage such investment.
With that, Mr. Chairman, I yield back my time.
Chairman Tauzin. I thank the gentleman. The Chair
recognizes the gentleman from New York, Mr. Engel. And I too
want to again, Eliot, on behalf of the entire Nation express
our admiration to the folks in New York for the way that they
handled yet another enormous crisis.
I recognize my friend, Mr. Engel, for an opening statement.
Mr. Engel. I thank the chairman for his kind words, and I
thank Mr. Shimkus as well. We may see, as a result of what
happened with the blackout that comes this May the census in
New York may increase a great deal and that perhaps we can get
back some of the Congressional districts we have been losing to
reapportionment as a result.
Chairman Tauzin. Wasn't that the effect of the last
blackout? Wasn't there a huge baby boom in New York?
Mr. Engel. Well, it did. In 1965 and 1977 we saw that
happening. So, but seriously, Mr. Chairman, thank you.
I am obviously, as every one else, but particularly as a
New Yorker, outraged by the blackout. We were told that this
couldn't happen. When we suffered in New York through the
blackouts of 1965 and then 1977, we were told that after that
happened steps were taken to ensure that it could never happen
again. And yet it did. I am glad we are holding hearings,
because I want to know what happened. We all want to know what
happened. There are many issues to be discussed.
Did deregulation play a role? What are other reasons that
this blackout happened? What disturbs me though, and I hope
this doesn't happen, is that I don't want, and I have heard
some rumblings of it today, I don't want this blackout to be
used to have a bill or to push a bill that has already been put
forward.
And, for instance, we have a bill that we passed in this
Congress, which many of us have great difficulties with it.
There is drilling in the Alaska wilderness. There is an energy
bill that I believe is so tilted toward the industry and
against renewable energy sources and conservation and sound
energy policies that sometimes you have to wonder if no bill
might be better than that bill. What troubles me with the
administration is that the administration seems to believe, and
I think the energy bill reflects it, that the solution to our
energy problems is production, more oil, more gas, more power,
drill in the Alaska wilderness. That will take care of all of
our problems. But that won't.
That is not the problem that caused the blackout, which
cost the people and businesses of New York about $1 billion. By
all accounts, it looks like this is a problem about
transmission, the infrastructure of a national grid that was
designed with 1950's technology and is being used in the 21st
industry. We need to upgrade that grid.
But I want to also use this to highlight a lot of
differences that I and many others on this side of the aisle
have with the Bush Administration about energy and about their
energy policies, and my fear is that the administration will
rush to use this blackout as a way to rubber stamp what I think
are misguided energy policies. I want to talk about some of
them.
The unilateral withdrawal from the Kyoto protocol, the
development of energy policies in secret, and refusal to
provide documentation of these meetings contrary to Congress's
request, the weakening of Clean Air Act regulations that will
allow power plants in the Midwest to foul and pollute the air
of New York.
Also, most egregious, in light of September 11, the recent
revelation by EPA's Inspector General that states that the
White House and National Security Council forced EPA to lie
about the air quality in New York City just after September 11
to cook the books to make it look better.
Of course, my favorite, the decision by FEMA and the NRC to
approve the evacuation plan for Indian Point Nuclear Power
Plant without certification from the State of New York or the
local Counties of Westchester, Rockland, Orange and Putnam. So
much for State and local control.
Again, I hope that what happened is not used by the
administration and others that support the administration's
policies as a way of trying to ram through what I think are
wrong policies.
I want to ensure that the public gets the true facts, not
facts that may be scrubbed to ensure its compatibility with
administration doctrine. You know, when I was growing up, Mr.
Chairman, we all watched the show Dragnet. And Detective Joe
Friday used to say: The facts, ma'am, just the facts.
Well, I want to know the facts. I want to know what
happened with this blackout. Frankly, I want to know what is
happening with energy policies throughout the country. Gas
prices are jumping in leaps and bounds. Every week you turn
around and the price of gasoline has gone up 10 or 15 cents a
gallon. I want to know if there is some kind of collusion
because I cannot believe that there is any other reason for gas
prices to increase so quickly.
So I want to say that we need investigations so we know
what truly happened, so we find out what truly happened. I want
to make sure that when it comes to investigating energy
policies in this country that the administration doesn't take
the view of these three monkeys, hear no evil, see no evil, and
speak no evil.
I look forward to the testimony today.
Chairman Tauzin. I thank the gentleman. The Chair would
want to point out in light of his comments, however, that while
there were many Democrats who voted against the energy policy
bill that was adopted by the House that has gone to conference,
there were well over 40 Democrats who voted for it. It had very
much of a bipartisan element in that regard. And there was no
attempt to ram it through. I just want to caution my friend
that we are trying our best to get consensus where we can and
will continue to do so.
The Chair is now pleased to recognize Mr. Total Recall, the
gentleman from California, Mr. Issa, for an opening statement.
Darrell, before you give your opening statement, I want to
point out that the gentleman sitting in the front out there, in
the first row on the right, third seat, remarkably reminds us
of Gray Davis. I was a little concerned that Gray Davis had
shown up today to face off with you.
But the Chair is now pleased to--thank you for letting me
do this, but the Chair welcomes the gentleman from California,
Mr. Issa, for an opening statement.
Mr. Issa. Thank you, Mr. Chairman. I am sure that Governor
Davis is busy doing the work of the people in California today.
But oddly enough focusing on California may be appropriate
for my 3 minutes of time with the indulgence of the Secretary.
It is interesting that when you look at this issue for 24 hours
a day, 7 days a week, year after year after year, that we don't
have more blackouts. Though I don't want to reduce the
importance of this committee investigating and understanding
what the cause of this massive blackout was, which may have
cost the American people billions of dollars of lost revenue, I
think it is also important that we not use this event as a
platform from which to move or not move every agenda,
particularly from my colleagues on the other side of the aisle
from California, a State in which NIMBYism has been taken to
the highest possible level, a State that, with all due respect
to those who said we have taken care of our energy crisis, what
we did is we exported our jobs. We have higher unemployment
than we had when the energy crisis first happened in the West,
and I think it is the result of logical and pragmatic thinking
on behalf of the businesses of California. They have left
California and taken with them their high paying jobs and their
energy consumption.
California, for the first time in decades, or in over a
decade, is a net exporter of people. We are losing jobs. We
have higher than national average unemployment. And all of that
is legitimately the result of a lack of affordable and reliable
energy in addition to some other well publicized problems.
So as we review what happened when the lights went out on
the East Coast I don't think we should haphazardly try to
confuse the two. California's problems have to do with an
unwillingness to produce new sources of reliable energy. We are
a net importing region and one that has a problem that if and/
or when our jobs ever return the problems of energy shortage
will return.
So, Mr. Secretary, I look forward to this committee
understanding better what did happen when the lights went out
in the East, and hopefully there will be no more references to
somehow linking California's inability to fix California's
problems to a national issue. With that I yield back, Mr.
Chairman.
Chairman Tauzin. The gentleman yields back. I think we have
four or five other Members who are going to give opening
statements, Mr. Secretary. Then we will take a 5-minute break
for you and for anyone else who may need a little break before
we take your testimony.
Next the Chair is pleased to recognize the gentleman from
Pennsylvania, Mr. Doyle, for an opening statement.
Mr. Doyle. I want to thank you, Mr. Chairman, for calling
this hearing today. Clearly the blackout earlier this summer
has rightfully attracted a great deal of attention and concern,
and the issues involved here are complex. And while I suspect
that we are unlikely to reach any definite answers through this
set of hearings, largely because it is simply too soon to know
all of the answers and those conducting the ongoing
investigations need time to continue their work, these hearings
I hope will still be productive, if for no other reason than
they raise the level of awareness of the issues and help to
find the questions we need to answer.
Thankfully my district in Pittsburgh and in fact most of
Pennsylvania was spared from the direct repercussions of the
blackout. But just because our lights stayed on this time, that
does not mean that will always be the case. I think it is
behooves us all to work together to address the problems that
arose on a national basis. I have said many times in the past
that it is imperative that we strive to create effective
cooperative regional approaches to the transmission of
electricity.
The RTO that we operate under in Pennsylvania has largely
been a success story in this regard, and I believe it provides
an effective model for the rest of the country. One danger as I
see it is that the lesson we take from this blackout becomes
that deregulation is too dangerous and that we should rely on
the status quo in many regions as the safest course.
In my view, nothing can be further from the truth. We need
to continue to modernize and update our systems, adopt uniform
reliability standards, and continue to create large RTOs as
this will be the most effective way to oversee the transmission
of power and comes closest to recognizing that these are not
issues that stop at State boundaries.
Protecting local interests or States rights in this case
will not lead to effectively modernizing the whole system. If
this blackout causes us to regress from a more standard
national approach, that will be a true step backwards and the
lingering effects of the blackout will prove even more damaging
than they have already been.
I want to also mention another issue that I have been
involved in for quite some time, and that is promoting the
utilization of distributed generation. When we look at the
long-term approaches to addressing the problems that ironically
enough this blackout brought to light, it is imperative that
aggressive utilization and implementation of distributed
generation technology and continued support for R&D work on
this important--be an important part of our mix.
Distributed generation technologies like fuel cells, micro
turbines and the like are providing reliable and secure power
throughout the Nation, and we need to promote their use, so
that at least our critical facilities like hospitals, police
stations, our military installations are guaranteed safe
reliable power, even in the case of blackouts like the one we
recently endured.
The current issue of the Economist made a case for DG quite
clear when they wrote: A system with more distributed
generation would be more robust than today's grid. They
continued that by speculating that the safest place in New York
during the blackout may have been the middle of Central Park.
Why? Because the police station in the park uses fuel cells.
While the rest of the city was in darkness, super clean micro
power plants carried on unaffected. New York's finest had all
of the power and light they needed. To me, that is a clear
example of the importance of distributed generation, and why I
think we must focus on its widespread utilization as an
integral part of our long-term efforts to address issues raised
by this devastating blackout.
Mr. Chairman, I thank you and yield back my time.
Chairman Tauzin. I thank the gentleman for his statement.
And the Chair recognizes the gentleman from Florida, Mr.
Stearns, for an opening statement.
Mr. Stearns. Good morning. And, Mr. Chairman, let me
commend you for your leadership and your expeditious manner in
having this hearing, and of course our witnesses for their
patience through these opening statements.
I think the American people should realize, of course, that
we have this hearing to find out what happened. We also have
the joint U.S.-Canadian task force, the North America
Electrical Rural Council, and the affected utilities themselves
are all trying to analyze what is a tremendous amount of data
to try and understand exactly what happened.
The good news, even though we had these many States that
lost electricity, there was no huge amount of damage, so that
in short order the States came back. We all know we avoided a
catastrophe, because if it had gone on for 2 or 3 days,
possibly there would have been severe damage in our
infrastructure as well as what would happen to the food and to
the water.
I think many of my Members have mentioned we should pass
our comprehensive energy bill, H.R. 6. We have a companion on
the Senate side. We are hoping that this is a way for the
public to focus on the need for a comprehensive energy plan
which our bill H.R. 6 encompasses. We encourage investment. We
provide incentives. It is not all about one thing, but it is a
lot about many things, including trying to preserve energy and
be more efficient with it.
I would offer a word of caution, Mr. Chairman, that we need
to look at this event in its totality. There were no shut-outs
in the southern part of the country. We note that the regional
differences that exist in this country have to be taken into
account when looking to increase the number of independent
organizations, such as the RTOs and the ISOs, whatever the next
three-letter acronym may be as a result of our discussion.
Throughout the Southeast, and I am from Florida, there has
been lots of talk about our energy systems. But we were
successful, and our States continue to work effectively in
planning, I believe in coordinating and maintaining effective
reliability measures. So I want to put that in the record.
So I welcome the witnesses, and again I commend you, Mr.
Chairman, for this hearing, and I yield back.
Chairman Tauzin. The Chairman thanks the gentleman, and
yields now to the gentleman from Maine, Mr. Allen, for an
opening statement.
Mr. Allen. Thank you, Mr. Chairman. I will waive an opening
and submit my statement for the record.
Chairman Tauzin. I thank the gentleman, and the Chair
recognizes Ms. Schakowsky for an opening statement.
Ms. Schakowsky. Thank you, Mr. Chairman. And welcome, Mr.
Secretary. I am really pleased that the committee is taking the
time to investigate the August 14 power outage that left
millions of Americans and Canadians without electricity.
I was in Israel watching on CNN late at night as the news
broke and city after city was announced, and I think like so
many people my first thought was to wonder if terrorism was the
cause. And the relief, on finding that in this instance it was
not terrorism, was tempered by knowing that in a country as
technologically advanced as the United States we have an
electric grid that is outdated and vulnerable to such drastic
disruptions, whatever the cause, and so that was a returning
sense of vulnerability and alarm.
And while it is essential that we find out exactly what
happened in a deliberative way, and that is what your task
force is doing, it is also true that many, like Mr. Wynn, have
been advocating for years that necessary fixes for the grid
have to be made, but those fixes have been derailed.
The blackout demonstrated to all of us that we can't delay
any longer fixing the deficiencies in the U.S. Power grid. We
can't allow for such roadblocks to prevent progress in the
future. And in my view, we absolutely can't hold an agreement
on the power grid hostage on behalf of an unsound and
unwarranted desire by some to open up the Alaska wilderness for
drilling, an anti-environmental move that would do nothing to
prevent future blackouts.
I support Mr. Dingell's wise suggestion that we move
quickly to enforce reliability standards. Reliance on voluntary
standards, the market and industry self-regulation will simply
not suffice. Particularly given the poor state of the current
U.S. Economy, we can't afford a repeat of the disruption to
commerce and personal lives that came along with the blackout.
We must work in a constructive bipartisan way to find
solutions to the problems that caused the blackout. We need to
move quickly and can't allow for extraneous issues or an
irrational reliance on the market. Our constituents deserve
better, and they deserve a guarantee that their government is
acting to prevent future problems.
My constituents have a few major questions: What are we
doing to protect them? When will they see the results? So since
we know the market alone won't work, what mechanisms are we
going to employ to ensure our constituents that their State
isn't next?
And if it turns out that blackout was due to the behavior
of industry actors, what are we prepared to do in response?
These are questions that I hope over time we will get answers
to and I hope we will continue these hearings. And I hope that
at some point consumer experts will also be invited to present
testimony. Thank you.
Chairman Tauzin. Thank the gentlelady from Illinois. The
Chair is pleased to recognize the gentleman from New Jersey,
Mr. Ferguson, for an opening statement.
Mr. Ferguson. Thank you, Mr. Chairman. And I appreciate the
ranking member and Secretary and others for making today
possible. We are going to obviously talk today about the events
of August 14, which resulted in 50 million people being
inconvenienced, businesses being hurt, and our Nation's
security being put at risk, to name a few items. But it is also
important to identify not only what went wrong, but what went
right that day.
I say that to highlight the good work Mr. Doyle was talking
about before by PJM. By shutting down the power and by
protecting the grid, PJM helped to contain the blackout and
kept the lights on in most of my home State of New Jersey and
in many other areas which otherwise would have been affected.
While today nobody has identified the exact cause of the
blackout, we do know that a disturbance within the system
resulted in a cascade that crippled the energy grid. Cascades
happen very quickly. They don't recognize State boundaries or
international boundaries, as we found out. They also don't
identify ownership of transmission lines.
When a cascade occurs, communication over a wide network is
vital. As a result of having a cohesive regional system in
place, our State of New Jersey and PJM were able to help
contain the blackout and assist our neighbors in New York
during their time of need.
I point this out because during the energy bill debate we
had a healthy conversation about the need for RTOs, and their
importance was highlighted again during the blackout last
month. The blackout also taught us about the need for a
comprehensive national energy policy, which as my friend from
New York was talking about, all of the different energy
questions he has, I would only suggest that if we had a
rational national energy policy for the past decade, a lot of
those questions would probably be a lot to answer these days.
H.R. 6, which we have passed earlier this area, would take
steps to correct a lot of these problems. It would require FERC
to take a hard look at its policies regarding transmission
rates and to set them high enough to get lines built. Our bill
would also reform the siting of new transmission lines by
giving States a year to act on an application for a new
transmission line to be built. If the States failed to act, the
DOE could step in and work with States to site lines that are
deemed critical.
All of these reforms are vital to modernize our grid, to
credit investment incentives in our electricity industry and to
reform transmission siting rules to reform the not in my
backyard attitudes that are currently stopping lines from being
built.
I also believe we need to go one step further to recognize
the important role that RTOs can play in a deregulated system.
RTOs can help avoid another massive blackout by providing the
oversight needed to guarantee reliability while also providing
consumers with the lowest possible rate due to the purchasing
power of a regional entity.
Mr. Chairman, I look forward to the rest of this hearing
and I yield back.
Chairman Tauzin. I thank the gentleman, and thank you for
reminding everyone that it was back in April when all of those
reforms were passed by the House, much prior to this blackout,
and all of them are going to be relevant as we go to
conference. I thank the gentleman and I recognize the gentleman
also from Illinois, my friend Mr. Rush, for an opening
statement.
Mr. Rush. Thank you, Mr. Chairman. Mr. Chairman, I want to
commend you for holding these hearings, and I want to welcome
the Secretary, Secretary Abrahams to this hearing. Mr.
Chairman, I will try to be as brief as possible. I know that we
have a busy time ahead of us.
I caution this committee to not allow this hearing to
deteriorate into a finger-pointing game with a lot of political
posturing before we can know exactly what happened with the
blackout and why it happened. Unfortunately, Mr. Chairman, I
believe today's hearings will only highlight the fact that
members of this committee, my esteemed colleagues on this
committee, significantly disagree on major issues concerning
energy regulation, electricity regulation.
No doubt, after learning why transmission lines failed in
the Midwest, and subsequently causing cascading failures to the
North and in the East, we will continue to fervently disagree
over how to appropriately legislate on this matter.
However, there is also much we do agree on in this
committee and in this Congress. In this regard, I want to voice
my support for Ranking Member Dingell's belief that we should
immediately pass a separate reliability bill that would at
least partially address the blackout issues before us today.
Mr. Chairman, there is no guarantee that this Congress will
present to the President a comprehensive energy bill in the
near future. Not only is there significant disagreement over
the bill's electricity title, but there is significant
disagreement over energy matters unrelated to the blackout.
If we in Congress are serious about protecting Americans
from future blackouts as quickly as possible, we should
immediately pass a noncontroversial reliability bill with
provisions that already enjoy broad-based support.
We can address the other more contentious matters in the
energy bill as time permits. Mr. Chairman, I believe that it is
indeed important for us that we do provide for some type of a
regulatory certainty so that we can send the right kind of
signals to those investors who would have to invest their hard
earned dollars into trying to upgrade our systems.
Mr. Chairman, I am concerned because I don't know--no one
has addressed, and no one has touched on the matter of how much
we are going to upgrade the grids, upgrade our distribution
system, and how much are the American people going to be asked
to put up for this? Is it the $50 billion that the President is
talking about? If that is the case, then who is going to pay
for it? Will the rate payers pay for it? Will the taxpayers pay
for it, or will the companies themselves pay for this upgrade?
Mr. Chairman, you know, not too long ago in my city we had
a large blackout, over a hundred thousand Chicagoans were
without electricity during one of our hottest moments in the
summer, during the July heat wave, and I am absolutely
committed to doing all that I can, to make sure, as I know you
are, to make sure that my constituents and your constituents
don't have to experience this again. No one in this country
should have to go through this type of experience, this type of
traumatic occurrences and this type of financial sacrifices
that they have been forced to make.
And we should support Mr. Dingell's initiative in this
regard, and this is the responsible thing for us to do as a
Congress. And, Mr. Chairman, I look forward to the testimony. I
look forward to the questions. And I look forward to give and
take and to the deliberative discussions that we are going to
engage in today.
And, Mr. Chairman, I am absolutely focused on the issue of
if--if we decide that there is going to have to be, which I
believe there is going to have to be an upgrade in our grid,
upgrade in our system, then I want to know who is going to pay
for it.
Chairman Tauzin. The Chair thanks the gentleman. The Chair
reminds the gentleman that 2\1/2\ years ago when I predicted
that we would be looking at New York very soon, I also included
Chicago. Chicago has many of the similar problems as we
examined them in the grids. I thank the gentleman for his
intense interest because his great city obviously and his State
is at risk here, too. I thank him for most of all his opening
comment, that we ought not be politically spinning this thing,
we ought to find out what happened and then we can debate how
to solve it.
The Chair is pleased now to welcome and recognize Mr. Pitts
from Pennsylvania for an opening statement.
Mr. Pitts. Thank you, Mr. Chairman. Welcome, Mr. Secretary.
I will submit my entire statement for the record. Just let me
say that I am hopeful that the hearing will examine why the
blackout occurred and how future blackouts can be prevented.
Unfortunately, some politicians have chosen not to discuss
solutions to our energy problems, but instead blame all of our
problems on deregulation and on the President's energy plan. I
know from my own experience in serving in the Pennsylvania
legislature back in the 1990's, when we passed the deregulation
legislation there, that if done in the proper way deregulation
can be successful, as it has been in Pennsylvania. And I look
forward to hearing the testimony today. Thank you, Mr.
Chairman.
Chairman Tauzin. And the Chair is pleased, I think, to
recognize the last member of our committee for an opening
statement, the gentleman from Ohio, a State dramatically
affected, and by some who indicate where the problem may have
started, Mr. Strickland.
Mr. Strickland. Now, we promised that we weren't going to
point fingers today. Thank you, Mr. Chairman. I appreciate your
work to put together these hearings regarding the August 14
blackout.
I recognize that we do not have all or even many of the
answers to questions about what exactly caused the lights to go
out on that Thursday afternoon. But it is imperative that we
begin to sort through the information that we do have.
I do look forward today, and I would particularly like to
welcome Ohio's Governor Robert ``Bob'' Taft, who will be
testifying later today, and someone that I admire greatly, Alan
Schriber, who is the Chairman of Ohio's Public Utility
Commission.
On August 14, major cities were affected, including
communities in northern Ohio. In fact not only did the lights
go out in Cleveland, Ohio, but the city's water system
experienced failures, and tens of thousands in the area were
without safe drinking water. There is also no question but that
the loss of electricity resulted in very harmful economic
consequences.
As Governor Taft's testimony will point out, quote, one
major Ohio company lost steel-making capacity for more than a
week. Rather than place blame before we have the full
information, or use the August blackout as a reason to advance
a larger energy agenda that is not without controversy. We
should react to what we do know and move forward where there is
much consensus. I am hopeful that we can pass legislation
swiftly to address necessary changes in the regulation of our
transmission grid.
We need to make it abundantly clear who has responsibility
for regulating our transmission grid, and assign that
regulatory body the necessary authority to enforce strong and
appropriate reliability standards.
I think we can find common ground on the electricity
reliability language that has been debated in this committee
many times over the past several years. I urge the chairman to
lead us, and I know he will, in the work necessary to pass
legislation to improve reliability of our transmission system
and to prevent future blackouts.
In closing, I would just say that now is not the time to
hold electricity reliability legislation hostage to a larger
energy bill that has numerous controversial provisions in it.
Instead, I would underscore the need to focus immediately on
legislation that will help to keep the lights on, protect
public health and safety, and avoid economic setbacks.
And, Mr. Chairman, I yield back the remainder of my time.
Chairman Tauzin. I thank the gentleman. I thank him for his
words of confidence both in the Chair and the committee.
For the record, let me, before we take a break, and I know
you are anxious for one, Mr. Secretary, let me mention two
individuals who are not here today who deserve an awful lot of
credit for advancing so many of these hearings and so much of
the information that we have used in order to pass the energy
legislation that is now in conference, which includes so much
of these electricity provisions: Chairman Barton of the Energy
Subcommittee, who is attending an energy conference as we speak
in Colorado, and his ranking member, Mr. Boucher, who have
worked as a great team. I think they have held over 12 hearings
leading up to the passage of the energy bill on the electricity
title alone.
So I want everyone to know that this committee, and its
subcommittee, has been diligent in trying to find that
consensus on this issue long before this crisis struck the
Northeast. I want to thank the gentleman for his statement of
confidence in the ongoing work we will have to do.
Mr. Secretary, we will now take a 5-minute break. We will
come back and hear your testimony, and go through a round of
questions, and then later on this afternoon we will have the
Governors coming in. So the Chair declares a 5-minute recess.
[Additional statements submitted for the record follows:]
Prepared Statement of Hon. Paul Gillmor, a Representative in Congress
from the State of Ohio
I thank the Chairman for the opportunity to learn more about last
month's electricity blackout, the largest in U.S. history. This hearing
is timely, both because of the events of August 14 and because of the
major energy legislation we now have pending in a conference committee.
August 14 was an event waiting to happen. If it had not happened
then, it likely would have occurred soon thereafter in another place
because of developments in the electricity marketplace in recent years.
Electricity use and generation has been growing much faster than
transmission capacity. We are putting more and more power into a system
which is less and less able to carry it reliably.
I would like to extend a special welcome to the Honorable Bob Taft,
Governor of my home state of Ohio, and fellow Buckeye Alan Schriber,
Chairman of the Public Utilities Commission of Ohio. I look forward to
hearing their testimony later this afternoon regarding the blackout's
affects on Ohio and the nation's human and economic health.
While the exact cause of the blackout remains unclear, again, we do
know that over the last several years, power companies have rushed to
build new, de-regulated generation without the necessary expansion of
the country's more-regulated transmission grid, where the Federal
Energy Regulatory Commission (FERC) requires that those owning the
lines sell access at a wholesale price. Yet, even if there were
sufficient transmission capacity, it is difficult to predict whether
such investment in new lines would have prevented the blackout as
preliminary investigations point to the possibility of a series of
human and mechanical errors.
With future blackouts projected as the demand for power increases
and transmission capacity remains stagnant, we in Congress must now
focus on setting electricity reliability standards, while at the same
time encouraging the expansion and modernization of the nation's power
grid.
As we further delve into what happened on August 14, we must also
soon consider reconciling the differences between the House and Senate
versions of the energy bill. Both measures contain provisions designed
to speed approval of building lines on federal lands, and in the case
of H.R. 6, includes additional language giving transmission companies
more incentives for new investment. We must have a relentless
commitment to producing a meaningful, comprehensive energy package
aimed at conservation, alleviating the burden of energy prices on
consumers, decreasing our country's dependency on foreign oil, and
increasing electricity grid reliability. Furthermore, it is my hope
that 50 million Americans without power, and no more, will be enough
momentum to help put our energy bill into practice.
I look forward to hearing from the well-balanced panels of
witnesses over the next two days and yield back the remainder of my
time.
______
Prepared Statement of Hon. Vito J. Fossella, a Representative in
Congress from the State of New York
An old Billy Joel song starts out, ``I've seen the lights go out on
Broadway.'' While many felt such a scenario was a thing of the past, it
again became a reality on August 14th. Before New Yorkers could say
Piano Man, they abruptly experienced the largest blackout in U.S.
history. Many were forced to crawl out of the subway and sleep on
streets as this country's biggest city worked to get public
transportation and traffic communications back up and running. Although
many steps have been taken to enhance reliability since the blackouts
of 65 and 77, August 14th proved one thing definitively: our nation
still has a long way to go in improving its system of delivering
affordable, reliable electricity to Americans.
Congress took great strides towards expanding markets and the
availability of low cost power with the Energy Policy Act of 1992. By
allowing wholesale generators greater access to the grid, this bill
opened the door for consumer choice and the benefits of lower prices
through embracing the free market. However, there is still work to be
done. While the market for power generation is ripening, businesses
continue to face obstacles in developing the transmission capacity
necessary to bring this power to consumers. This year, our Committee
has tried to eliminate regulatory red tape for consumers. The House
passed energy bill once again paves the way for improving our energy
markets by repealing ancient, burdensome regulations, such as the
Public Utility Holding Company Act, and providing incentives for
investment in transmission. The bill also recognizes electricity
markets are interstate in nature. It provides the federal government
with increased authority over the siting of interstate transmission
lines and creates mandatory national reliability standards. These
policies maintain states rights, while simultaneously recognizing
electrons don't stop at political or state boundaries.
In debating energy legislation, we must also examine ongoing
efforts of federal agencies. One such initiative is the Federal Energy
Regulatory Commission's Wholesale Market Platform. This proposed
rulemaking promotes reliable energy markets by encouraging the
formation of Regional Transmission Organizations, or RTOs. Such
independent grid operators provide greater price transparency and more
efficient flow of power to consumers. As FERC Chairman Pat Wood
recently noted, ``the cascading nature of this blackout offers an
object lesson of how the electricity grid requires regional
coordination and planning.'' This is exactly the approach Congress
should look to support by allowing FERC to continue developing its
proposed rule. Independent oversight of the transmission grid is the
most effective way to bring about the necessary policy coordination and
needed investment to ensure future reliability. We must work vigorously
to advance such policies as we move into the energy conference.
______
Prepared Statement of Hon. George Radanovich, a Representative in
Congress from the State of California
Thank you Mr. Chairman for holding this hearing, and I applaud your
efforts to identify the cause of the worst blackout in the nation's
history and the steps needed to prevent similar events in the future.
Our nation's health, safety, and economic well-being are tied to
the reliable, affordable supply and delivery of electric power.
Appropriate action must be taken to ensure that the system is reliable,
efficient, and receives the kind of investment that is needed to
maintain its service without compromising long-term failure.
This blackout illustrates the fact that electricity is a regional
commodity that doesn't respect state boundaries. Until we start
thinking and planning regionally, and using new technology to build a
more modernized grid, our nation will continue to be vulnerable to
massive blackouts.
The days are numbered for those who used the blackouts in
California as a reason to stall market reforms and attack deregulation.
As energy demand increased, we properly opened up the wholesale
electricity market to greater competition. The right balance is not
easy to achieve, but it is not impossible to craft energy regulation
that will cut prices, improve choices and ensure a secure supply.
Utilities and their customers have been painfully reminded by the
meltdown in electricity markets that electricity is not just another
commodity, but is instead an essential service for all consumers. Our
nation has recognized the importance of a reliable transmission grid to
investors, customers and the citizens of the U.S. Our country needs
legislation that will promote reliability in our wholesale power
markets. This will be achieved by working closely with FERC and the
states to accommodate regional needs, state authority and other
relevant concerns.
Deregulation must not mean no regulation. Nor can it mean an inept
regulator who arbitrarily intervenes in private decisions like Gray
Davis. He not only helped freeze retail prices while making utilities
pay volatile wholesale prices, but he also discouraged them from
hedging the resultant risk through futures contracts.
In the end, I hope we can work together to forge bipartisan
legislation on a fair and effective national energy policy--one that
protects consumers from the horrific consequences of a massive
blackout.
Thank you, Mr. Chairman, for holding this hearing today. I look
forward to the witnesses' testimony.
______
Prepared Statement of Hon. Diana DeGette, a Representative in Congress
from the State of Colorado
Mr. Chairman, I thank you for holding these timely hearings. The
testimony we will hear over the course of the next two days presents
us, as Members of the Energy and Commerce Committee, with an excellent
opportunity to gather the information we need to fulfill our duty to
craft our nation's energy policy. I hope we all avail ourselves of the
opportunity to listen to the experts, learn what they currently know
about the outage and identify areas where our knowledge is lacking.
I would like to begin by echoing the call of our esteemed
Democratic leader, Ranking Member Dingell. I believe that we should
empower the North American Electric Reliability Council (NERC) to
mandate and enforce federal reliability standards. This measure is
sensible, enjoys bipartisan support, and is relatively non-
controversial.
But I urge caution in adopting more sweeping changes that are far
more controversial. This includes a push for more deregulation and
greater federal control over power-line siting. Public catastrophes do
not warrant action that ultimately leads to public debacle. Many of the
early responses to this crisis are guilty of overreach. I voted against
H.R. 6 when our committee considered it earlier this year for what I
believe are solid and serious policy considerations.
The editorial pages of Denver's newspapers have raised similar
concerns. I read from a Rocky Mountain News editorial dated August
20th. ``We need an energy bill that spurs economic growth and helps
ensure affordable and reliable energy supplies for Americans. What we
don't need is a special-interest banquet that picks the pockets of
taxpayers.''
I agree with their call for an energy bill that increases
affordability and reliability. In my view, we must also reduce
consumption and use energy more wisely. Conservation must be a part of
this policy. New technology, identified by the Energy Star label, could
reduce wasted energy by up to 75 percent. These changes, while small on
an individual basis, can have enormous impacts in overall energy
consumption.
During our earlier consideration of H.R. 6, I offered an amendment
that would have made Congress follow the same energy efficiency
requirements we have already required the other branches of government
to meet. It's time for Congress to encourage widespread adoption of new
technologies to reduce energy consumption that we hope will be widely
adopted in commercial and residential properties. We need to continue
our efforts on behalf of renewable energy programs and energy efficient
programs. Maybe my amendment, which recognizes that what's good for the
goose is good for the gander, will be adopted during the energy bill
conference proceedings.
Of course, this is a small part of the solution. But I do not
believe that conservation should play a small part in our national
energy debate. And I believe that H.R. 6 was not sufficient in
recognizing the very real gains that conservation can achieve.
In conclusion, the 2003 blackout was a staggering event. Thirty-
four thousand miles of transmission lines were adversely affected in
approximately nine seconds, eventually leaving tens of millions of
Americans across the Midwest and Northeast without power. Colorado was
not walloped, but I do not fool myself that Coloradoans are immune to
future blackout threats. Let's work together--across the aisle and
across the nation--to improve reliability standards. Let's undertake
more conservation efforts. And let's listen to the experts as we figure
out the best way to avoid a repeat of the 2003 blackout.
[Brief recess.]
Chairman Tauzin. The committee will please come back to
order. And we are pleased to now welcome the very patient
Secretary of Energy of the President's Cabinet, and our dear
friend, former Senator of the U.S. Senate, the Honorable
Spencer Abraham, who is accompanied today by the Deputy
Secretary of the Department of Energy, the Honorable Kyle
McSlarrow, who is here to assist the Secretary in his
testimony.
Mr. Secretary, again, we are anxious to hear from you as to
what your Department's understanding of this event is and any
suggestions you might have about how we ought to proceed from
here and what you believe will follow. Particularly, I know we
are all interested in the joint task force that has been
assigned to you and the officials in Canada to make sure that
we have not only a multi-state but international cooperation in
solving this problem.
So again we thank you. We appreciate your service to the
country, and your willingness always to come to our committee
and share with us information as we desperately need it today.
Secretary Abraham.
STATEMENT OF HON. SPENCER ABRAHAM, SECRETARY, U.S. DEPARTMENT
OF ENERGY; ACCOMPANIED BY HON. KYLE McSLARROW, DEPUTY SECRETARY
OF ENERGY
Secretary Abraham. Mr. Chairman, thank you very much. I
thank you and the ranking member for inviting us here today.
And as you indicated, I an joined by our Deputy Secretary, Kyle
McSlarrow, who along with myself has been very active in
overseeing the work of our task force. We appreciate the chance
to give an initial briefing to this committee.
As you know, President Bush and Prime Minister Chretien of
Canada formed this joint task force just a few hours after the
lights went out across large portions of the United States and
Canada on August 14. I am the cochairman of the task force,
along with my Canadian counterpart, Canada's Minister of
Natural Resources Herb Dahliwal.
I can assure this committee that both Minister Dahliwal and
I take the responsibilities which we have been given extremely
seriously. We have been in frequent contact since August 14,
and since the task force was created, and will certainly apply
our own personal commitments as well as the resources of our
respective department and ministry to the task force efforts.
As a personal matter obviously for me, this is significant
not just because it happened here in America, but because one
of the affected States is my own home State, Michigan. Like a
number of the Members of Congress who are present here today, I
have family members who were directly affected by this, and I
can assure the Members of Congress that even as you implore us
to answer the question of what happened and why, even more on
my doorstep are my own relatives who want to know the answers
to the question, those questions as well. And we intend to
provide them.
Our job is to find out why such a widespread power outage
occurred and to recommend measures to help keep something like
it from ever happening again. To ensure complete and
cooperative investigation, the task force is working closely
with the Governors of the States involved, some of whom I know
will be testifying later today, as well as the affected
Canadian Province of Ontario. We are also working with the
major entities involved, with the operation of our electric
transmission infrastructure, including the independent systems
operators that manage the flow of power over transmission
systems, the utility companies whose customers were affected by
the blackout.
Today, less than 3 weeks after the blackout, I think we are
making good progress in putting together the extraordinarily
complex sequence of events which surrounded the incident. And
while we are encouraged by the progress, there is still a lot
more to be done before we can determine exactly what caused the
blackout and why it spread.
As we all have heard, there are a number of theories
already circulating as to what may have happened and who might
be responsible. All of that, no matter what the source, is only
speculation at this point. Determining the exact causes of this
blackout is far too complex a task for anyone to know all of
the answers at this stage. We are gathering information on
about 10,000 individual events that happened across thousands
of square miles in the space of about 9 seconds.
All of that information has to be collected, compiled,
sequenced, and analyzed before any credible conclusions can be
drawn.
To try to put the complexity of this inquiry into
perspective, I think it is important to understand the nature
of the electric transmission grid. Our grid system consists of
thousands of power plants, tens of thousands of substations,
switching facilities and other specialized equipment, hundreds
of control centers and about 260,000 miles of power line
stretching all across the country.
The American portion of the area affected by the blackout
included 34,000 miles of transmission lines and about 290 power
generating units, which is a substantial segment of the
national total. As members of this committee who have worked on
these issues know, this intricate network delivers electric
power to virtually every home and business in America.
Electricity, because it can't be stored, might be produced
almost the very instant it is used. It must be moved
efficiently from where it is produced to where it is being
consumed, traveling over this highly technical grid system at
the speed of light. Keeping this complicated web of
interconnected wires and power plants and control facilities
operating is I think a miracle of modern engineering, and it is
a miracle that happens 24 hours a day all year round.
It is without a doubt the most complex and elaborate piece
of infrastructure that this country has. And it is, in my
judgment, the most important, because without electric power
there is no U.S. Economy. When the lights go out, as members of
this committee have already suggested today, modern life as we
know it grinds to a sudden halt, transportation is interrupted,
communications fail, water systems shut down, factory work is
disrupted, food spoils, businesses lose money, and people are
inconvenienced and even endangered.
And that is why it is so important that our task force
conduct a complete and totally thorough investigation of what
happened on August the 14. It is why we have so many experts
from so many sectors of government and industry working in our
search for answers.
The United States members of our task force are Secretary
Tom Ridge of the Department of Homeland Security, Pat Wood, who
is the Chairman of the Federal Energy Regulatory Commission,
and Nils Diaz, who is the Chairman of the Nuclear Regulatory
Commission.
The Canadian members of the task force are Deputy Prime
Minister John Manley, Kenneth Vollman, who is the Chairman of
Canadian National Energy Board, and Linda Keen, who is
President and CEO of the Canadian Nuclear Safety Commission.
The task force is organized into three working groups that
are focusing on critical areas of the investigation. Our
Electric Systems Working Group, led by experts at our
Department and FERC, along with Natural Resources Canada, is
focusing on the transmission infrastructure, its workings and
management. The Nuclear Power Working Group, which is managed
between the Nuclear Regulatory Commission and the Canadian
Nuclear Safety Commission, is looking at how nuclear plants in
the affected areas performed during the outage. Our Security
Working Group, managed with the Department of Homeland Security
and the Canadian government's Privy Counsel Office, is looking
at all of those security aspects of the incident, including
cyber security.
Technical support for the Electric Systems Working Group is
being provided by our department's Consortium for Electrical
Reliability Solutions, the CERTS group, a group of experts from
our national laboratories, and a number of universities, people
with broad experience in transmission and power delivery
issues.
That team, which has investigated a number of major power
outages, including the 1999 blackouts, includes some of the
world's foremost experts in transmission reliability issues,
grid configuration, transmission engineering, wholesale power
markets, outage recovery and power system dynamics.
In addition, we have recruited transmission experts from
the Bonneville Power Administration to help in the
investigation as well. These are the experts who led the team
that examined the 1996 blackouts in the West.
Each working group will consist of technical management and
engineering experts appointed by the Governors of each U.S.
State affected by the blackout and the Province of Ontario in
addition to the governmental agencies involved in the
investigation. That will allow the States who are affected to
be directly involved in helping us to both collect the
information and try to analyze it effectively.
Once we are able to determine what happened, why and how,
we will then enter a second phase of the task force's
assignments, which is formulating recommendations to address
the problems which we uncover. Any recommendations that the
joint U.S.-Canada task force makes will likely focus on
technical standards for operation and maintenance of the grid,
and on the management of the grid, in order to more quickly
correct the problems which we identify.
Mr. Chairman, we believe we have put together a superlative
investigative team. We are pleased at the level of cooperation
we are receiving from State and Provincial governments,
regulatory agencies, utility companies and industry groups, and
we work together in this binational effort.
We are determined to complete this inquiry in a timely
manner. We hope to have conclusions and recommendations in a
matter of weeks, not months, but we will not compromise quality
for speed. We want answers quickly, but we want to make sure
they are the right answers. The American and the Canadian
people want and deserve answers about what happened to our
power system on August 14, and we on the task force are aware
of the importance and the urgency of our assignment, and we
know the vital role that our findings will play in maintaining
the energy security of both of our countries. That is why we
are dedicating so many resources to the investigation. That is
why we will not engage in any sort of preliminary theorizing or
speculation about what might have happened. We will focus only
on the facts, we will follow the facts where they lead us, and
we will not draw any conclusions until the facts are in.
Mr. Chairman, I want to thank you, thank the ranking member
of the committee for inviting me here today to appear before
you on this important matter, and I will be glad to try to
answer questions at this time.
[The prepsred statement of Hon. Spencer Abraham follows:]
Prepared Statement of Hon. Spencer Abraham, Secretary of Energy
Good morning, Mr. Chairman and members of the Committee. I am
pleased to be here today to discuss the August 14th blackout and the
work of the joint U.S.-Canada Task Force that is investigating the
cause or causes of the blackout and the reasons it cascaded to
encompass such a wide area.
Given that the U.S.-Canada Task Force has not yet completed its
investigation, I will not speculate today as to why the August 14th
blackout occurred or why it was not better contained. Such speculation
would be premature. The Task Force will follow the facts wherever they
lead us. We won't jump to conclusions. Our investigation will be
thorough and objective.
At the appropriate time and in consultation with the other U.S. and
Canadian members of the Task Force, I will report to you on the Task
Force's findings and recommendations. In the meantime, I want to
describe for the Committee how the Task Force was formed and how it is
conducting its work.
On August 15, 2003, only hours after the blackout had occurred,
President Bush announced that he and Canadian Prime Minister Chretien
had agreed to form a Task Force to investigate the causes of the
blackout and to make recommendations on how to minimize the risk of
future outages. The President and Prime Minister determined that, given
the international scope of the August 14 event, a bilateral
investigation would be more efficient and would end the
counterproductive international finger-pointing that began immediately
after the blackout.
President Bush appointed me to serve as co-chair of the Task Force
along with Canadian Minister of Natural Resources Herb Dhaliwal,
appointed by Prime Minister Chretien. On August 20th, I met in Detroit
with Minister Dhaliwal. That day, we agreed on a joint communique
expressing our determination to work cooperatively and quickly in
carrying out the Task Force's work. Based on our discussions with each
other and with relevant government agencies in each country, we also
agreed on the membership of the Task Force and to an outline that lays
out the working structure for the inquiry and the initial questions
that the Task Force will address.
The U.S. members of the Task Force are Tom Ridge, Secretary of
Homeland Security, Pat Wood, Chairman of the Federal Energy Regulatory
Commission (FERC), and Nils J. Diaz, Chairman of the Nuclear Regulatory
Commission. The Canadian members are Deputy Prime Minister John Manley,
Kenneth Vollman, Chairman of the National Energy Board, and Linda J.
Keen, President and CEO of the Canadian Nuclear Safety Commission.
Minister Dhaliwal and I agreed to a narrowly focused investigation
to determine precisely what happened--in phase one, to identify why the
blackout was not contained, and in phase two, to recommend what should
be done to prevent the same thing from happening again. Our
recommendations will focus on technical standards for operation and
maintenance of the grid, and on the management of the grid, in order to
more quickly correct the problems we identify.
Because of the complexity of the work before us, the Task Force
established three working groups to support the fact-finding phase of
its work--an electrical system working group, a security working group,
and a nuclear issues working group. These groups are chaired by the
U.S. and Canadian agencies best able to carry out the work. In
addition, as was stated in the August 20 statement issued by the U.S.-
Canada Task Force, the North American Electric Reliability Council
(NERC) ``and the affected Independent System Operators and utilities
have agreed that their investigations will supplement and contribute to
the work of the Task Force.''
Even before my meeting with Minister Dhaliwal, and shortly after
the blackout occurred, I used my authority as Energy Secretary to
assemble and dispatch a number of individuals to begin investigating
the blackout. I also asked industry officials with involvement in the
blackout and the recovery process to preserve all data of potential
relevance to our investigation. The Task Force team has grown larger
since those first days and is working hard to collect and review the
massive amounts of data involved, as well as to interview officials
from NERC, the relevant utilities, and the independent system
operators.
As I have repeatedly stated since being named Task Force co-
chairman, we are not setting a deadline for completing our work. We are
focusing on doing the job right--not on meeting an arbitrary deadline.
The complexity of the challenge demands no less than our full attention
and enough time to do a complete and thorough job of assessing what
happened and putting forth our recommendations and solutions.
Finally, Mr. Chairman, I want to thank you for your complimentary
remarks concerning my efforts with respect to the investigation. I look
forward to answering any questions you may have.
Chairman Tauzin. I thank you, Mr. Secretary, and the Chair
recognizes himself briefly for a round of questions.
Let me first, I guess, try to put this in layman's terms so
we understand what we are looking at. In a house, in a home in
which we live, power surges occurs. There is a short on a wire.
Our homes are protected with circuit breakers, and the surge
occurs, and the circuit breaker switches off, and our house
doesn't burn down, but we are out of juice on that circuit.
Lights go out, appliances stop until we flip the circuit switch
back on and we got power again, and if that short isn't
corrected, it clips it again.
In a big grid, multistate, international, I assume that is
part of the problem, too, that we have a series of events, some
involving perhaps a tree falling on a line, we are told,
perhaps a power plant going down, and, in the context of the
surges or the shortages, whatever happens in that system,
circuit breakers started going off. We know that parts of the
system were protected from shut-down. Parts of the Northeast
continue to have their lights, continue to have electricity.
Others failed to work. So the two questions I think that we
will anxiously await, all the technical gurus and the task
force are working on, number 1: How did it start? That is
important, what started it, although that is not the most
critical one. Storms knock down power lines; ice storms,
hurricanes, tornadoes, earthquakes knock down power lines, put
stations out of work.
The most critical one is we have these massive grids. Why
did it spread? Why did these power surges develop, and why
didn't the protections in the grid work? Was it a failure of
the Reliability Council having enforcement authority to make
sure standards were enforced throughout the grid that would
have prevented the spread, or was it something else? Can you
give us any kind of idea yet as to what you are learning or
what you think we may want to focus on to reexamine with
Governors and power company officials and others coming to our
committee in the next 2 days?
Secretary Abraham. Mr. Chairman, I should state at the
outset and repeat what I said in my opening statement: Until we
have what I think are and what our task force has a comfort
level with and the analysts have given us a comfort level, I am
not going to try to prejudge what might have happened or why it
cascaded, although you have identified the first two parts of
our responsibility, and why it cascaded, is that, in many ways,
as you say, is even more important. There are a lot of things
that might create surges or instability in terms of the grid.
We do know some things, though, just as a fundamental
matter. One is that these things happen very fast, and yet
humans are in various rolls that are critical to the process,
and people can't move as fast as these events can develop.
Chairman Tauzin. Were there communications problems?
Secretary Abraham. We are looking at that. We are also
obviously looking at the interesting question of why certain
areas were able to isolate themselves and others weren't.
One of the broader issues, you know, that we have been
talking about for some time is the need to move to a smarter
grid, one that relies--or allows for much more instantaneous
communication if issues happen, and all of those are part of
the sort of the role or the possibilities that we will be
taking into account. But it is early in the process, now, too
early to specifically say why things failed in certain areas.
Chairman Tauzin. Mr. Secretary, it is clear that States,
communities in those States, are becoming more reliant on
electricity generated and functioning over interstate
boundaries. We now see in the Northeast blackout a situation
where those boundaries even extended to another country, and I
realize the President has called upon the task force
representing both countries to look at this.
As we wrestle with the problems of multistate
jurisdictions, the jurisdiction of the FERC and your
Department, and the complexities working out siting problems
between sites, does the fact that these lines cross
international boundaries add a level of complexity that we need
to focus on?
Secretary Abraham. It certainly adds more to the challenge,
but I don't believe it is the case, at least in terms of the
U.S. and Canada, that there is a lack of relationship or lack
of communication or working relationship between us. We have
initiated a number of strong binational energy dialog and
working group activities to deal with these issues, but the
point you make, helps to underscore how big this grid is, how
complicated it is, how far we are now hauling electricity and
it is not just a local or a single-State issue any longer, and
the fact that it is international in scope underscores, I
think, the challenges we have.
Chairman Tauzin. And the final question, we have debated
transmission in this committee for a long time. We have been
told the transmission is the lowest profit, if you will, sector
of the utility industry, that incentives for new transmission
lines are desperately needed, that authorities to make sure
those lines are built to at least the technical standards are
desperately needed, that coordination between States and siting
is desperately needed, all of which we tried to include in the
energy package we sent to the floor. Do you concur that all
three items are necessary basic reform, as we move to a
solution?
Secretary Abraham. Well, again, I want to separate what
took place on August 14 from a broad discussion of public
policy decisions. We don't know yet what happened on August 14.
We do know, as I think was underscored in the national grid
study which our Department completed last year, that the
combination of growth and demand for electricity, the age and
condition of the grid, and its congestion levels and so on
require us to address all of the issues you identified, and
obviously the recommendations of that are still well-known to
this committee.
Irrespective of what we might determine as to the causation
of the events of August 14, those issues will remain before
this country and a challenge for us to address as we move
ahead.
Chairman Tauzin. Thank you, Mr. Secretary.
The Chair welcomes and recognizes the ranking Democrat,
former chairman of our committee Mr. Dingell, for opening
statements--for a round of questions, rather.
Mr. Dingell. Mr. Chairman, thank you.
Welcome, Mr. Secretary.
Secretary Abraham. Thank you.
Mr. Dingell. Mr. Secretary, I was impressed by your
comments about the way you are inquiring into this matter, and
I commend you for that. You and I have had some correspondence
on this, and I would like to ask at this time, Mr. Chairman,
that that correspondence----
Chairman Tauzin. Without objection, the Secretary's
response will be made part of the record.
[The information referred to follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Dingell. There is one letter with questions I would
appreciate an answer to, Mr. Secretary, and I hope you will
give that.
Secretary Abraham. Actually, we were working on that, and I
will try to answer any part of that today as I can.
Mr. Dingell. Now, Mr. Secretary, we have, really, an
ongoing query to find out what was the cause. We also have no
assurances that this blackout could not occur again; isn't that
right----
Secretary Abraham. Well----
Mr. Dingell. [continuing] under current--under current
practices, and so forth.
Secretary Abraham. Until we know the exact reasons for this
blackout, I think it is difficult to answer whether this
particular type of incident would occur again, but I would just
reiterate what I said in response to the last question: The
condition of the grid, its age, the demands being put upon it
causes a lot of concern, as we have expressed in our grid study
and other comments the Department has made.
Mr. Dingell. Now, Mr. Secretary, are you familiar with the
reliability sections of the Senate and the House bills?
Secretary Abraham. Yes.
Mr. Dingell. Does it--does the administration support them?
Secretary Abraham. Yes, we do.
Mr. Dingell. Do you have any additional suggestions for
legislative actions which would perhaps prevent either the
event of August 14 or something similar thereto from occurring
again?
Secretary Abraham. We do. I believe, Congressman, that
probably next week a broader statement of administrative
position conferees will be forthcoming, but I think we have
expressed, and I think my answers to Congressman Tauzin's
question before indicate, our support for the need for
providing incentives for investment in transmission, for the
reliability standards that you have just referenced for
addressing the broad set of issues that threaten the long-term
health of the transmission grid.
Mr. Dingell. Now----
Secretary Abraham. Number of provisions, in other words,
that are in----
Mr. Dingell. I am concerned. General statements tend to be
somewhat troublesome. They are hard to reduce to legislative
language.
Will you be submitting to us legislative language, or will
you be submitting to us statement of principles?
Secretary Abraham. I think that we will be submitting a
fairly specific statement of administration position to
conferees on the various issues that will be going to
conference on the energy bill. I believe next week may even be
the timetable.
Mr. Dingell. I find that--I find us, Mr. Secretary, in a
position where neither you nor I or anybody on the committee or
regulatory agency can assure us that this kind of blackout, or
at least these kinds of events, couldn't occur again, and I am
very troubled by the need to get reliability authority in at
the earliest time.
I remember one time I was much praised for getting the
clean air bill through the House in 13 hours. I observed it
took me 13 years to get it through in 13 hours.
We are now in our eighth or ninth year of hassling around
with a general energy bill, and a big broad energy bill carries
with it huge amounts of controversy that preclude early and
speedy enactment, so I am concerned that--that, if we have a
serious problem with regard to reliability, we address the
reliability questions to reduce possibilities of confronting
another event like we found on August 14 and the days that
followed.
Can you tell us that--that waiting around for a big energy
bill will give us assurances that we can protect people in the
Northeast and Midwest from the kind of events that we saw on
August 14, or we would be better off if we are interested in
reliability to bring forward a provision which will--which can
be speedily passed on which there is agreement in the House and
Senate already with regard to reliability? Which is the better
course?
Secretary Abraham. I think there are a lot of provisions in
the energy bill that enjoy the kind of consensus support that
the reliability provisions enjoy, and I think there are a few
areas of contention that need to be worked on.
I guess I would say this, that every few weeks or months,
at least during the time that I have held this job, there has
been a sector of the energy world that has had something either
described as a crisis or certainly a serious problem, whether
it is natural gas storage a few weeks ago or this blackout, or
it is high gasoline prices. I think to ignore those other
challenges would be----
Mr. Dingell. I am not talking about ignoring them, Mr.
Secretary.
My time is running out.
I just want to observe that some of these other areas are
much more controversial. We can get to the areas where we have
agreement, do so quickly, and then proceed to address the other
more contentious questions which could delay us addressing the
reliability question.
I am curious which was the course that you would take.
Secretary Abraham. I would reiterate what I have said to my
friends on both the Republican and Democratic side for 2 years,
which is let us get an energy bill done quickly, and I think
now the conferees have plenty of reason and plenty of momentum
to move quickly.
We have conferenced much of this legislation, almost to
completion a year ago. I don't think that that much has
changed, so I believe it can happen quickly, and I would
encourage the conferees and certainly the Chairman.
Mr. Dingell. I would note in sheer desperation the Senate
passed a bill which--which they had never even considered. It
was last year's bill. They seemed to be trying to punt, and
they have punted it, I think, either over here or into
conference.
What I am trying to do is figure out how to kill the
closest snake first. It appears to me we are going to be busy
killing snakes and maybe not the one that is most near us or
that constitutes the most serious danger.
Secretary Abraham. Well, I commend the Senate for finishing
an energy bill this year, doing it in less time than it took
them last year. I hope the same pragmatism will produce a bill
through conference as soon as possible.
Chairman Tauzin. Thank you, Mr. Dingell.
Mr. Dingell. Thank you, Mr. Secretary.
Chairman Tauzin. The Chair recognizes the chairman of the
Telecommunications Subcommittee, Mr. Upton from Michigan, for a
round of questions.
Mr. Upton. Thank you, Mr. Chairman, and thank you, Mr.
Secretary, for your statement this afternoon.
I would like you to comment briefly about the need to
upgrade our transmission facilities, and in light of that, two
statements that I see. One is a recent energy report that
indicated, and I quote, some utilities are concerned that
transmission investments may be of greater benefit to their
competitors than to themselves, and, as a result, many
promising technologies are left stranded.
The second statement that I think you made at one point,
indicating the need to increase rates of return from investment
in transmission facilities, and in that--those remarks, I think
it was understood that FERC had not acted sufficiently to
address transmission investment.
We have a provision in H.R. 6, the energy bill that passed
the House, that requires that for transmission rulemaking to
provide better rates, but there are a number of us that are
concerned that they may not propose anything better than what
they have already offered, and I would like to ask you whether
you would support provisions to the Federal Power Act that
would require for it to provide better transmission rates if,
in fact, it is needed to encourage transmission expansion.
Secretary Abraham. The administration, I think, has
previously endorsed those provisions that are in the House
bill.
I think that the need for investment in terms of upgrading
the transmission grid is obvious, and several Members who have
worked on it spoke earlier very authoritatively about the need
to do that.
One of our concerns is not only that we upgrade the grid,
but that we move to a smart grid, to a smarter grid, and also
one that works more efficiently, which is also one reason we
have invested very substantially in things like
superconductivity research, to try to make the grid more
efficient in its operation.
One other point I would make is our grid study revealed--
and I think most experts concur on--is that the congestion in
the grid is driving up the cost of energy for the ratepayers of
this country today, and that, in fact, if we improve the
transmission grid and relieve that congestion, it will actually
have a positive impact on the other side of the bill, the part
that relates to the cost of generation.
Mr. Upton. As you begun to investigate the events of August
14, is one of the things you are going to be looking at is the
wholesale transactions that were scheduled to take place that
day, particularly in the Midwest?
Secretary Abraham. Well, we intend to look at all the
events, to determine in both sequence and how they related to
what took place, so those events would be included in the scope
of the work we do.
Mr. Upton. Now, for the most part, my district escaped
direct impact because of the energy blackout, but one of the--
one of the events, and I mentioned this in my opening
statement, that really did trigger an impact, that hit us, was,
in fact, the almost immediate spike in gasoline prices about 2
weeks later when they went up about 20 cents, in fact,
overnight.
Are those refineries back on-line that were taken out?
Secretary Abraham. It is my understanding they all are back
on-line.
There was one, I think, in the Detroit area which was down
a little longer than others because of problems that I think
ensued in the wake of the blackout, but it too, is operational.
So my understanding is that they all are up and functioning.
Mr. Upton. Thank you.
I yield back my time.
Chairman Tauzin. Gentleman yields back, and the Chair is
pleased to recognize the gentleman from Massachusetts, Mr.
Markey for a round of questions.
Mr. Markey. Thank you, Mr. Chairman.
Mr. Secretary, I read in the paper that the Bush
Administration has agreed to a proposal by Senator Shelby to
prevent FERC Chairman Wood's proposed standardized market
design plan from being implemented until the year 2007.
What if it should turn out that one of the reasons why the
existing system failed to contain the blackout was a lack of
standardized market structure, including strong regional
transmission organizations that communicate well with each
other? Haven't you traded away already what is potentially one
of the solutions to the problem?
Secretary Abraham. Well, Congressman as you probably know,
last year in the energy conference that was conducted with a
Senate Majority of one party and the House majority on the
other, the decision to delay implementation of those proposals
had already been largely agreed to. We did not----
Mr. Markey. Mr. Secretary----
Secretary Abraham. Yes?
Mr. Markey. There was no conference report which was ever
completed between the House and Senate.
Secretary Abraham. Yes. I am describing what I know to be
and I think was reported at the time to be the situation.
Our goal in this Congress is to see an energy bill passed.
We thought that it remained the view that to have gotten a bill
through the Senate required us to support that provision.
Our top priority is to get an energy bill passed, and that
remains our goal.
Mr. Markey. Would you be willing to change your mind if it
turned out that this is part of the solution? Are you open to
that, changing your mind on the commitment that you have made
to Senator Shelby?
Secretary Abraham. This administration is on record as
supporting the idea of regional transmission organizations. The
question whether they should be mandated or not is not one we
have endorsed, and so that is our position at this time.
Obviously I am not going to speculate about what might or
might not evolve from our investigation until I----
Mr. Markey. Mr. Secretary, I think it is going to be
difficult for you to get a comprehensive solution to this
electricity problem if you have already made up your mind with
regard to which provisions you are going to mandate and which
you are going to negotiate away.
I have also read in the papers that you have said that
there aren't sufficient incentives for new investment in
transmission, and that this may have contributed to the
blackout.
Why isn't rate recovery for transmission investment and a
regulated 11 to 12 percent profit for those companies, which is
what the Federal Power Act already allows the utilities to get,
sufficient to incentivize them to invest in transmission?
Secretary Abraham. I can't answer what investment decisions
individual companies make. What I know and what I think a
number of people on both sides today have commented on is that
there are a number of impediments, including financial
considerations, to the expansion of the grid. How long it takes
to site transmission lines is a big impediment.
In some instances, the extent of the return on investment
is less predictable because sometimes the transmission line,
the Chairman maybe mentioned this a little bit earlier, that
the people who invest in building the line are not necessarily
the people who benefit from its use.
Mr. Markey. I know that, but there is a guaranteed 11 to 12
percent return on investment, guaranteed. What business in
America, in the world, gives you a guaranteed 12 percent return
on investment? Why would a company need more than a just and
reasonable return on their investment to build a transmission
system? What is the flaw? How much more money do consumers have
to give these companies to build transmissions lines, more than
a 12 percent profit?
Secretary Abraham. The ratepayers that you have heard, the
consumers, two-thirds of whom are the businesses of America,
private industry and business, obviously are shouldering a
substantial burden with their energy costs. The one thing that
we do know is that if we improve the transmission grid and
alleviate some of the congestion, a very substantial amount of
the energy prices people are paying will, in fact, be affected
in a positive way, because right now, of the full energy bill
the typical ratepayer pays, 80 percent is paid for generation;
10 percent of that bill is----
Mr. Markey. All I am saying is that a 12 percent guaranteed
return seems to me----
Secretary Abraham. Well----
Mr. Markey. Mr. Secretary, let me ask one final question:
In an August 27, 2003, article in The New York Times, Mr.
Donald Benjamin, vice president of the North American Electric
Reliability Council, said, we think we have a time line fairly
well nailed down. It is down to the second in terms of what
happens, which transmission is open when areas became isolated.
It provides a good understanding of how the power flows.
The article goes on to say that while NERC was unwilling to
point to a particular cause, Federal investigators had already
determined that, ``all the data pointed to mistakes by people
in the event's earlier stages relating to the hour-long
sequence of line failures and plant shutdowns in the Midwest.''
This article suggests that you already have a chronology of
the key events that led to the blackout and those which caused
it to spread, and that based on that and other information, you
already have a pretty good idea of what happened. If that is
the case, why aren't you sharing that information and analysis
with this subcommittee today?
Chairman Tauzin. The gentleman's time has expired, but the
Secretary may answer.
Secretary Abraham. Yes.
Congressman, we will share our conclusions when we reach
that point, and the article in The New York Times was
premature. It did not accurately state the actual status of the
work that was being done.
We are putting as much emphasis on this as we can to get a
timely conclusion to this sequencing issue, but the analysts
set another meeting yesterday, looking at the data they had,
and concluded that they still did not have it to a stage where
they felt they could recommend its release as being accurate.
Believe me, I would have very much enjoyed coming here
today and making news by announcing it before this committee,
but we are not going to announce or release anything we claim
is the authoritative sequence of events or any of the other
things that we are addressing here until we really can tell
this committee it is right and it is unimpeachable.
Chairman Tauzin. I thank the gentleman.
The Chair now recognizes gentleman from Pennsylvania,
chairman of the Oversite and Investigations Subcommittee, Mr.
Greenwood for a round of questions.
Mr. Greenwood. Thank you, Mr. Chairman.
Welcome, Mr. Secretary. Thank you for your patience.
I would like to touch on an issue or ask you a couple of
questions about an issue that is rather tangential to this
hearing, but that is connected, and Mr. Upton mentioned it
earlier, and that is the impact of the blackout on gasoline
prices. Between August 18 and August 25, the average retail
price for regular gasoline in the United States rose by 12
cents a gallon, which I think is the largest weekly increase
ever both in terms of the actual price increase and the
percentage, which was 7 point----
Mr. Upton. If the gentleman will yield, it went up 20 cents
in my district.
Mr. Greenwood. Well, you have a high-priced district.
Mr. Upton. Yeah.
Mr. Greenwood. It was 7.4 percent where smart shoppers buy
gasoline, and it is 100--it is $.175 a gallon now, which I
believe is the highest average retail price ever.
We have heard that the fact that refineries were shut down
because of the blackout contributed to a supply crunch, and, of
course, this is all going into a high driving period of time
for vacations and the Labor Day weekend and so forth.
The question is: What has the Department done to--to look
at--it seems it is a fairly straightforward mathematical
calculation to estimate how much gasoline was not produced as a
result of a blackout, what percentage of the supply that is,
and how using that fairly simple economic model, how that
should impact the price of gasoline, and also some estimate as
to how long it should last.
I think--I have no reason to believe there is anything at
work here other than the basic laws of supply and demand, but I
can tell you that most of my constituents are not quite sure
that that is all there is to it.
Secretary Abraham. Right Mr. Greenwood. It seems to them we
had a hiccup here which produced a lasting and very significant
increase in the price of gasoline. So the question is: What can
you tell us about that; to what extent was it, in fact, related
to the blackout, and what kind of studies and investigations is
the Department undertaking?
Secretary Abraham. There is almost nothing that goes on in
the energy world that has my attention more quickly riveted
than rising gasoline prices, because whenever the price goes up
above about $1.50, I read articles that say it is my fault, and
when it goes back down, somehow the market is working, so it
gets me focused.
There obviously were several incidents that occurred. There
was, in addition to the blackout, and I think a certain amount
of exaggerated speculation that always seems to happen when a
crisis happens, people predicting dire and longer-term
consequences than sometimes happen.
We all know the events in Arizona which had an impact in
that region that were very substantial, the pipeline breakdown,
but the nature of this price--and then there was Labor Day
driving and these other issues, and we had forecast some
increase in the Department's Energy Information Administration,
but the--the nature of this fluctuation struck me as being
unusually large as well and in need of greater explanation.
We have actually in this instance launched an internal
inquiry on it, and just started doing that, but I think we will
hopefully get some additional insight into whether or not this
was really a market reaction only or if other factors were
involved. I don't know.
Maybe the Deputy might want to comment on some of the
things we are doing specifically on that.
Mr. McSlarrow. As Secretary Abraham said, he has directed
us to look at the events, particularly over the last week. We
did predict there would be, as most everyone knows, the
inevitable price increase in the run up to the Labor Day
weekend. We have very low gas inventories, we have no margin
for error, so once the pipeline in Arizona went down, you had
three refineries--because of the blackout, you had some
problems out in California with refineries. It all added up to
a predictable increase.
The question is and what we will look into and work with
our colleagues at the FTC about is whether or not anybody took
advantage of a situation in terms of market manipulation.
Mr. Greenwood. And assuming that there did, and I don't
know, I am not an expert on these issues, but I know a little
bit about human nature, if you can ride the wave a little bit
longer than it actually exists, you will do it, but there is
nothing illegal about that; am I right? In other words, profit
taking, gouging, if that is what is going on, there is nothing
illegal about that. And I don't--I am not going to put you on
the spot about this right now, but I think when you do complete
your analysis, including whether there was--whether there is
ongoing profiteering that is resulting, I would appreciate it
if you would let us know if you have any recommendations about
that, because this is--it seems to happen with some frequency.
It seems to happen in the home heating fuel sector as well.
There always seems to be some sort of a perfect storm that
causes these spikes, but then they seem to go on longer than it
would intuitively seem should be the response. And, with that,
Mr. Chairman, I will yield back the balance of my time.
Chairman Tauzin. Would the gentleman yield quickly?
I want to point out to the committee that we examined the
effect of tight supplies on demand in the Chicago/Milwaukee
spike situation that occurred a few years ago, and one of the
things we learned was that when there are those tight supplies,
and then something happens, a pipeline breaks or a refinery
goes out--in this case six of them did--but when that happens,
the first people who get the gas are the name-brand stations.
They get it from the refineries of the name brand.
The independent stations then have to compete for what
supply remains, and they start bidding it up, so even a small
ripple effect becomes a cascading effect in the marketplace,
and that may have occurred in the marketplace. We obviously
have to know that.
And second, I commend the Secretary in his statement that
they are going to look to see whether anybody abused the
marketplace, the market manipulation. There are laws against
predatory pricing, a pricing too low on a sustained basis to
drive somebody out of business, and there are laws against
market manipulation for an extended period of time in which
someone uses anticompetitive power to gouge consumers. So we do
have some relief here, and I am pleased the Secretary wants to
look at it. He may want to comment on it.
Secretary Abraham. Only that one of the things which we
instituted a couple of years ago was a hotline so that
consumers could, in fact, communicate directly with our
Department if they believed gouging was taking place.
We had--I think it was in the wake of 9/11 that we first
launched this, and I would say that we had to monitor the
frequency of calls on that to gauge whether there seems to be--
and one of the reasons why we decided to look even further into
this situation is that we were getting what seemed like a
broader and more disproportionate response on that, on that
hotline in the last few weeks.
Chairman Tauzin. I thank the gentleman.
The gentleman yields back his time.
Explain to the members of the audience.
The gentleman had additional time because he waived his
opening statement. Under our rules he got additional time, and
he is yielding it back now, and the Chair is pleased to
recognize Ms. Eshoo for a round of questioning.
Ms. Eshoo. Thank you, Mr. Chairman, and welcome, Mr.
Secretary.
Whenever I am involved in either hearings and other
legislative debates here at the committee relative to energy, I
think many of my colleagues kind of tense up and think, here
she goes again, because I am a Californian, and we are raw from
our experience of market manipulation, indeed market
manipulation, because the energy companies actually signed
confession slips and had very well-known names for the tactics
that they employed, but we didn't get anywhere.
Certainly, California legislated, I think, shortage in
their deeply flawed deregulation plan, but I think at the
national level that there were huge failures and shortcomings
as well. And so I led with that, with some of those comments,
in my opening statement, and I think it is important to raise
this today. Even though there may not be a nexus between the
blackout that occurred in August in the--in the Northeast and
in the Midwest, that it is very important for the
administration, certainly for you in your leadership and
trustee position as Secretary of Energy, that you take into
consideration everything, everything.
Market manipulation was not taken into consideration
before, and while I agree with you in the statement, part of
your statement, in your opening statement to the committee,
that while the facts will lead you wherever they may go, that
you will not jump to conclusions, and that the investigation
will be thorough and objective. I commend you for saying that.
I urge you to stick to that.
Your assistant just mentioned a few moments ago that market
manipulation should be examined, at least I think that is what
you said, relative to the prices at the gas pump, and I might
add that in California and in the Bay area, they jumped 35
cents a gallon in 2 weeks. I filled my car up the other day. It
was $2.35 for regular, for unleaded, so we know what market
manipulation can do.
What I want to ask you, Mr. Secretary, is will you commit
to the examination of even that in your investigation; that the
energy in whatever role they may have played--and they may not
have played any role in this--but that you will be open to and
will indeed look at this area as well, because the
administration, most frankly, didn't before, when manipulation
happened in California.
Secretary Abraham. Well, first of all, we will follow the
facts where they lead, as I said.
Second, I don't want to leave unresponded to the
implication the administration did nothing in California.
Ms. Eshoo. What did you do?
Secretary Abraham. Well, first of all, we inherited a
problem that no one had done anything about.
Ms. Eshoo. But what did you do?
Secretary Abraham. Well, on the very first week in office,
we promulgated emergency orders to allow electricity to be
bought by California. The President issued----
Ms. Eshoo. But I might interrupt because it is my time, Mr.
Secretary, and I will let you finish that, but I think it is
important--wait a minute. Wait a minute. It is my time.
Secretary Abraham. For the record----
Ms. Eshoo. It is very important to note that the FERC,
which is--has a key role in this, would not allow and did not
allow the refunds for a whole variety of reasons, but
California has been screwed, in plain English.
So you want to finish what you were saying about what you
did do? I am curious.
Secretary Abraham. Well, I would be happy--it is a fairly
lengthy list. I would be happy to enter it into the record in
order to preserve time.
Ms. Eshoo. It did nothing about manipulation.
Secretary Abraham. Well----
Ms. Eshoo. That is my--that is my point.
Secretary Abraham. I would only note that, prior to the
appointment of Mr. Wood and Nora Brownell to the Commission,
nothing had been done about--no investigations had occurred and
no refunds had been ordered, and after the appointment by
President Bush, all of those things happened.
Ms. Eshoo. Nothing. I still don't--that is why I am asking
about manipulation. If, in fact, the administration chose to do
nothing, which is the public record--I mean, I don't know what
you can point to that the administration ever did relative to
market manipulation. We never even had a hearing here.
Now we are here as a result of the August 14 blackouts, and
I think it is very important that the administration, you, the
Secretary, give us the encouragement that wherever the facts
lead, and you have said that in your opening statement, that
market manipulation be included in this, and I just want a yes
or no answer.
Secretary Abraham. I think I already gave you a yes answer.
Ms. Eshoo. Good.
Secretary Abraham. Again, Mr. Chairman, there was an
administration that didn't do anything, but it was not ours.
Chairman Tauzin. All right. The gentlelady's time has
expired.
Ms. Eshoo. I think that is a suspension of reality.
Chairman Tauzin. Would the gentlelady or the Secretary
request that that information be included as part of the
record?
Secretary Abraham. I would be happy to provide.
Chairman Tauzin. Is there objection?
Hearing none, you will enter that into the record.
[The information referred to follows:]
List of Administration actions on California blackouts:
california
The Administration offered a great deal of assistance to the State
of California during the power crisis. It is important to remember this
crisis began months before the Administration took office. Prices began
to rise in May 2000, and the blackouts started a week before the
President was inaugurated. In the wake of these blackouts, one of the
first actions Energy Secretary Spence Abraham took was to call Governor
Davis and offer the assistance of the department.
On the third day of the Bush Administration, Secretary Abraham
issued emergency orders directing electricity generators to sell power
to California. This action kept the lights on while the State passed
emergency legislation authorizing the State to buy electricity on
behalf of its citizens. President Bush issued emergency orders
directing Federal agencies to conserve energy use and expedite permits
for new power plants.
Governor Davis asked Secretary Abraham to intervene with FERC and
urge them to issue an emergency order waiving certain fuel requirements
to qualifying facilities. Secretary Abraham intervened and FERC issued
the desired order.
Governor Davis asked Secretary Abraham to support his proposed
purchase of the utilities' transmission grid. Secretary Abraham
supported his proposal, although it was later rejected by the
California State legislature.
During the early months of 2001, FERC ordered substantial refunds.
The Department of Energy consistently supported refunds of unjust and
unreasonable charges.
Secretary Abraham directed the Western Area Power Administration to
take the necessary steps to build a transmission line to remove the
Path 15 bottleneck that caused higher prices and lower reliability.
The Bush Administration appointees to FERC developed a price
mitigation approach that helped lower prices without causing more
blackouts.
In the past, Governor Davis credited the Administration for helping
solve the California crisis: ``[President Bush] appointed Brownell and
Pat Wood. They helped save our behinds . . . I think the world of
President Clinton but the Clinton Administration didn't give us any
help.'' San Diego Union Tribune, March 10, 2002.
Chairman Tauzin. I would also remind the gentlelady that
there were hearings in this committee on the California
question, and we will be happy to go back in the record and
clarify those.
The Chair at this time would recognize----
Ms. Eshoo. Not since the Enron memos came out, Mr.
Chairman.
Mr. Cox. A point of order, Mr. Chairman?
Mr. Burr [presiding]. The Chair would recognize the
gentleman from California Mr. Cox.
Mr. Cox. Thank you, Mr. Chairman, and as a California
Member, I certainly remember vividly participating in those
hearings, answering questions, asking questions of the
administration, and getting a very healthy response that I
think was very constructive in helping California get back on
its feet. And I want to commend you, Mr. Secretary, for the
role that you played in those actions by the Bush
Administration.
I want to ask a question that anticipates some of the
testimony we are going to get later today. Some of what we are
going to hear is going to advise us that all of this August
blackout could have been averted if only somebody at
FirstEnergy had picked up the phone and alerted other
transmission operators when it first detected problems.
We will have other testimony not exactly to that effect,
but to a similar point, which is that there were thousands of
megawatts of capacity, of power plant capacity, that was shut
down by American Electric Power, by Detroit Edison, by
FirstEnergy, and if there had been better communication, this
could have been avoided.
And what I want to ask you is, without necessarily opining
who shot John, because I know you are very clear that the U.S.-
Canadian task force is still studying this, and you don't know
all these answers yet, if there is, in fact, an element of this
that is apparent or appearing already that in here is
inadequate communication among the different players, shouldn't
we go beyond technology that looks like picking up the
telephone, but relies on human beings watching things in real
time when so much of this can happen in seconds and less than a
second? And isn't technology part of the solution here; by
investing in our systems, can we not build redundancy and
backup into a security plan that doesn't currently exist?
And, then, finally--and I will let you take all the time
for answering, I will not ask a follow-up--finally, because I
spend so much time worrying with another hat on in another
committee about homeland security, isn't this an example of an
area in which homeland security investment that protects us
from the downside of things going bad can also make our economy
healthier; by investing in what will protect us from security
downside, we might also build the capacity of our country to
produce more goods and services and make the lives of Americans
better?
Secretary Abraham. Well, I couldn't agree more with the
last comment you made.
First of all, we recognized when we launched the task force
the important issues that relate to homeland security, which is
why we have as one of the three working groups a security
working group. That isn't because we have any evidence that
there were homeland security or national security factors
involved in the actual blackout, but because we want to learn
from this experience and focus on anything that might be second
either to this blackout or future ones where we might be able
to enhance the security of the infrastructure.
Second, there is no doubt that the technology either exists
or can be developed to enhance the intelligence of the
transmission grid and to assist the people who want it in terms
of their ability to respond even quicker to developments that
occur.
I mentioned earlier in response to Chairman Tauzin's
question the concern that we are talking about 10,000 events or
so in 9 seconds. No human being has the ability to be that
responsive, to take every action maybe in terms of
communication, notification in that sort of timeframe. And so
we are looking at or will look at the ones that collected
information.
We are going to be looking at the issues and analyzing
whether communication problems were a factor, but, whether or
not they were, I have already advocated here some of the new
technology that we are looking at, whether it is in terms of
superconductivity or smart grid technologies, to try to enhance
the capacity of the system, and I think this committee on both
sides has appreciated that point even in the abstract. Now
maybe because of the blackout it is more widely appreciated
nationwide.
Mr. Burr . The gentleman's time has expired.
The Chair would recognize the gentleman from Michigan Mr.
Stupak for questions.
Mr. Stupak. Thank you.
I believe I get 8 minutes?
Mr. Burr. The gentleman is correct.
Mr. Stupak. Thank you.
Mr. Secretary, thanks for being here.
I mentioned that we weren't affected in northern Michigan
from the blackouts, but I am sure a lot of my people were, as
you have mentioned people from the United States, Canada, all
over, were affected. There is a great deal of concern on what
has happened here.
When your task force meets, will these meetings be open to
the public, where people can see what is going on?
Secretary Abraham. Well, we are trying to address the
question of how to properly keep people informed. Right now the
work that is going on is taking place, a lot of it is taking
place, at the NERC offices in Princeton, New Jersey. It is a
setting in which literally a huge table of analysts is sitting
in front of a computer terminal trying to sequence events and
to analyze, so that is what----
Mr. Stupak. These working groups are going to have to
report back to your task force, right?
Secretary Abraham. Right.
Mr. Stupak. And will those meetings be open to the public?
Secretary Abraham. Well, there are two phases which we are
in. In the first phase, which is just collecting information, I
don't really see that as lending itself to a public role.
However, we are interested in and I have asked legal counsel to
explore how, during that first phase, information can be
formally received from people who are not part of these working
groups. We recognize there may be individuals out there who are
either not contacted by us or who may have information which
would be helpful to us, so we are looking for a way to address
that.
Once that sort of data collection and analysis is done and
we move to the sort of second phase that I described earlier,
phase 2, which is kind of a time in which we would hope to make
recommendations, then I think we are going to try to look at
how we can determine what the public role is in terms of being
careful what the legal issues are, both Canadian as well as
American legal issues that surround participation and
recommendation or policy formulation.
Mr. Stupak. Well, there is some concern that we don't want
this task force to be like the energy policy task force at the
White House where nothing that happens there is public. In your
testimony you go on to say that you are going to look to North
America Electric Reliability Council, and I am quoting now, and
the affected independent system operators and the utilities
have agreed that their investigations will supplement and
contribute to work of the task force.
As I read that, these other people are going to be
reporting to this task force, and your recommendations, I take
it, will be after the report. So, while they are reporting to
you, especially like the North America Electric Reliability
Council, why wouldn't that be an open meeting so that we can
see what is being recommended by the North American Reliability
Council, which has some expertise----
Secretary Abraham. Let me be very specific about what they
are providing. They are not providing recommendations at this
point. In phase 1, what all of those entities are providing are
data----
Mr. Stupak. Sure.
Secretary Abraham. [continuing] and information.
Mr. Stupak. This would be phase 2, right?
Secretary Abraham. To the extent that we can, I envision
that information also being made public. We haven't yet figured
out as to how the formulation of recommendations will be done.
We are working on that to address both the legal side of that--
--
Mr. Stupak. Sure.
Secretary Abraham. [continuing] as well as the public
interest side.
Mr. Stupak. Well, I am sure that if you mention that the
task force is going to have a meeting, whether or not it is a
working group, and that they are going to be looking at the
report from the North American Electric Reliability, if you are
concerned about whether people would be interested, why don't
we just make it an open meeting, invite the media with C-SPAN
on it so we can watch it, you know, and, if there is no viewer
interest, I am sure they won't show up. But if there is
interest, and I am sure there is great interest, why don't we
just do it that way so there is an open dialog?
Secretary Abraham. You are putting, I think, conclusion in
place before we have gotten to that stage yet. I am not
prepared today to tell you that, when we get to the
recommendation stage, we are going to have outside groups,
whether it is the North American Electric Reliability Council
or anyone else, engaged as part of the effort. It may or may
not be the case.
Until we determine that, then I think at that point we
would determine what the proper way was to make sure that the
process was appropriately inclusive.
Mr. Stupak. Well, in order to make the changes that may be
needed in the energy grid, I have heard about new technology
today. People are asking what is it going to be? Usually, when
there are changes, the cost comes from the taxpayers, in this
case the ratepayers. So I would think as recommendations are
being made, whether recommendations will be asking the Congress
to give tax breaks or whether you are going to push it off to
the taxpayers, that they would want to know about that so that
they could have some input before the recommendations are made.
And that is the reason I am pushing so hard to make these
hearings that you are going to be holding public in the
recommendation stages, because I think we all have a stake in
this, whether ratepaying or through just turning on the
electricity in our homes, even in the Upper Peninsula.
Secretary Abraham. I am cognizant of that, and I appreciate
the recommendation.
I would just say this: As I indicated in my opening
statement, at this stage, and this is an early stage in this
process, I think it is my belief, and I think Minister Dhaliwal
shares this, that the types of recommendations that this task
force will be putting forth are going to be far more in terms
of operations, engineering and mechanics as opposed to broader
public policy recommendations of the sort you outlined. I think
the results of our effort will probably be used by Members of
Congress, the Canadian Government, our administration and
others to formulate those kinds of recommendations, and that is
my sense of it.
Mr. Stupak. The technical working part that you think you
will be doing that we won't be interested in, I think we would
be very interested. Also we are up here as policy makers.
According to the North American Electric Reliability Council,
in the year 2002, there were 97 planning standard violations
and 444 operating policy violations. I mean, if that is what is
going on, and if you are going to try to fix this so we don't
have these 444 operating policy violations, which obviously may
have led to some of this cascading effect of this blackout----
Secretary Abraham. Right.
Mr. Stupak. [continuing] I think we need to know that,
especially if we are going to have to write some rules. Whether
it is the energy bill that is in conference or Mr. Dingell's
reliability bill that he is introducing today, these are things
that we need to know, and you are assuring us that your report
will be done in the next few weeks, not months, you said, were
your quotes.
Secretary Abraham. Right.
Mr. Stupak. So I want to make sure that as you are doing
your work, that we are all on the same page, and we can
interact on what is going on, and people know what is going on
before you come back or the Energy Committee comes back and
says, we need this and that from the American taxpayer either
through higher rate increases or through tax breaks. We want to
make sure we are all on the same page so we don't have these
problems again.
Secretary Abraham. Right, and I appreciate the point.
I would commit to the Congressman that I would share these
concerns with our Canadian counterparts as we work to develop
the process for the formulation of recommendations and also
assure you that all of the information that we are obtaining
that is forming the basis for this analysis will, to the
fullest extent possible, legally be information we share.
Mr. Stupak. One more and I will just wrap with this. There
has been a lot of discussion about the gasoline prices. I
happened to have the opportunity to be up in Pennsylvania with
my colleague Mr. Doyle, and I couldn't help but notice that the
gas was 30 cents less in Pennsylvania. Now, the blackout
skirted around Pennsylvania, but I am sure some of the
refineries were down, had to get their gas from some of these
refineries that were down. Why would--you know, if this is a
problem from Arizona because of a broken pipeline and the
blackout, whatever else you want to call it, why wouldn't all
States see the increases, or is it just a manipulation of a
few?
You have heard from about everybody here. Ms. Eshoo said
hers was $2.35 to fill up. We are right around $2 up in the
Upper Peninsula. Then I fly into Pittsburgh and fill up Mr.
Doyle's car; I was happy to pay for his because it was 30 cents
cheaper a gallon.
So I hope you look at that in your investigation.
Secretary Abraham. Yeah. And one of the other issues here
is that transportation costs of the fuel itself can be a
factor.
We will try to analyze and separate that which is--I mean,
as the Deputy Secretary indicated, and as I indicated, you
know, we see a lot of fluctuations in prices. This one for a
variety of reasons caused us concern.
Mr. Stupak. Sure.
Secretary Abraham. [continuing] and we decided to pursue an
inquiry.
Chairman Tauzin . The gentleman's time has expired, and the
Chair yields to the gentleman from Illinois Mr. Shimkus for a
round of questions Mr. Shimkus. Thank you. Mr. Chairman, and,
Mr. Secretary, thank you for your long time being here.
Let me just briefly talk about a few--energy cannot be
discussed in isolation, so it is--I think it is appropriate
that we talk about gasoline prices. I think it is appropriate
that we talk about natural gas and generation of coal and other
things. And that is why it needs to move in a bill together.
Gasoline, because of the regional requirements for fuel being
specific for the area, because of EPA standards on the Clean
Air Act, that is why you can't move product from one area to
another, even if--if there is disruption, because we can't move
fuel. Hopefully in this energy bill, I think there may be some
ease of that because of doing away with the 2 percent oxygen
standard when we go to--with the 5 billion renewal fuel
standard. So these should not be taken in isolation. It is
very, very important.
My friends on the other side talk about the reliability
language which we support in the comprehensive bill, but the
transmission grid is not a reliable--reliability standard by
itself. There is need on investment, there is need on a return
of that investment, and there is a need to address the siting
issues, and we have had numerous hearings on the siting of
transmission lines.
Many times I have talked about the Illini Coal Basin. Nine-
tenths of the State of Illinois is the Illini Coal Basin, more
coal reserves than Saudi Arabia has oil. The Illini Coal Basin
also goes into Indiana. It goes into Kentucky.
How does this all relate? Well, if we don't have a
transmission grid, then what we have done is we site natural
gas peaker plants that are actually running for baseload
generation in different locations instead of using baseload
generating facilities like coal and nuclear to do the everyday
activity, and when we have to run a natural gas generating
plant, that creates a higher demand, which then calculates into
the price debate. So for those who will claim to take it, an
isolated aspect of energy, it is just like putting a Band-Aid
on a problem. That is why it is so critical to have a national
energy policy.
Let us make a statement. Let us set some consistency. Let
us give investors the idea of where this country wants to move
to be free of the swings that come when we just take a Band-Aid
approach.
So again, Mr. Secretary, I applaud the push, and this is
the time again, as I said in my opening statement, if we can't
move a national energy plan when natural gas has doubled in
price, when we have gasoline prices as high as they have ever
been at the pump, when we have 50 million people without power,
if we can't do it now, then we ought to give up.
I do have two questions, and I will ask them both and you
can address those. Your agency has been working on high
temperature superconductivity cables. We have had a tough time
trying to authorize funding for that. Can you talk about the
need and the importance of high temperature superconducting
cables? And the other issue is why is Canada part of our grid?
Secretary Abraham. Well----
Chairman Tauzin. You sound like the kid from South Park,
John.
Mr. Shimkus. I don't let my kids watch that show.
Secretary Abraham. I will answer the second one just by
saying this: we think it holds the possibility of
superconductivity really revolutionizing the electric system. I
have said that two or three times in my answers. Because
superconducting lines can carry much more electricity than
conventional cables, and yet can be buried underground, they
can serve multiple purposes potentially. So it is, in my
judgment, yet another important ingredient in the comprehensive
energy approach. And we have just awarded several substantial
grants for new research in this area, and we think it holds
tremendous promise and would urge Congress, in fact, would
compliment the committee and the work it has done in this area
and, more broadly, in trying to address the energy challenges
through the passage of your energy bills, both this year and in
the last Congress.
Mr. Shimkus. Mr. Secretary, wouldn't that also alleviate
some of the NIMBY aspects, if we can push more power over
conventional rights-of-way, that that would be an important
aspect?
Secretary Abraham. It would seem that that would be
important, because obviously, to the extent we can minimize the
amount of transmission needed, transmission lines needed, and
to the extent we might be able to put more underground instead
of building towers as some wanted, that would certainly be
better.
The issue on Canada, I mean we really have a very
interdependent economic relationship in North America. I do not
know the exact history of the U.S. and Canadian cross border
transmission construction, but it is consistent with much--a
lot of other things where there is an intertwining of
relationships. And I would note, it is always I think maybe an
interesting side-bar is just that we have this
interconnectivity with Canada throughout the country running
north and south, but we don't have an east-west capability of
transmission connectivity in this country, or I guess in
Canada. So that is just an interesting comment on how the
system evolved. It has evolved internationally, but it hasn't
evolved nationally. And it has obviously implications as well.
I am not advocating that we do anything specific about it; I
just mean it is an interesting reflection of how the system
develops.
Chairman Tauzin. The gentleman's time has expired.
The Chair recognizes Ms. McCarthy for a round of questions.
Ms. McCarthy. Thank you very much, Mr. Chairman. Thank you,
Mr. Secretary, for all of the time that you are spending with
us today. I want to commend you and the administration for your
work with Canada and to continue the line of thinking you have
just been sharing with my colleague across the aisle.
In your testimony you talk about recommendations that will
focus on technical standards for operation and maintenance of
the grid and on the management of the grid in order to more
quickly correct the problems we identify. It is the management
of the grid I would like to explore with you in the brief time
that we have, particularly again working with Canada and the
north-south grid. What will this mean for States' authority
which traditionally has been the management and regulatory
bodies for the 50 States? And second, does the administration
still support PUHCA repeal? In the literature and in the
information that I have received from both industry and other
sources, PUHCA has served a very good purpose in transmission
and regulation, and also in sort of shoring up the public's
confidence that rates are indeed fair and no foul play has been
going on. So I would love--I know you don't have the report and
the recommendations will follow, but as far as the
administration's view on PUHCA, do they still support repeal,
and also how do you envision the administration's position on
management of the grid and what that will mean to the States
who have traditionally held such authority?
Secretary Abraham. Well, in answer to the PUHCA position,
we have not changed our position; we still favor its repeal. We
believe that the benefits in terms of the potential for
sufficient investment in the energy sector, particularly in
transmission, would be very important.
In terms of the management issues, I don't wish to be
misunderstood. The comments that are in my testimony relate to
what I suspect would be the scope of recommendations that our
joint task force would make and that should be interpreted, at
least as it was intended by me, as a small M, not a big M,
management, and by that I mean the operational systems between
ISOs between the managers of the system itself, the operational
people. I am not trying to prejudge the outcome, but the scope
that we are looking at right now is the actual day-to-day
functioning, hour-to-hour and minute-to-minute functioning and
how that is managed, as opposed to the broader issue that I
think you are asking about in terms of the macro management of
the structure, the regulatory structures of electricity
systems.
Ms. McCarthy. So you do not foresee a Federal regulatory
role or even a Canadian-American role, but the power, or the
authority still resting within the States and provinces?
Secretary Abraham. Yes. Again, I don't want to be too far-
reaching and speculating about recommendations, but I do think
this is a task force, the conclusions of which will be ones
that both the U.S. and Canadian members will be either
approving or not, and I just suspect that we will be looking at
the operational side of the electricity grid. I don't foresee
either the Canadians or the American participants trying to
make recommendations about how the other country's overall
regulatory structure is established. But again, I will leave
myself a small amount of wiggle room. But that is what I
believe, so far to be the----
Ms. McCarthy. Well, I appreciate you can't anticipate the
outcome of the study you are doing, but I do want to know the
administration's view of that. And I want to revisit the PUHCA
issue with you just briefly and be sure that you are aware that
industries and groups such as Trans-Elect feel that it is the
wrong time to act to repeal PUHCA. I am reading from their
newsletter commentary: PUHCA has the effect of keeping certain
predatory players out of the transmission business, and Trans-
Elect is perfectly willing to be governed under PUHCA and so
should any other independent transmission player.
As Mr. Markey I think raised with you earlier in the
hearing, with a guaranteed return of 11 or 12 percent of
whatever it is investing, utilities investing in transmission
and PUHCA does nothing to restrict that investment; certainly
PUHCA has not been a problem. So I am just wondering again why
the administration feels that this is the time to eliminate
PUHCA.
Secretary Abraham. Well, again, I think our concern has
been that the absence of investment in the modernization of the
transmission system and other elements of the energy sector
have been affected by that legislation, which is, as you know,
a piece of legislation passed at a different time in terms of--
--
Ms. McCarthy. Mr. Secretary, if I might regain my time.
Chairman Tauzin. The gentlewoman's time has expired.
Ms. McCarthy. I just want to close with PUHCA does not
restrict their investments, Mr. Secretary, so I hope you will
rethink that, and I thank the Chair for his indulgence.
Chairman Tauzin. If you want, Karen, we can include a
provision in the bill that says any company that wants to be
covered by PUHCA can still be covered by them.
I thank the gentlewoman.
Mr. Norwood is recognized for a round of questioning.
Mr. Norwood. Thank you very much, Mr. Chairman. I am going
to try to get us a little bit back on the subject. I can't tell
if this hearing reminds me of the markup or the many, many
hearings we have had over the last year or what our subject
matter is here. But as I recall, it is about the blackout, what
caused it and what caused it to spread.
Mr. Secretary, you have answered this in a lot of different
ways this morning, but let me just ask you a couple of very
simple questions for the record.
You don't really know what caused the outage, do you?
Secretary Abraham. We are not at the stage of being able to
answer that question, no.
Mr. Norwood. Well, do you agree that our response to this
outage should be formed by a proper understanding of the
reasons that it occurred?
Secretary Abraham. Sure.
Mr. Norwood. Yes, I thought you probably would.
Can we make an intelligent legislative response to this
outage until we know how it got started and what caused it to
spread across the country?
Secretary Abraham. Well, I am not going to speculate as to
what might have caused this outage and, as a result, I am not
going to speculate as to whether there will be a specific
legislative silver bullet to prevent it from happening in the
future. What I will reiterate is what I have said many times. I
think the legislation this committee has worked on addresses
both in the electricity sector as well as in a variety of other
energy sectors serious challenges this country faces today and
will face in the future. I would hearken back to the chairman's
prediction of not too long ago that he has mentioned today, and
that moving comprehensive energy legislation is important to
try to avoid other kinds of problems afflicting either the
electricity sector or other parts of our energy world.
Mr. Norwood. Well, I totally agree with you and I
appreciate your adult response to this because, frankly, I
don't know how any of us think we can write legislation to
solve a problem that we don't know what the problem is. I wish
other members of the Federal Government would consider that as
responsible, too. Because we had a blackout is not the time to
use the blackout to try to ram down the throats of Congress
that has already done this through the House, through hearings
after hearings and produced legislation, one's personal agenda.
Now is not the time to do that. Now is the time to let your
task force work and us move forward. I appreciate some comments
you made one time about forcing ideas and ramming it down the
throat of individual communities and regions, and I think that
also should apply to Congress. I don't think anybody ought to
use this blackout simply as an excuse to push their agenda that
has already been set aside by this Congress and will, in the
end, cause great harm to a final energy comprehensive package.
Let me just take a minute and talk plainly here. The
problem--we keep referring to all of the United States, Mr.
Secretary, about the problem simply that we have not met
demands, there needs to be more generation, there is not enough
transmission lines. I agree that that is true, but it is not
true all over the United States. It is true in certain areas
that has been pointed out, I forgot what the Vice President
called his task force, that predicted this was going to happen
immediately after the President came into office and produced
his blue book. This has been fairly predictable. But it doesn't
mean we should use this opportunity to ruin the parts of the
country that has met demand, that does have good transmission
and does have good generation. It seems to me everywhere
blackout has ever occurred, it is in an area that insists on
importing electricity, whether that be from another country or
whether that be from two States over. There is where the
problems are concerned. And I hope, Mr. Secretary, at the end
of the day as you work with us in conference that we can all
come to a good energy bill that actually doesn't tear up part
of the country in order to fix another part of the country.
I see my time probably ought to end about now, Mr.
Chairman. I yield back.
Chairman Tauzin. The gentleman yields back. I thank the
gentleman. Hooray for Georgia.
Ms. Solis is next. The Chair is pleased to recognize Ms.
Solis for a round of questions.
Ms. Solis. Thank you, Mr. Chairman. Thank you again,
Secretary Abraham, for being here.
My question is a little different. I wanted to ask about
sitings of potential power lines that affect minority
communities and low-income communities. We have--someone
mentioned earlier I think on the other side of the aisle
regarding NIMBY, NIMBYism. But the reality is that many times
when we are looking at placing these kinds of power generating
facilities, they end up in areas where minorities or low-income
people or disadvantaged communities have to shoulder the
burden. I would like to know what opinion you would have on the
placement of future facilities like that and if there will be
some level playing field that would be applied, some standard.
Secretary Abraham. Well, the first and most important point
is just that the Federal Government obviously does not have the
power to site. These are decisions made at the State and local
level, and I would hope they would be made in a credible and
open process that allows everybody to have some input in terms
of where the siting will occur rather than discriminate against
any community. I think that one of the concerns we have has
been that because the Federal Government in this unique area
does not have any authority to do siting, no eminent domain
power, unlike interstate highways or pipelines that failure to
site sufficient transmission capability is obviously a problem
and creates occasionally the kind of bottlenecks that result in
higher prices for everybody, as well as creates stress on the
system. So that is one of the reasons why we have advocated at
least some sort of last resort authority for the Federal
Government. But at this point we don't have any. The local
communities and the States make those decisions. I would urge
them to be as inclusive in the process of decisionmaking as
possible.
Ms. Solis. Might that be something that would be included
in say a potential goals statement that might be included in
language that might introduce? I mean we have done that in the
past. Actually through President Clinton's Administration, we
had an Executive Order that asked for different agencies to
look at fair play standards in siting different projects
throughout the country.
Secretary Abraham. Well, I am happy to stand on the
statement I just made which people are welcome to use. I think
that it is something obviously the Congress needs to deal with.
I think in the absence of having a Federal authority though to
do any siting, it might be questionable whether the States
would feel much reason to be responsive until the Federal
Government itself is in the business. So it might be one
possible step in the right direction to have at least some last
resort authority for the Federal Government.
Ms. Solis. Okay. My next question goes to renewable energy.
It is my understanding that the Niagara project, which is a
hydroelectric plant, did not go off line during the blackout,
but plants powered by coal and natural gas and uranium all
tripped off line. Why was the Niagara project less fragile to
the blackout when other systems went off?
Secretary Abraham. I don't know yet. I mean one of the
things that I envision the task force and the working groups
especially looking at are the places where things worked, where
there wasn't a failure of the system. That would pertain to
generating facilities as well as to parts of the grid. You
mentioned renewables. There is no question that I think in the
area of the hydro systems we are more easily able to get back
on line or to be more stabilizing, and that is probably true of
other renewable energy sources as well.
Ms. Solis. What about solar power?
Secretary Abraham. I think it would be consistent for most
of the renewable energy generation approaches, wind, solar, or
hydro. Unfortunately, of course, the percentage of energy
generated from those sources is not as great at this time, but
I think that comparatively speaking, obviously have a little
different kind of activation approach, as I understand it, that
allows them to be back up and running more swiftly, obviously,
in comparison to other, bigger facilities.
Ms. Solis. Might that be something that we could explore,
given that as we heard earlier by some on our side that there
are definitely incentives for some of the power companies to
keep a profit to start putting that money back into other
renewable type of sources?
Secretary Abraham. Well, I don't know about that. I do know
that we endorsed and supported that part of the energy package,
the tax provisions that would help to subsidize more renewable
energy.
Ms. Solis. Incentives.
Secretary Abraham. It is one of the reasons why our
renewable energy budgets that we have submitted, our energy
efficiency and renewable budgets for the last 2 years have been
larger than any budget Congress has enacted in the last 20
years. One of the earlier comments about distributed generation
I think was a very important one, because the potential to have
fuel cells play a role in terms of a smart grid and help to
both be a backup, but also a provider of energy for the grid is
important and is one of the reasons why we have put a lot of
our resources in the Department research programs on fuel cells
and hydrogen.
Chairman Tauzin. The time of the gentlewoman has expired.
I might point out to the gentlewoman that 70 percent of the
energy bill passed out of this committee was in renewables and
conservation, so a lot of good stuff in there.
The Chair will yield to Mr. Walden for a round of
questions.
Mr. Walden. Thank you very much, Mr. Chairman.
I wanted to follow up on the discussion about distributive
energy generation. During the August break I met with a
constituent out in La Grande, Oregon who is working on
localized wind energy development, and he was telling me they
think they can basically put a windmill on each farmer's farm
that will power a full wheel of irrigation. So basically the
farmer could recoup in a couple of years on energy savings the
cost of putting one of these smaller sized wind generation
facilities on their own farm and pay for their irrigation costs
from then on. So it is an exciting development as we move
forward on distributed energy.
Mr. Secretary, I am told that within 6 hours of the start
of the blackout, the NYPA's entire hydropower generation was
back on line which provided New York with 3,794 megawatts of
energy or close to 45 percent of the State's total electricity
load, and that the two largest facilities, Niagara and St.
Lawrence-FDR remained in service during the outage because
their size enabled them to withstand the shock that had pushed
thermal and other generating plants off line.
As you know, H.R. 6 included House Resolution 1013, the
legislation I introduced with my colleagues, Mr. Radanovich and
Mr. Towns, which adds some common sense to a currently onerous
relicensing process for non--for Federal hydro projects.
Ninety-nine percent of the hydropower generated in my district
in Oregon comes from facilities up for renewal over the next 3
years. Together these projects have the cumulative potential to
produce up to 1,602 megawatts of power or enough to serve the
power loads for everyone with a home in the Pacific Northwest
cities of Portland, Seattle, and Spokane.
Hence my question to you is the administration's view on
those hydro policy changes for relicensing first, and then I
have two other questions.
Secretary Abraham. Well, again, we are likely to be issuing
an official statement of administration position in the next
few days, but we have already acknowledged in both our energy
plan and in the previous discussions of last year's bill and so
on that we support the streamlining of relicensing for hydro
facilities. We think it should be quicker, and that certainly
we have to balance the environmental effect of dams with their
ability to produce both abundant power and clean power, to fuel
economies of the regions in which they are located, and we will
play an active role, I expect, on that issue to try to make
sure that a final bill would include provisions that help
streamline the system consistent with those environmental
challenges.
Mr. Walden. Earlier this year, as I mentioned in my opening
comments, the Congress provided $700 million in increased
borrowing authority with the support of the administration for
the Bonneville Power Administration to build new transmission
facilities and, as you know, they got under way this summer.
However, Bonneville had originally requested more than that in
bonding authority. In light of the renewed focus on reliability
and the need to modernize the grid, do you anticipate being
able to support additional funding of--bonding authority, I
should say, to reduce transmission congestion in the Northwest?
I think they were seeking up to $1.3 billion.
Secretary Abraham. Let me ask the Deputy Secretary to just
comment because he has been involved in this quite a bit.
Mr. Walden. Certainly.
Mr. McSlarrow. The short answer would be not at this time.
I was actually pleased to participate in one of the
groundbreakings for one of the 3,500 KV lines that we have
started construction on, but in my discussions with the
Bonneville Administrator my understanding is that in terms of
the pace and the resources required for the upgrading of the
transmission grid in the Northwest, which everybody agrees is
critically important, the $700 million is sufficient. If that
changes, then we will obviously review it again.
Mr. Walden. Mr. Secretary, I have a little less than a
minute left, so let me ask you this: again, could you just
summarize for us what additional investments--what the Bush
Administration believes Congress should do to promote greater
investment in the grid? What are the top two or three things
that we could do here to get the reliability we need, and
adequacy?
Secretary Abraham. In terms of transmission investments, we
had an earlier discussion about the repeal of PUHCA. I have a
different opinion than that which was expressed by the
Congresswoman, because we think that there are restrictions.
The restrictions PUHCA has on who can even participate places a
restriction on investment by and of itself, and we think its
repeal would help to bring needed investment into the sector.
Second, we would favor and have favored the provisions
which would bring about a FERC action to try to produce an
incentive system that would stimulate investment.
Third, I think we have acknowledged on a number of
occasions our support for the spinning off of transmission
assets to RTOs, and I think that really those would be some
examples of ways that this could happen.
I mean at the end of the day people decide where their
investment is best placed, and I can't speak for those
companies who might invest in transmission. I mean they make
those decisions based on their shareholders' concerns or
whatever it might be that is their decisionmaking process. But
presumably, they will invest what resources they have available
in those investments that have the best chance of return, where
they feel they have the best opportunities and the least risk.
And clearly, if this was an attractive investment at this
point, more of it would happen, I think. But maybe we also need
more people able to make those investments.
Mr. Walden. Thank you.
Chairman Tauzin. The gentleman's time has expired.
The Chair is now pleased to recognize the gentleman from
Florida, Mr. Davis, for 8 minutes because he waived on his
opening statement. By the way, Mr. Davis, our numbers indicate
that California uses about nine times as much energy, total
energy, as it produces within its State. Florida uses 22 times
as much, and yet Florida has not had nearly the problems that
other regions have had. That may be some compliment to your
State, although I would like to see you produce more from
California. The gentleman from Florida, Mr. Davis, is
recognized.
Mr. Davis. I didn't think you would let me off that easy,
Mr. Chairman. Thank you.
I want to congratulate the Secretary because he has
succeeded in bringing this committee together on energy issues,
and that is tough to do. There is a universal respect which I
share that we should not rush to judgment, Mr. Secretary. We
should wait upon the facts and have an open and honest
discussion as to how we interpret those facts and the
conclusions we draw. Certainly the public will be unforgiving
if we do not act on that information once we ultimately have
it.
There was a statement made earlier by Congressman Blunt, a
thoughtful member of this committee and the Republican whip,
and I think it is important enough that I need to ask you your
reaction. He said, I believe, that having a policy developed
was more important than what the policy said. I don't agree
with that, and I wanted to ask you your opinion. It ultimately
is important that we get the right policy and not that we just
rush into any policy, isn't it?
Secretary Abraham. Well I can't actually remember his
statement. But what I would say is that this committee, under
Chairman Tauzin's leadership, has spent an awful lot of time
trying to debate these issues, the broad issues, and I commend
you for that. Energy challenges are important ones that have to
be confronted and getting the best policy requires the kind of
deliberation that is going on. I don't think this committee has
underperformed when it comes to the deliberation on policy
discussions in this area. It seems to me that the number of
hearings that the full committee and subcommittee have had have
been very thorough, and I think they have yielded legislative
action here which resulted in a bill passing. So I commend you
for it.
Mr. Davis. Mr. Secretary, as I understand your testimony,
the administration does support the incentive rates to
encourage upgrades to the transmission grid?
Secretary Abraham. Yes.
Mr. Davis. Now, the FERC has already taken that position,
and my question to you is, why is it so essential that Congress
put that in statute as well?
Secretary Abraham. It is my understanding that there is
some dispute as to their authority to take action, and again,
maybe in the later panel when Chairman Wood is here he might be
able to shed more light on that issue. But my understanding is
that the clarification of it by a congressional statutory
action would be helpful to dispose of questions that might
exist.
Mr. Davis. In 1998 an advisory board to DOE issued a report
that said, without fundamental reforms, substantial parts of
North America will be exposed to unacceptable risk.
My question to you is how urgent is it that the Congress
act on the issues you have generally identified this morning to
help tackle the blackout problem once it is fully defined?
Secretary Abraham. Well, I think that, as I have said
before, no one should confuse what we are doing to try to focus
on the specific problems of the specific blackout with the
obvious broad challenges that this committee has already
wrestled with in the passage of its energy bill in terms of the
electricity title. I mean regardless of what the sequence of
events was on August 14 there is no question that the demand
being put on the grid is growing and already pressing the grid
to its full limits. There is no question that we need more
transmission capability. There is no question that we need to
have enforceable reliability standards, because some other
event at some later point may be averted and likely will be if
we do these things.
So my view is that the legislation which has already moved
through the House is a giant step forward to dealing with those
challenges which not only that study, but the one which we
conducted in 2002 identified. And again, I commend this
committee and all of you for working on it and making it a
priority.
Mr. Davis. I guess my point, Mr. Secretary, is I understand
your point of view that investor confidence is important and
that steps need to be taken quickly to deal with this grid.
Once you have finished your report and we all have a chance to
look that over, there is an urgent need for us to act. To
convince the rest of the country that we are serious about
making sure this does not happen again, shouldn't we be
prepared to pass that legislation separately if the Congress
gets bogged down with the rest of the energy bill?
Secretary Abraham. Well, I think the opposite is true. I
think that the problem America faces is a broad set of energy
challenges. And this is where it is frustrating, I have to be
honest, in my job, because whenever there is one of these
crises there are usually hearings and there are people who are
calling for action to address that one crisis, and then there
are other people who say it is wrong to let a crisis force
legislation, and then soon the crisis abates, and then people
say, well, we don't have a crisis, why do we need a bill? And
this sort of circular, or the cycle, seems to keep happening.
The problem is that it is not just a problem with
electricity transmission, although that is the one that we are
here today about. I think the chairman's--I can't remember your
quote exactly, Mr. Chairman, but he predicted something like
this. We were very much caught up in the concerns about, and
continue to be, the natural gas storage levels as we go into
the winter, and there is that problem. I would hate to see us
ignore these other problems, because they are equally
important. They will affect our economy, they will affect the
safety and health of Americans in many respects as much as the
blackout.
Mr. Davis. Mr. Secretary, it is a fair point. I don't want
to debate with you, I just want to underscore that the country
is watching you, and us, and expects us to act. There are not
even conferees appointed to this energy bill and, to my
knowledge, there has been no meaningful staff conversation that
would push forward a conference.
Chairman Tauzin. Will the gentleman yield?
Mr. Davis. Yes, Mr. Chairman.
Chairman Tauzin. That is not true. Senator Domenici and I,
and I will give the gentleman additional time, we had a
conversation the day the Senate acted and we agreed to put our
staffs immediately to the task of side by side analysis, to
begin working out exactly what the conferees are going to need
to agree and disagree on, because there are areas of broad
agreement and there is of disagreement, to isolate them. The
staff has been working all through--they took 1 week off. They
worked all during the August recess, and if you were to call
Senator Domenici today you will find out that he believes, as I
do, that we are going to make speedy progress once we
officially begin the conference. We have a lot of work going
on. Add to that, Mr. Davis, the fact that we came awfully close
last Congress, and the Senate under Democratic leadership came
very close to agreeing with us last year, I feel very confident
that our staffs are going to give us the chance to finish this
work before we leave. So I hope you have a sense of the same
optimism I have before this is over with, and as I predicted
the problem, I hope my predictions about our answer is equally
accurate.
Mr. Davis. Thank you, Mr. Chairman. I hope the conferees
are appointed soon so the official conference can start, and
what the Senate has done speaks for itself.
Mr. Secretary, in my remaining time which the chairman has
generously offered to recalculate slightly, I would like to
talk about something that has heavily affected my State and
that is the price of gasoline at the pumps, and certainly the
blackout is the major issue we will be discussing over the next
couple of days.
As I understand it, the EIA in your department had said not
too long ago that they thought prices would be returning to the
more normal range after the Labor Day holiday. Is that correct?
Is that still your expectation?
Secretary Abraham. Yes. I think we have a number on
Monday--the Deputy Secretary points out that on Monday the
wholesale gasoline--or Tuesday the wholesale gasoline prices
dropped 20 cents, so that is kind of consistent with what we
had predicted.
Mr. Davis. I haven't seen that translate to a reduction at
the pump in my area. Are you seeing it in other parts of the
country?
Secretary Abraham. That is a wholesale number.
Mr. Davis. Okay. So my question was going to be what is
your expectation or projection as to that translating into a
reduction at the pump?
Secretary Abraham. I will give you my projection. The
analysts in the Energy Information Administration suggests
there is typically a 2-week lag time in terms of the decline in
price. And my observation has been that there is a much quicker
increase whenever events happen, but there isn't a similarity
in terms of the change in the price at the pump. The increases
happen instantaneously, and the tendency, at least in my
observation, it is nonempirical.
Mr. Davis. I assure you that is the perception of the
consumer at the pump as well.
Do you expect that the investigation you have mentioned and
presumably are undertaking is having a positive impact on
bringing the prices back down?
Secretary Abraham. Well, we just started, so I don't think
that would be true. But I have said repeatedly whenever there
has been one of the sort of major incidents over the last
couple of years, starting with 9/11, is that we have a hotline,
a gouger information hotline, and I will even read it into the
record, Mr. Chairman. It is 1-800-244-3301.
Chairman Tauzin. We will start calling it today.
Secretary Abraham. I will let you finish.
Mr. Davis. I don't need to call. I have delivered to you
my----
Secretary Abraham. Every time I have noticed that when we
do reference that it is a positive statement, I think.
Chairman Tauzin. The gentleman's time has expired, Mr.
Davis.
Mr. Davis. Mr. Chairman, thank you. I would just add, I
hope that you would consider dispatching Mr. Greenwood as
chairman of the Oversight and Investigation Subcommittee the
opportunity to conduct some hearings on this very issue as
well.
Chairman Tauzin. Mr. Davis, I can assure you if the
Secretary and Mr. McSlarrow indicate to us there is a need to
do that, we will do that, but we obviously want to give them a
chance to report to us.
The Chair recognizes the vice chairman of our committee,
Mr. Burr, for a round of questions.
Mr. Burr. I thank the Chair.
Again, welcome, Mr. Secretary. Some analyses of the
blackout period have already taken place, though cursory, and I
think it is safe to say that I think this committee would
rather wait until the official committee that is set up comes
out with their conclusions. But I think that there are some
things that we can sort of take for granted, that this is a
process that happened in very close to an hour or a little bit
longer, that we went from the startup problems to a total
blackout.
In that process, in that hour period, we had transmission
lines that tripped, we had generation that shut down; I might
say all by design. Had that not happened, had that design not
been in place, what would have happened to that grid and those
generation facilities?
Secretary Abraham. Well, obviously, there is a certain
fragility in the system that is designed to be that way so
that, for instance, a nuclear power reactor, if there is this
instability that goes to backup generations so that there can't
be any adverse affect on its cooling systems, things like that
worked and we have got a nuclear security working group that is
focused on that, to see if it worked the way it was anticipated
across the board. Parts of the grid obviously responded
effectively and quickly in terms of preventing the blackout
from spreading, and others didn't. So we are--one of the most
important parts of what we will be doing is to learn from the
ones--the things that did work well to see what the
dissimilarities would be between those systems and the ones
that shut down.
Mr. Burr. But it is true the transmission lines tripped so
that they didn't overload, bringing the lines down?
Secretary Abraham. Right.
Mr. Burr. Generation shut down so that turbines didn't blow
up. The net result is to not have it default, that they trip or
go off line means that the potential damage is much more
serious and longer, and that is why we do that?
Secretary Abraham. Right.
Mr. Burr. My question gets at the heart of whether we are
headed in the right direction to totally separate transmission
from generation. One might look at this and question whether in
this particular case we have increased our ability to respond
given that in the transmission or the generation end there is
an anomaly that happens, that without the ability for immediate
conversation between those responsible for generation and those
responsible for transmission, it could in fact delay a decision
and based upon not this scenario, but potentially others, the
net result might be much worse. Do you have concerns of that?
Secretary Abraham. As I have indicated, I think the issue
of communication is one that will certainly be explored as the
working groups try to assess what went right and what went
wrong. I don't want to speculate as to how the nonexistence or
existence of integration within the system addresses that; I
think it falls in the category of issues that would be
difficult and premature to look at today.
Mr. Burr. Well, I hope, since we do have part of the system
that was a member of an RTO, that the Commission will look at
whether in fact that delayed or decreased our reaction time on
particular decisions that may or may not have been made.
I don't want to cover old ground, but I think in the week
after the blackout you made some statements that I think were
very much on line that related to the transmission grid. You
said we need greater return on investment, we need quicker
return on investment, we need adjustments to the Tax Code or
adjustments to the Tax Code that favor voluntary sell off of
transmission assets to a transmission only entity, along with
NERC standards are among the types of remedies that you
referred to that weekend after.
I would only ask, is that still the belief of you and the
Department of Energy today?
Secretary Abraham. As I have said, again, I want to
separate the specific causes and issues that affected the world
on August 14 from what I think is a broader challenge, that
regardless of what we might determine on this blackout need to
be addressed, and certainly the adequacy of our transmission
grid is one of those, and I stand by those comments.
Mr. Burr. I would like to encourage you, in concluding,
that the efforts that the Department has already entered into,
the cooperation and the agreements which involve field testing
of new potential transmission line, 3M, numerous manufacturers
who are out there, I think it is an integral part of our
decision as to where we head with our energy policy as it
relates to the transmission upgrade. I think that it is really
the role of the Department of Energy to set that standard, and
I think you are making a correct investment today and I hope
that investment continues so that when the capital markets are
ready to finance this upgrade of the transmission grid that in
fact what we are stringing or what we are burying is in fact
the right thing for the future and not necessarily what is
right for today.
Chairman Tauzin. The gentleman's time has expired. I am
sort of the multi-breaker here. I have to trip you off and go
on. I recognize Mr. Engel from New York for a round of
questions.
Mr. Engel. Thank you, Mr. Chairman.
Mr. Secretary, welcome. I realize that many of us have
different ideas about what energy policy should be, and I just
wanted to ask you, we have heard a lot of talk here today about
Congress should pass a comprehensive energy bill, and I agree.
I don't like the bill that the Congress--the House passed. I
think that it relies too much on coziness with the energy
companies and with the industry, and I think that it talks too
much about production. And what has been troubling me is the
policy of the administration seems to be that the solution to
our energy problem is production: more oil, more gas, more
power, drilling in the Alaska wilderness, pass an energy bill
that I think is very much tilted toward the industry and
against conservation instead of energy policies.
What bothers me is it seems that many people are putting
the cart before the horse, saying that let's pass this bill
again, and that is going to be the solution to all of our
problems.
Now, we in New York, and it has been said by the chairman
and others, very generously, I am very proud of the way New
York has acted during the blackout. We showed again why New
York is a great city and showed again why New Yorkers are
great, as the aftermath of September 11 showed that certainly
we can cope with any kind of crisis. But we recently found out
the EPA's Inspector General stated that the White House and the
National Security Council essentially forced the EPA to lie
about the air quality in New York City just after September 11.
So what bothers me, and I guess I am saying to you say it
ain't so, and you have said it, but I want to hear it again,
that I want to first find out the facts. I want to find out
what happened, and then I think it makes sense to decide where
our policies go from there, and I am just worried that if we
try to wrap this all into a big comprehensive energy bill that
we are going to have lots of disagreements, and honest
disagreements, that what we really need to do in terms of
upgrading the grid and other things is going to fall by the
wayside. So I just would like to hear from you that that is not
the case, that we are not putting the cart before the horse,
and that the administration doesn't already have an idea of
what it wants to do before we find out what the facts really
are.
Secretary Abraham. Well, first of all, let me reassure you
again, our goal is to find the facts and to follow the facts
where they lead. And remember, a substantial amount of this
energy bill has nothing to do with the electricity grid and has
to do with a lot of other areas such as our hydrogen fuel
initiatives, such as the tax credits that will support
investments in the use of alternative fuel vehicles and
renewable energy sources, a lot of things that I think the
American public wants. And you have my assurance that our goal
is to--and remember, this is a binational task force. This is
not a task force of just the United States; it is one where the
Canadians are equal participants in and certainly will bring
the same commitment I believe that we bring.
Mr. Engel. Can I ask you, Mr. Secretary, if any of the
findings or backup documentation will be made classified, and
if it is made classified, the public would not have access to
it? Because, you know, there is an energy policy that was
developed by the administration. The Vice President held
meetings with Enron and other companies in the industry and
refused to provide Congress with documentations of these
meetings, contrary to Congress' requests. We don't know what
happened. I just want the windows to open and the fresh air to
come in, and I want to know will everything be made public or
will we have parts of it being classified and, therefore, once
again, we are not going to really know what the story is?
Secretary Abraham. My goal and our goal is to have a
transparent process. I have asked our legal counsel to
determine what, if any, legal issues exist, and by that I would
just point to the following: I have no idea what kind of
proprietary information is being obtained from the various
people who are part of this transmission system and what
options we have as to the release of proprietary information. I
don't know how that works, and we intend to determine that and
determine, you know, what--but our goal is a fully transparent
process.
Mr. Engel. Are you involving FERC at all?
Secretary Abraham. Yes, FERC's Chairman, who will be
testifying some time today, I guess----
Chairman Tauzin. We have the Governors scheduled for 2
o'clock.
Secretary Abraham. Mr. Chairman, Pat Wood is a member of
one--one of the four U.S. members of the task force and FERC
shares with our Department the lead responsibility on the U.S.
side for the electricity working group.
Mr. Engel. I think you can understand, and then I will give
back the balance of my time, which is already up, that I just
don't want to use this blackout as an excuse to cook the books,
to further the administration's energy policies. I want to find
out again what happened and I want to make sure that we act
according to that. You said that the energy bill has all kinds
of other things. I want to concentrate on why the power went
out and what we can do to make sure that it never happens
again.
Secretary Abraham. I do, too.
Chairman Tauzin. Well, the gentleman's time has expired.
I want to point out to the gentleman that power doesn't
come out of the air and it doesn't come out of the walls.
Somebody has to deliver it to the wall. We had an amazing
survey done, and I won't mention the State that recently had
problems. A surprising number of respondents, when asked where
electricity came from, said the wall. And a surprising number
of respondents when asked who put it there said the contractor.
Somebody has got to generate it and get it into that home, and
if you don't have natural gas to build all the plants we are
told we need and we don't have an energy bill that addresses
those problems, we are going to have other problems. It is a
complex maze that we have tried to literally work through in a
major comprehensive bill.
Mr. Engel. If the chairman would just yield for 10 seconds.
Chairman Tauzin. I will be happy to yield.
Mr. Engel. I think you would agree with me that energy can
be dealt with in many different ways, and one of them would be
to have more production, more oil, more gas, and more power,
and another way would be to kind of temper that with
conservation, renewables fuels, and things like that.
Chairman Tauzin. The bill does all of that.
Mr. Engel. Well, not to the extent that I think it should.
Chairman Tauzin. Not to the satisfaction of you and your
vote, but again, 40 Democrats found the bill satisfactory. It
passed 247 to 175. It was a bipartisan vote.
Mr. Engel. Okay, and 150 Democrats found it unsatisfactory.
Chairman Tauzin. Exactly. Because you didn't like ANWR or
something. But my point is that we have broad, comprehensive
legislation in conference that has been agreed to by a
bipartisan substantial majority of the House, and that is still
true, whether you like that or not. We have to move on, though.
The Chair recognizes Governor Otter for 5 minutes.
Mr. Otter. Thank you, Mr. Chairman. I want to point out
that being one of the low ranking members on the committee has
its advantages and one of those advantages is trying to ask a
question which hasn't been asked, which I think most all of
them have been asked. But the other advantage is to try to
clear up a few misgivings that certain members have offered
through the Secretary, or to the Secretary. One of those, in a
response to the other side of the aisle; in fact, I think it
was Ms. Eshoo, the Secretary was without an answer to her
question as to why didn't the Department of Energy do something
when California had its crises. And I want to offer to the
Secretary a copy of a letter that was dated March 20, 1997,
signed by the California delegation, including Ms. Eshoo, on
the very top. The letter is directed to the chairman of the
Energy and Commerce Committee and it says, This measure
provides for national first fully competitive electric utility
systems. The new law provides for customers' choice to begin
January 1, 1998, and to be fully implemented by the year 2002,
and it goes on to explain the virtues of that new law that was
passed by a unanimous vote in both Houses of the California
State Legislature and signed by the Governor, and it concludes
by saying, stay out of our business. We believe that the
decision made in California on utility restructuring and
competition are the right ones for our State, so stay out of
our business.
So I would also like to offer that, Mr. Chairman, as part
of the official record of this committee.
Chairman Tauzin. Without objection, it will be made a part
of the record.
[The information referred to follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Otter. Mr. Secretary, isn't it necessary to attract
investment that public policy relative to any kind of
information in the United States lasts beyond one Presidential
term? I don't know of any infrastructure that we have where we
asked the private sector or a private-public sector investment
that we want to attract, that they can amortize those kinds of
investments in 4 years, do you?
Secretary Abraham. Obviously, the predictability of policy
is critical.
Mr. Otter. So you have to have continuity. You know, I
haven't made a check, but I know that relative to one of the
other members from the other side of the aisle's questions
about why isn't 12 percent enough and why isn't that going to
generate a tremendous investment; however, I suspect if we
checked our portfolios for our 401(k)s for those members
sitting in this committee on this dais today, we probably
wouldn't find a lot of investment in that 12 percent by any
stretch of the imagination.
Let me move on. I want to commend you, Mr. Secretary, for
staying away from leapfrogging over the process which you and
the Canadians have already engaged in to try to come to some--
instead of playing the blame game to try to come to some sort
of conclusion on what has happened, because we do that in
Congress all the time. If there is a little problem we jump
right in and say this is the answer, and in the end we always
conclude that wet sidewalks cause rain, and the process of
doing that in this case could be way too damaging.
In another response, one of the questions was why aren't
these hearings made public? I was not satisfied with your
answer to that. But I would ask you this: have you and your
colleagues made any assessment of opening these meetings and
what it might suggest to the terrorists of the world of what
our vulnerability would be if these meetings were opened and we
came to some conclusions?
Secretary Abraham. Well, as I indicated, we haven't even
gotten yet to the stage of considering the deliberation
process. Obviously, the task force at this point is in an
information gathering stage, and the Congressman raises a very
interesting and important point as to----
Mr. Otter. So have you not made an assessment of that
information being made public?
Secretary Abraham. No, we have not reached the point of
assessing public hearings.
Mr. Otter. Immediately after 9/11 the Army Corps of
Engineers was requested to go out and make an assessment of
potential targets of our infrastructure like dams and like
power plants and things like that. And then that information
was made public, and of course it was a list of potential
targets for somebody. Don't you think it is important that we
not allow that kind of information in total to be made public?
Secretary Abraham. The Department of Homeland Security and
the Canadian counterpart are in the process of running that
working group and I am sure they will be very explicit in terms
of as they reach their information gathering and analysis as to
the classification level of issues that might relate to
terrorist threats.
Mr. Otter. My time is up.
Chairman Tauzin. The gentleman's time is up. Let me tell
you where we are now. Mr. Secretary, you need to leave. I have
four or five members who have still not asked questions. The
Governors are here and we are trying to take good care of the
Governors in our conference room and we need to get them up. So
what I am going to ask if maybe the members who still have
questions, if you could maybe make it one or two questions
quick and move on.
Mr. Doyle is next.
Mr. Doyle. Thanks, Mr. Chairman. I won't use my whole 5
minutes.
Mr. Secretary, I understand that Chairman Wood is part of
the task force. I also understand that FERC has the authority
themselves to conduct an investigation but they are not
presently doing so. It just seems to me that some autonomy
could lead to a useful process and it wouldn't be much harm
having an additional set of eyes, if you will, examining the
issue. Do you think it would be useful for FERC to conduct
their own independent investigation?
Secretary Abraham. I think that, first of all, I strongly
have urged that we have one investigation so that we could
benefit from the collective work of all of the people who can
bring some talent to this effort. No. 2, I don't know whether
FERC's authority extends to the full range of areas that I
believe the Department of Energy's authority extends in terms
of our capacity to conduct a comprehensive investigation. We
are in no position to prevent FERC from doing its own
investigation.
Mr. Doyle. So you wouldn't oppose it?
Secretary Abraham. Chairman Wood and the members of the
Commission and the two other members I guess will have to make
a decision. But I think we benefit from bringing all of the
expertise together in one investigation so that we can get
hopefully a timely as well as a comprehensive approach.
Mr. Doyle. But you wouldn't oppose it if they decided to do
it on their own?
Secretary Abraham. Chairman Wood's investigative authority
I think in this area or the FERC's is derivative of our
Department which we have assigned on a nonexclusive basis to
FERC and they are an independent commission to make decisions.
I think the country benefits from having all of the talent
working together, combined with that which Canada brings to
this effort.
Mr. Doyle. Fine. Thank you, Mr. Secretary.
Just one quick last question. I talked about distributed
generation in my remarks and I felt strongly that this could go
a long way toward solving some of our problems. Do you support
ramping up R&D funding for this? I know you keep mentioning
fuel cells, but the fuel cells that you mentioned, the hydrogen
fuel cells are 15, 20 years down the road. We have fuel cells
that have near term commercialization potential and that
funding has been cut. So how do we get more resources to that?
Secretary Abraham. Well, at the end of the day we have
expanded our overall commitment to fuel cell research. I think
the technologies that are being explored right now as to
hydrogen production, for instance, as fuel cell functioning has
the potential benefit in both the transportation as well as
stationary application. But we certainly see, as I mentioned in
response to another answer a little while ago, that we share
the view that this is part of a long-term solution.
Mr. Doyle. Thank you.
Chairman Tauzin. I thank the gentleman. Let me ask, does
anyone on this side have a question? Mr. Stearns, quickly.
Mr. Stearns. Thank you, Mr. Chairman.
Mr. Secretary, just an overview. It seems to me that if we
are going to avoid incidences like these blackouts, the first
thing we need to do is to establish a complete analysis of a
national threat and vulnerability assessment that identifies
these problems.
Has your office done this yet, a national assessment of
grid?
Secretary Abraham. Actually the Department of Homeland
Security has that charge now.
Mr. Stearns. So you don't do that at all?
Secretary Abraham. I mean, we play a role as technical
support. The DHS has the infrastructure security
responsibilities. They previously have been more in our
department.
Mr. Stearns. You know there were a lot of studies done in
the Clinton Administration. In 1999, a study of the
transmission grid was done. The DOE released its power outage
study in March 2000. You know, given these reports, are these
reports useful or useless? I mean, shouldn't these reports have
told us some of the vulnerabilities?
Secretary Abraham. Congressman, as I have commented several
times today, we feel that the grid study we did in 2002 is
explicit in identifying challenges which we confront. They were
also, if one reads our energy plan, expounded on there. And
Secretary Richardson was frequently seen and heard, in the wake
of the blackout, talking about the work he had done in terms of
these issues. We waited a long time to address them. They need
to be addressed.
Mr. Stearns. All right.
Mr. Chairman, thank you.
Chairman Tauzin. Anyone on this side the last question?
I think Mr. Allen first, and then I will get you next.
Mr. Allen. Thank you, Mr. Chairman.
And, Mr. Secretary, thank you for being here. Like many
other members, I am going to ask you a question about the
energy bill, because you know, we are, as you have said several
times, sort of ahead of the curve a little bit in trying to
devise legislative solutions to what happened on August 14. But
in the course of this hearing today, several members have
referred to a provision in the energy bill that they have
characterized as allowing the Federal Government to work with
States to get transmission lines sited. But when you look at
that provision, it is a provision that was reported by this
committee, but opposed by almost every Democrat and certainly
seems to be much more heavy-handed than working with a State.
The provision allows FERC here in Washington to swoop into
a State and preempt the State's ability to make siting
decisions in a variety of situations, some of them, I would
suggest, inappropriate. For example, if a State denies a permit
for transmission facilities for any reason whatsoever, then
FERC can overrule the State. So if a utility wants to build a
transmission line interstate--transmission of interstate
electricity in one spot rather than another--and the State
agency has a preference, then basically the utility cannot
agree, wait for a denial, wait for a delay and count on FERC to
preempt the State. Or if the State takes more than a year to
consider a transmission proposal, then FERC can also simply
take over.
This approach is great for utilities, but it may be
terrible for States who want to ensure that these facilities
are constructed in a way that meets their other public policy
objectives, environmental and otherwise. And I think that
Congresswoman Solis asked a question along these lines, and I
think you used the words ``last resort'' in describing the
State authority. But I would suggest to you that for an
administration that prizes State rights, this looks and feels
to some of us like a pretty heavy-handed power grab, to use the
phrase, because the weight of the FERC authority is there from
the beginning of the filing of the application, and basically
FERC is there to take over the transmission siting decision,
you know, if anything, changes.
So the question after all that, with respect to this
specific provision of the House energy bill, does the
administration support it? Do you have reservations?
Secretary Abraham. Let me tell you what I think, first of
all.
You know, nobody thinks twice if a pipeline is sited by the
Federal Government or the highways. We have done those. This
scenario, the Federal Government has no authority whatsoever.
The problem we have is that made sense when essentially the
transmission system was intrastate, when there wasn't a lot of
interstate development. Now there is. The question is, should
the Federal Government have any role.
What we have tried to argue in our grid study and what I
think was intended in the construction of the House bill was
that we ought to identify serious congestion areas, what we
called in the grid study ``national interest corridors,'' that
is, interstate transmission corridors which were so severely
congested as to cause the potential for the sorts of problems
we are here today talking about; that once we identify those,
we would wait, give the States an opportunity to act. But if
the States won't act, the question is, do we just do nothing,
or should there be some ultimate power at the Federal level;
when its an interstate matter that affects interstate commerce,
interstate health and safety issues, should there be an
opportunity for the Federal Government to site in the last
resort. That is the viewpoint we support.
Mr. Allen. But you would agree, this is a fairly
significant change from the rules that prevail today?
Secretary Abraham. The communication I received from the
Governors of this country on this issue certainly reflects that
view, and I in no way wish to diminish the significance of it.
But what is equally significant, I think--and again, I am not
going to speculate about what happened on August 14, but I
believe if we don't have adequate transmission on an interstate
basis, and it is what we call--not every single transmission
siting but ones that have caused severe congestion problems
with broader implications, I think the State should have the
first crack. They should have a sufficient time to act, but if
they won't act, then I believe there ought to be some ability
of last resort.
Chairman Tauzin. The gentleman's time has expired.
Let me point out, however, for the record that there is a
tradeoff in the bill. Feds get that authority, but the States
get additional siting authority on Federal lands as part of the
tradeoff. So States do gain additional rights under the
provisions of the House bill.
Ms. Schakowsky and then Mr. Brown.
Ms. Schakowsky. Before and after September 11 there was
this broad acknowledgment that the grid had to be upgraded, and
I am trying to understand under what conditions.
Mr. Markey talked about that guaranteed 11 to 12 percent
rate of return on the investment. And that doesn't seem to be
sufficient to have prodded people, nor did the warnings that
this could be a serious problem for the economy and for our
security as a Nation. The--so the answer seems to be, we talk
about incentive rates, representing the idea of consumers and
who pays. Isn't another idea that we just say this is so vital
to the United States' economy and to our security as a Nation
that we require that the transmission grid be upgraded, as
opposed to trying to find how much money do we have to require
consumers to pay in order for companies to be induced,
incentivized to do that?
And then the question is, who does pay? I mean, is it going
to be the captive consumers who are now paying so much at the
pump or paying so much for natural gas and then seeing their
electric utility bill rise? Is there some way to protect those
captive consumers from those high rates?
Secretary Abraham. Just two observations: First of all,
about 80 percent--I mentioned this earlier. About 80 percent of
the energy bill that people pay, whether it is the individual
or the business or industry consumer, about 80 percent goes to
the cost of generation, 10 percent goes for transmission, 10
percent for distribution.
It is our view--first of all, it is an important point that
came out of our grid study that because of the congestion in
the transmission system, we are artificially inflating the cost
of the generation.
Ms. Schakowsky. But you don't guarantee that prices will go
down. There is a guarantee of a rate of return, but.
Secretary Abraham. I am expressing just the results of our
study.
Ms. Schakowsky. I know, but consumers would feel, we give
you this tradeoff and give you higher rates, and then we say,
and then, therefore, we guarantee you that because congestion
will be alleviated, prices will go down. As you said, prices go
up pretty fast, but prices don't come down very fast; and there
is no guarantee of that.
Secretary Abraham. I think I was candid in my earlier
response in that.
I think the other point, though, I would bring to the
committee's attention is this: Two-thirds of the consumption of
energy in these rates that are paid is the consumption in the
business-manufacturing-industrial sector; one-third is
residential. And so what we have right now--I mean, in terms of
who does pay the bill and who should pay the bill, it seems
that as we look at this, I believe there will be an offset, but
I also believe that these heavy industrial consumers need to
pay their fair share, and if we are going to increase the
system to meet those demands, that the people who are putting
that demand into the system need to pay their fair share. And
that would be my----
Ms. Schakowsky. Did you ever lower--was there ever gouging
found throughout your hotline, this gasoline price gouging
hotline? Did anything result in lower prices?
Secretary Abraham. We brought and referred to the FTC, you
know, every.
Ms. Schakowsky. Did anything ever happen?
Secretary Abraham. I have no idea. I have to get back to
the committee.
Chairman Tauzin. The Chair reminds everyone, we have two
Governors and a mayor who have to catch a plane. Mr. Brown is
the last one.
Mr. Brown. Thank you, Mr. Chairman.
The response--to respond to the question of Ms. Schakowsky,
can you give us in writing the response to her and to me of
what actually came of those?
Secretary Abraham. Sure.
Mr. Brown. I have one question and a couple of remarks
before the question, and I appreciate the chance to speak to
you, Mr. Secretary.
May, 2003, the North American Electrical Reliability
Council issued its summer reliability assessment estimating
summer electricity demand in the Midwest ECAR region, or the
reliability region which includes my home State of Ohio, at
over 100,000 megawatts. But according to NERC, our region will
use demand-side efficiency measures in other words to meet less
than 3 percent of the demand this year.
The American Council for an Energy Efficient Economy
estimated that adopting a seasonal energy efficiency ratio of
13 for air conditioners would reduce demand nationwide by
57,000 megawatts during the next quarter century. One of the
White House directives in 2001 was to roll back the SEER, the
SEER 13 air conditioner standard, rolling back the required
efficiency. The Alliance to Save Energy says the
administration's decision will cause demand to be 13,000
megawatts higher than under the one point enacted, more
responsible SEER 13 standard.
During the next quarter century or so, the administration
decision will reduce energy efficient standards for air
conditioners and will cost consumers $18-plus billion in higher
electric bills. With the grid already badly strained with
demand-side measures meeting only a small fraction of total
demand, it seems puzzling to me that we can ignore the
reliability benefits of the SEER 13 standard.
Are you willing--are the Department and the President and
the administration willing--in light of this $18 billion cost
on top of perhaps 50 billion in transmission grade upgrades
brought on by what we are doing today, is it something you
would reconsider?
Secretary Abraham. Two points: First of all--and then I am
going to have the Deputy Secretary comment.
Point No. 1, these standards would go into effect in 2006.
And I don't think there should be confusion as to how they
might have in any way affected the blackout.
Second, we increased the standard from 10 to 12. We did not
roll anything back.
Third, I would just point out that one of the reasons we
did not support the 13 SEER standard was that--we concluded
that the analysis--we concluded that the cost to the consumers,
to low-income consumers, of the 13 SEER standards in position
would be prohibitive in terms of their ability to afford to
have residential air conditioning; and we did not think that
that was an appropriate way to save on energy on the backs of
those low-income consumers who would simply be priced out of
the market.
Mr. McSlarrow. I would only add that in addition to that
rule, which increased the energy efficiency of air conditioners
by 20 percent, this administration approved three other energy
efficiency rules. The total savings in terms of electricity
would equal over 5 years of all power that goes to every
American home. So we have already done a tremendous amount.
Now, it is true none of these start until 2006, but every
rule that we had in front of us we approved.
Mr. Brown. Just in closing, I would dispute a couple of
things that the Secretary and the Deputy Secretary said. One is
that while we did maybe increase from 10 to 12, the
administration before, in addition to regulation, increased it
to 13. So it is only in Washington do you call it an increase
to paraphrase my friends.
Second, this is the same administration, that is showing
such concern for low-income air conditioning users, that
doesn't seem to show that concern when it is time to put out a
budget on helping low-income energy assistance when it is
heating assistance in my part of the country.
Secretary Abraham. That is actually false, Congressman. And
if you look at the President's proposals on the weatherization
program in my department, where we have consistently submitted
to Congress budgets substantially greater than the
appropriators have given us to try to expand the weatherization
program. So that is not an accurate statement.
Chairman Tauzin. The Chair wishes to express my sincere
gratitude to the Secretary for the enormous patience he has
shown today, and I wish you Godspeed.
As you said, you plan to give us a report, you think, by
next week?
Secretary Abraham. We will give it.
Chairman Tauzin. Thank you, Mr. Secretary and Deputy
Secretary.
And we will now move on to the second panel, which has been
waiting patiently. And we will call the second panel and I will
wait for them to assemble before I introduce them, but I ask
all the members and guests to allow the Secretary to make his
departure and to invite Governor Taft and Governor Granholm and
Mayor Kilpatrick to enter the room.
[Brief recess.]
Chairman Tauzin. Let me ask the witnesses to take their
seats. The Governors are here and the Mayor is here, and we are
deeply honored to have the presence of two of our Nation's
Governors and the distinguished Mayor of the great city of
Detroit, who are here to share their perspectives on the crisis
that occurred in the Northeast on August 14.
So if our guests will take seats, please, we can begin the
rest of our hearing. So please take seats and get the doors
closed. Thank you very much.
Ladies and gentlemen, the committee and guests, we are
honored and pleased to have with us, as I mentioned, two of our
Nation's most distinguished Governors and the great,
distinguished Mayor of one of America's great cities that gives
the New Orleans Saints the dickens every now and then.
I want to welcome the Honorable Bob Taft, Governor of the
great State of Ohio, the Honorable Jennifer Granholm, the
Governor of the great State of Michigan, and the Honorable
Kwame Kilpatrick, who is the Mayor of the great city of
Detroit, Michigan. All of you had some real experience in what
occurred August 14, and obviously a perspective that maybe can
help us understand what happened and how we can best prevent it
again.
Let me extend to all of you, first of all, our sympathies
for what your folks had to go through; and second, the great
appreciation of the rest of our country in the way you handled
it. In New York, your great city and State were an example to
the rest of us of how to handle a crisis, and you managed it
awfully well; and I want to extend my thanks to all of you for
setting the right example for the rest of us in the country.
And we will begin with Governor Taft, if you will lead off
and give us your perspective, Governor.
STATEMENT OF HON. BOB TAFT, GOVERNOR, STATE OF OHIO
Governor Taft. Mr. Chairman and members of the committee,
thank you for this opportunity to testify on a matter of great
importance to Ohio and to the Nation. It is my hope that what
happened on August 14 will awaken us all to the urgency of
creating a modern, well-coordinated system for the transmission
of electricity.
The unprecedented blackout that occurred posed severe
threats to public health and safety and to the economy of Ohio,
other States and provinces and two nations. Although we will
not know for some time the exact sequence of events that gave
rise to the blackout, this incident revealed serious
shortcomings in the transmission of electricity that could well
create a real calamity in the future if not addressed.
The blackout underscores our deep dependence on our energy
infrastructure and the vulnerability of that system. The
consequences go far beyond the personal inconvenience of
lights, refrigerators or air conditioning. In Cleveland, the
downstream impacts led to a near catastrophic failure of the
city's water system leaving tens of thousands in the metro area
without safe drinking water and rendering beaches unsafe for
days due to sewage contamination.
The blackout cost Ohio businesses more than a billion
dollars in lost economic activity. One major Ohio company lost
steel-making capacity for more than a week because of the
damage of the blackout.
Above all, the blackout shook the confidence of our
system--of our citizens in the system that most take for
granted. We must now do whatever it takes to establish an
improved system that people can rely on to power their homes,
their offices and their communities.
In that immediate effort to assist with an answer to the
question of what happened, I have directed the Public Utilities
Commission of Ohio to undertake a second-by-second account of
events in Ohio that took place leading up to and during the
blackout. The chairman of the PUCO, Alan Schriber, has been in
contact with utilities and industry groups operating in Ohio to
gather time lines and other data critical to the investigation.
He will be a member of the joint U.S.-Canadian task force and,
in that capacity, will make his information available to
support the binational investigation; and he will be testifying
before you later today.
From the standpoint of preventing a future potentially more
serious blackout, we support several initiatives that are under
way or under consideration. First, we urge the Congress to
require mandatory reliability standards for the transmission of
electricity. Voluntary standards have been proven inadequate.
Responsibility for enforcement of rigorous national standards
for safe, reliable transmission of electricity could be given
either to a Federal agency or to State commissions operating to
enforce Federal standards.
With respect to rail lines, natural gas pipelines, there is
already a precedent for State enforcement of national safety
and reliability standards in Ohio and other States.
Second, I strongly support FERC's proposal for an
effective, empowered regional system that places direction and
control of transmission with independent, regional grid
operators. The current system is both fragmented and weak.
For example, in Ohio, oversight of transmission is divided
between two different organizations. We have companies that are
members of the Midwest ISO, others that belong to PJM and one
company whose efforts to join a regional group has been delayed
by legal and technical disputes. In addition, the Midwest ISO
and PJM still lack effective control over transmission lines in
Ohio that they are supposed to oversee and coordinate with
lines outside our State.
Congress should act promptly to support FERC's plan for
empowered, all-inclusive regional transmission entities. A 3-
year delay, as some are proposing, would impose an intolerable
risk on the Nation.
I have directed our PUCO to conduct a review of whether
Ohio's division among two separate regional transmission
organizations poses a serious risk to the reliability of the
delivery of power to customers in Ohio and, if warranted,
provide recommendations to bring our utilities within the State
under a single transmission organization. Without strong
Federal action, such a result may not be achievable.
In addition to mandatory reliability standards and strong
RTOs, we must not overlook the importance of investment in
technology and infrastructure to upgrade the grid and its
operating systems. It has been reported by many sources that
investment in transmission has declined even as the burden on
the lines has increased. After the blackout, a transmission
system in a neighboring State stated that his company should
have received a courtesy call from an Ohio utility in regards
to lines going out in Ohio. Quite frankly, in the 21st century,
a system that relies on courtesy calls is clearly outdated and
needs to be modernized. Therefore, I encourage the Congress and
the FERC to provide incentives and adequate returns on
investments to enable grid operators to upgrade transmission
systems, including deployment of advanced technology to detect
problems and provide rapid communication and coordination.
Some may disagree that change is needed. Others will use
the blackout as a platform for concerns that are not relevant
to the cause of the outage or actions necessary to prevent new
blackouts in the future. I believe we must support the joint
U.S.-Canadian task force as it works to identify the causes of
the blackout, adopt national mandatory reliability standards
and establish a strong regional transmission system capable of
upgrading technology, creating regional wholesale markets and
managing the power grid so our lights will stay on.
I urge the Congress to enact the required reforms at the
earliest possible date as part of a comprehensive energy bill
that addresses, also, the need to expand domestic energy
supplies, reduce our dependence on imported oil and eliminates
the ethanol penalty which unfairly discriminates against Ohio
and other States in the allocation of Federal gas tax dollars.
Chairman Tauzin. Thank you very much, Governor.
What is your relationship to the ex-President?
Governor Taft. Great grandfather.
Chairman Tauzin. I wanted to express the appreciation of
the people of Louisiana because it was he who appointed one of
our native sons and a great person in Louisiana history, Chief
Justice Edward Douglas White, to the Supreme Court and named
him Chief Justice. So we have a debt to your family.
Governor Taft. Thank you so much, Mr. Chairman.
[The prepared statement of Hon. Bob Taft follows:]
Prepared Statement of Hon. Bob Taft, Governor of Ohio
Mr. Chairman, members of the committee, thank you for this
opportunity to testify. It is my hope that what happened on August 14th
will awaken us all to the urgency of creating a modern, well
coordinated system for the transmission of electricity.
The unprecedented blackout that occurred posed severe threats to
public health and safety and to the economy of Ohio, other states and
provinces, and two nations. Although we will not know for some time the
exact sequence of events that gave rise to the blackout, this incident
revealed serious shortcomings in the transmission of electricity that
could well create a real calamity in the future if not addressed.
The blackout underscores our deep dependence on our energy
infrastructure and the vulnerability of that system. The consequences
go far beyond the personal inconvenience of lights, refrigerators or
air conditioning.
In Cleveland, the down-stream impacts lead to a near catastrophic
failure of the city's water system, leaving tens-of-thousands in the
metro area without safe drinking water and rendering beaches unsafe for
days due to sewage contamination.
The interruption of business activity resulted in the loss of
millions of dollars of economic activity that will not be fully
recouped through private insurance and state or federal programs. One
major Ohio company lost steel making capacity for more than a week
because of the damage from the blackout.
Above all, the blackout shook the confidence of our citizens in a
system that most take for granted. We must now do whatever it takes to
establish an improved system that people can rely on to power their
homes, their offices and their communities.
In an immediate effort to assist with an answer to the question of
``what happened?'', I have directed the Public Utilities Commission of
Ohio (PUCO) to begin a second by second account of events in Ohio that
took place leading up to and during the blackout. PUCO Chairman Alan
Schriber has been in contact with utilities and industry organizations
operating in Ohio, to gather timelines and other data critical to the
investigation. As a member of the joint U.S.-Canadian Task Force, he
will make that information available to support the bi-national
investigation.
From the standpoint of preventing a future potentially more serious
blackout, we support several initiatives that are underway or under
consideration. First, we urge the Congress to require mandatory
reliability standards for the transmission of electricity.
Voluntary standards have been proven inadequate. Responsibility for
enforcement of rigorous national standards for the safe and reliable
transmission of electricity should be given either to a federal agency
or state commissions operating to enforce federal standards. With
respect to rail lines and natural gas pipelines, there is already
precedent for state enforcement of national safety and reliability
standards in Ohio and other states.
Second, I strongly support FERC's proposal for an effective,
empowered regional system that places direction and control of
transmission with independent regional grid operators. The current
system is both fragmented and weak. For example, in Ohio oversight of
transmission is divided between two different organizations. We have
companies that are members of the Midwest ISO, others that belong to
PJM, and one company who's efforts to join a regional group has been
delayed by legal and technical disputes. In addition, the Midwest ISO
and PJM lack effective control over the transmission lines in Ohio they
are supposed to oversee and coordinate with lines outside Ohio.
Congress should act promptly to support FERC's plan for empowered,
all-inclusive regional transmission entities. A three-year delay, as
some are proposing, would impose an intolerable risk on the nation.
I have directed the Public Utilities Commission of Ohio to conduct
a review of whether Ohio's division among two separate regional
transmission organizations poses a serious risk to the reliability of
the delivery of power to customers in Ohio and, if warranted, provide
recommendations to bring utilities within the state under a single
transmission organization. Without strong federal action, such a result
may not be achievable.
In addition to mandatory reliability standards and strong, regional
transmission organizations, we must not overlook the importance of
investment in technology and infrastructure to upgrade the grid and its
operating systems. It has been reported by many sources that investment
in transmission has declined even as the burden on the lines has
increased.
After the blackout, a transmission system operator in Michigan
reported his company should have received a ``courtesy call'' from an
Ohio utility in regard to lines going out in Ohio. Quite frankly, in
the 21st Century, a system that relies on ``courtesy calls'' is clearly
outdated and must be modernized.
Therefore, I encourage the Congress and the FERC to provide
incentives and adequate return on investments to enable grid operators
to upgrade transmission systems including the deployment of advanced
technology to detect problems and provide rapid communication and
coordination.
Some may disagree that change is needed. Others will use the
blackout as a platform for concerns that are not relevant to the cause
of the outage or actions necessary to prevent new blackouts in the
future. I believe we must support the joint U.S.-Canadian Task Force as
it works to identify the causes of the blackout, adopt national
mandatory reliability standards and establish a strong regional
transmission system capable of upgrading technology, creating regional
wholesale markets and managing the power grid so our lights will stay
on.
I urge the Congress to enact the required reforms at the earliest
possible date as part of a comprehensive energy bill that addresses
also the need to expand domestic energy supplies, reduce our dependence
on imported oil and eliminates the ethanol penalty which unfairly
discriminates against Ohio and other states in the allocation of
federal gas tax dollars.
Chairman Tauzin. It is now our pleasure to welcome the
Honorable Jennifer Granholm the Governor of the great State of
Michigan for your testimony.
STATEMENT OF HON. JENNIFER GRANHOLM, GOVERNOR, STATE OF
MICHIGAN
Governor Granholm. Thank you, Mr. Chairman, and thank you
to all of the members of the committee, particularly the ones
from my home State, Representative Upton, Representative
Stupak, and of course our ranking member, Mr. Dingell.
I appreciate the chance to come and tell you what it was
like from the perspective of a Governor and from my
perspective, as well, what we might take a look at in terms of
remedying the problem.
In Michigan more than 6 million people were without power.
The entirety of the Detroit Edison system went down for the
first time in their history. And of course that left us without
recourse with respect to water. I am sitting next to the great
Mayor of the city of Detroit, Mayor Kilpatrick, whose water
system serves all of southeast Michigan, and without
electricity, people couldn't turn on the taps and see fresh
water coming out. And I know that the same was experienced in
Ohio. Clearly there are negative impacts on all of our States.
For us, the public dollars that we have requested
assistance on amount to $20 million that we have calculated so
far. Detroit Edison says that they suffered $35 million in
losses.
On the private side, at least 70 manufacturing plants went
down. The water system, as I mentioned, was also shut down. And
the total loss of earnings in Michigan, we believe will total
at least $1 billion once the numbers are aggregated.
So there were things that went right, however. There is a
silver lining to all of this. The real success, I think, is
that in Michigan we had no deaths. We had no severe injuries;
we had no spikes in crime. We had a spike in community, and
that was the good news that came out. This is a testament, I
think, to our first responders who sprang into action and to
the spirit of the great Michigan citizenry. It was the power of
the people that really held us together in those dark hours.
Our communities united instead of dividing. And as soon as
we knew--for example in southeast Michigan, as a Michiganian,
we come with a map attached to our persons--but in our
southeast Michigan region, which is this part here that all
went out, people from the west, when they learned that this
part of Michigan was without power, began to send bottled
water; and in fact over a million bottles of water were donated
from areas of the State that were completely unaffected. So it
was, I think, a good tribute to citizen patriotism.
The suspected cause of the blackout was one of the
questions that was asked when we were invited to testify. And
of course as you heard from Spencer Abraham and you will hear
from our public service commissioners, who will testify after
us, investigations are ongoing, and it is difficult to
speculate as to exactly the cause when it is still preliminary.
However, I think there may be and I think the investigation
might suggest three possible factors in this.
One, I do believe there may be an aspect of human error
involved, related to communications or lack thereof. And I
agree with Governor Taft that we shouldn't have to rely on
courtesy calls, absolutely. We should have a system that is
reliable enough that you don't have to rely on a courtesy call.
But in this case, of course, there was no courtesy call nor
was there a system in place. Neither Detroit Edison nor the
international transmission company which services the
transmission grid in Michigan received any indication prior to
the blackout, although it has been traced to about an hour and
5 minutes prior to the time that in Michigan the transmission
company found that there was a problem. So about an hour and 5
minutes before that, problems began to emerge on the grid and
yet nothing happened.
In the best of all possible worlds, we would have a command
and control system where it would be clearly--notification
would be given to States, to connected grids, to connected
entities that a problem was occurring; and if power needed to
be offloaded, that would be the time to make that decision.
None of that was able to occur because it was too late by the
time the ITC, the International Transmission Company, which is
our transmission grid, was notified--or found it wasn't
notified--and saw the problem emerging on the system.
If our utilities had the ability to identify that a problem
was occurring either through the regional transmission
organization, or some other entity during that previous hour,
then this problem of cascading might have been prevented. So
the first problem or the first factor that might weigh into
this is the potential human error.
Second, obviously we had a power line failure. There were
reports that failure to adequately maintain some power lines in
the region might have contributed to the blackout. I am sure
that question is going to be covered extensively by other
witnesses.
And the third thing that is a factor, that may not be the
cause of the problem but is certainly a factor for the
discussion today, are the changes in the utility market. While
restructuring of electricity, which has occurred in Michigan,
did not cause the blackout, I think we have to explore whether
an evolving utility market might not have impacted the ability
to get responsibility out there for the power outage. In other
words, nobody was taking responsibility because there is nobody
we can point the finger to who is responsible for maintaining
reliability and enforcing it.
So Michigan has not fully deregulated like a number of
other States, but several years ago, we did make significant
changes in the ownership of our utility system and how power
was transmitted. There are a lot of positive results that came
from that. Wholesale electricity began to become competitive
and people could purchase that. More power plants were built,
more investment in the transmission grid and in the
transmission lines.
However, partial deregulation also had some impacts that
may dilute responsibility, and that is a problem. Power
companies sold off their transmission systems to separate
operators. Movement of power on the grid is now controlled less
directly by the power companies in Michigan and is much more
widely influenced by the power supply and demand in the region.
And the bottom line, of course, is that this contributes to a
system where no one, myself included, knows who is ultimately
responsible for ensuring reliability. That is an unacceptable
situation.
So the lessons that we learned are: First, increased
training and planning after September 11 meant that we were
able to respond. And you will hear from Mayor Kilpatrick, who I
am sure will underscore the great efforts he made in
responding; and two, the necessity of ensuring a safe and
reliable and efficient electric transmission system should be
critically apparent to all of us, and that is why we are here.
The State of Michigan certainly stands ready to help, but
the necessity of a Federal solution is evident. The third
question you asked, How can similar incidents in the future be
prevented, we need to pass immediate reliability standards. I
think we also need to pass a bill included in that requires
accountability.
If we can look at price stability, that would be a
marvelous thing. Something that incentivizes investment in the
power grid would also be, I think, a worthwhile exploration for
this committee. Perhaps investment tax credits. Perhaps an
enhanced return on investment, some have suggested, although
frankly 12.88 percent, or 13.88 if you are a member of an RTO,
is a good return on investment and should be enough to provide
incentive to invest in the grid.
And, of course, I think the biggest incentive is to develop
a regulatory framework that requires predictability, mitigates
investment risk and ensures enforcement of reliable standards.
So, as Governor, you know, I don't pretend to be an expert
in this, but I do know this: that our citizens, when they flip
the switch, they want the light to come on; when they get in an
elevator, they want to be able to know they will be able to get
off; when they turn on the tap water, they want to make sure
safe water emerges.
I appreciate the chance to come and share my thoughts with
you, and I am confident that if sane heads prevail, we can see
a quick resolution to this question of making sure we have got
reliable, enforceable standards. Thank you.
[The prepared statement of Hon. Jennifer Granholm follows:]
Prepared Statement of Hon. Jennifer Granholm, Governor, State of
Michigan
Mr. Chairman and members of the Committee, my name is Jennifer
Granholm and I am the Governor of the State of Michigan. I appreciate
the opportunity to appear before the Committee on Energy and Commerce
today to discuss the blackout that ripped across the Eastern United
States and Canada on August 14th, eventually hitting and stopping in my
State.
As this Committee has recognized, all of us need to ensure that
appropriate steps are taken to identify, address and correct the causes
of the blackout.
In Michigan, over 6 million people lost power. The entire utility
system of the Detroit Edison Company (DTE) was knocked out, leaving the
City of Detroit, and much of the southeast region of Michigan without
electricity and other essential services such as water and sewer.
Detroit Edison's officials have stated that this is the first time in
the company's history that the utility lost power to all its customers
at one time.
I must express how enormously proud I am of Michigan's citizens,
emergency responders, utility workers, and governmental employees who
responded in extraordinary ways to lessen the severity of the crisis
and restore the utility services as quickly and efficiently as
possible. Our emergency preparedness was tested and I am pleased to
report that Michigan's citizenry and emergency management system came
through with flying colors.
Despite the best efforts of the people of Michigan, the effects of
the blackout on individual residents, small businesses, and major
industrial electric users were very substantial. Although we are still
in the process of assessing the damage, we have an initial estimate of
direct cost of the emergency to state and local government of over $20
million dollars. In addition, we know that DTE suffered about $35
million in losses. Over 70 manufacturing companies in Michigan were
forced to shut down. Anderson Economic Group in Lansing, MI has
estimated that the total lost earnings in Michigan will reach the $1
billion mark once all of the numbers are totaled. Moreover, facilities
such as hospitals and nursing homes were left scrambling to provide
care to those who needed it. Streets were clogged with cars and gas
stations were largely shut down, which made it more difficult for
emergency responders to get to people in need.
We feel fortunate that despite the inconvenience, financial loss,
and disruption of people's lives caused by the blackout, there was no
loss of life. If we were to have a similar incident in the future, we
might not be so lucky. In short, we cannot afford to have this kind of
failure to our electric system happen again.
what were the specific factors and events leading up to, and
contributing to, the blackouts of august 14?
Michigan's Public Service Commission has launched an investigation
into the outage, as has the U.S. Department of Energy in conjunction
with our Canadian counterparts. I would like to thank Secretary Spencer
Abraham for appointing Mr. J. Peter Lark, the Chair of the Michigan
Public Service Commission, to this body. I can assure this Committee
and Secretary Abraham that Mr. Lark brings with him a wealth of
expertise that will serve both Michigan and the country very well.
Until we receive the results of the investigations, I am reluctant
to make pronouncements of what may have been the precise cause of the
outage. While we believe we know the sequence of events that resulted
in the power outage--power plants tripping off-line and transmission
lines going down in a fashion we are not used to seeing--we do not know
why those events occurred, and I believe we need to wait for the
investigations to be completed before we jump to conclusions.
Based on information provided by our utilities, transmission
companies, and by our preliminary examination of the situation, we do
know that there is a strong likelihood that the outage can be traced to
at least three potential factors. One potential factor is human error.
The transmission system that serves Detroit Edison's utility system,
International Transmission Company (ITC), as well as Detroit Edison
officials, have reported that they received no communications prior to
the blackout from the northern Ohio utility that has been identified as
the likely system where the troubles originated. ITC has traced the
timeline on actions that contributed to the blackout back to 1 hour and
5 minutes before it occurred. While ITC was able to develop and provide
this information to us after the blackout occurred, ITC and DTE tell us
they were unaware of any problem or any unusual activity on the grid
until 2 minutes before the blackout, when the power flowing from
Michigan to Ohio jumped by 2000 megawatts in 10 seconds. By this time,
ITC told us that the situation was at the ``point of no return.'' If
they had been informed during the previous hour that the system was
having problems, they may have been able to craft a contingency plan
for the energy demand and delivery, and avoid the cascading failure.
The second potential cause for the blackout cited in various
accounts is powerline failure, possibly due to inadequate maintenance.
Again, the extensive investigations currently underway will probably
give us a precise factor or set of factors and events that caused the
blackout. I also anticipate that the testimony provided by public
service commission chairs and by the transmission companies today will
give you greater insight into the precise series of events and
technical failures that occurred.
A third potential cause that needs to be explored is whether an
evolving utility market might have impacted the power outage. In 2000,
Michigan passed PA 141, a law whose main goal was to provide cheap,
reliable power for Michigan's industrial, commercial and residential
customers. It was touted as a law that would provide ``[c]hoice for
those who want it, and protection for those who don't.'' Whether you
believe this act was a positive or negative step for electricity in
Michigan it does not change the fact that this law completely altered
the way electricity was transmitted, distributed and sold in Michigan.
This legislation changed Michigan from a state with a fully regulated
utility system, to one with a restructured market. Michigan did not
fully deregulate like some other states, but Michigan did make
significant changes in ownership of the utility system and how power
was transmitted.
There were some positive results that came out of PA 141. More
power plants were built in Michigan which has helped us meet peak
demand in the summer months, and 2000 MW of new transmission lines were
constructed to transfer power in and out of the lower part of the
state. Both of these changes should have helped enhance the reliability
of the power supply.
However, PA 141 also resulted in power companies selling off their
transmission systems to separate operators. Before restructuring,
Michigan's two big utilities, DTE and Consumers Energy, shared a power
pool and were able to monitor and control production and movement of
power between each other and their customers in a centralized fashion.
Under PA 141, movement of power on the grid is now controlled less
directly by the power companies in Michigan and is much more widely
influenced by power supply and demand in the region.
In addition, under the guidance of the Federal Energy Regulatory
Commission (FERC), Michigan utilities chose to join a Regional
Transmission Organization (RTO). The RTO that Michigan utilities and
transmission companies generally joined was the Midwest Independent
System Operator (MISO). MISO is supposed to help control the movement
of power across the grid, and ensure that situations like the one that
happened on August 14 do not occur. But, participation in an RTO is not
mandated by the federal government, and there are no mandatory
reliability requirements that RTOs must follow. In the case of MISO,
some of Michigan's most critical partners--utility and transmission
companies in Northern Ohio and Illinois--did not join. The bottom line
is that this contributes to a system where no one, myself included,
knows who is ultimately responsible for ensuring reliability. That is
an unacceptable situation.
The average citizen will not care who is responsible or how exactly
they are held responsible. They simply want to know that when they get
on an elevator, they are going to be able to get off; when they flip a
light switch that light will come on; or when they turn on the tap safe
drinking water will flow.
which systems operated as designed and which systems failed?
Again, I am reluctant at this time to suggest what worked, what
didn't work, and why, until we receive the results of the
investigations. While we do know the westward flow of the cascading
blackout stopped in Michigan, we do not yet know why. I hope that
investigations by the Michigan Public Service Commission and the United
States Department of Energy shed light on what worked, what didn't, and
why, so that we develop a system capable of stopping any future
cascading blackouts.
what lessons were learned from the blackouts?
Two points stand out. First, our increased planning, training, and
coordination since the events of September 11, 2001 paid off
tremendously, even in a non-terrorism related contingency. We must
continue to be prepared, to be vigilant, and to give our first
responders every resource they need to protect our citizens in the
event of another unseen emergency. The real success of this blackout is
that Michigan had no deaths, severe injuries, or spikes in crime during
the time when the power was out. This is a testament to our first
responders who sprung into action, and to the sprit of the Michigan
citizenry. It was the power of the people of Michigan held us together
during our darkest hours.
Our communities united instead of dividing. As soon as we knew that
drinking water was needed in southeast Michigan, businesses around the
state offered up their stocks of water bottles. In two days, through
the generosity of Michigan businesses, over 1 million bottles of water
were delivered to the victims of the blackout in southeast Michigan.
During the early hours of the blackout, while the emergency
management team and I were working hard to learn what had happened and
what we needed to do, right outside my window civilians had taken to
the street to help direct traffic and ensure people got home safely.
Second, the necessity of maintaining a safe, reliable and efficient
electric transmission system should be critically apparent to all as a
result of this blackout. It is vital that we take all steps necessary
to avoid a repeat of the August 14 disruption. The State of Michigan
stands ready to help, but the physical and legal nature of the Nation's
transmission system requires a strong, coordinated federal solution.
how can similar incidents in the future be prevented?
Congress must respond swiftly to institute measures to stabilize
and protect our electrical transmission systems. By this I mean there
must be in place a system of mandatory standards and rules for the
reliable operation of the electricity grid. Congress should immediately
pass a stand-alone bill that will provide enforceable reliability
standards for the nation's transmission system. This could mean giving
more regulatory teeth to the North American Electric Reliability
Council (NERC) or to the Federal Energy Regulatory Commission (FERC).
It could also mean putting a higher priority on making RTO's work
effectively.
The security and reliability of the interstate electric
transmission system is unmistakably under the purview of the federal
government. Yet, FERC's Chairman has stated that ``right now, there is
no federal regulatory authority over reliability.'' I urge you to fix
this deficiency by passing legislation that requires enforceable
standards for the safe and reliable operation of the nation's power
grid.
While I believe that mandatory reliability standards should be
immediately enacted in stand alone legislation, there are clearly other
important goals that should be included in any overarching energy
legislation considered by Congress:
1. Require Accountability--The electrical system in this country must
include a system of accountability. We need to know who is
responsible for what, and there must be ways to enforce
accountability in the system.
2. Ensure Price Predictability and Stability--The system must provide a
level of stability and predictability of energy prices.
Clearly, steps need to be taken to strengthen consumer
protections in electricity pricing. Currently, federal rules do
not prevent unfair price gouging in wholesale electric sales,
and they do nothing to protect families and businesses in
Michigan or any other state and the retail prices they pay. No
family--not just those living on fixed or low incomes, although
they are particularly vulnerable--can budget for wildly
changing or perhaps even doubling or tripling of their home
energy bills. And as vulnerable as each family's budget can be,
small businesses can be put out of business by dramatic
increases in their electric bills. Energy costs are a large
expense of doing business for the local grocery store,
restaurant, or dry cleaner. How do they survive without stable
and fair prices for their electricity? Even our largest
manufacturers could lose business--could lose job--if energy
costs climb and they lose they are unable to compete and win
against foreign competitors.
3. Encourage Investment in the Power Grid--Finally, comprehensive
energy legislation must do more to ensure the national power
grid is capable of handling the energy needs of our country.
Whether that is additional power lines, or the development of
new technologies that allow for more efficient distribution of
power, it is clear that we need a transmission system that
provides an appropriate level of investment in improvement and
maintenance. A poorly maintained power grid is not only an
inconvenience to every family in the country--it is a threat to
our jobs. Losing power shuts down commerce. Some of our largest
manufacturing plants were shut down for days as a result of
this outage. It threatens our health and safety when we can't
provide electricity to guide traffic, illuminate roads and
sidewalks, or power our water supply systems. And it has a
continuing impact. An unreliable electric supply is a direct
impediment to attracting investment, and something that we all
will suffer the consequences of in the future.
As Governor, I do not set the rules for supplying electric power,
but I am the one who has to protect the peace when the power goes off.
A massive blackout has an even larger impact on public safety, from law
enforcement to medical services, from ground transportation to even
shutting down our airports. People will tell you that fixing this
problem in our transmission system is going to be expensive, but the
bottom line is we cannot afford to ignore this problem.
In conclusion, whether we learn that the causes were systemic or
human error, mechanical or electronic, an obvious starting point to
address the problem will be the passage of legislation to enact
mandatory and enforceable standards and rules for the safe and reliable
operation of the nation's transmission grid. I urge Congress to act
quickly to address these issues and meet the need that was so clearly
demonstrated on August 14, 2003.
Thank you for this opportunity to share these comments with you.
Chairman Tauzin. Thank you for your excellent testimony.
And I want to add something you said about the citizens across
Michigan.
The citizens in Michigan and Ohio have always been there
when we got hit with hurricanes. Fresh water flows in from
across the country. It is a beautiful example of, as you said,
citizen patriotism. Kids in my State gave up Christmas money
for construction of two fire engines to the people in New
York--Christmas money.
Those are good stories arising out of a crisis like this,
and there are always reasons to celebrate.
Now we welcome the Mayor of the great city of Detroit. I
want to tell something about Kwame that you may not know. He is
a son of one our colleagues, Ms. Carolyn Cheeks Kilpatrick, is
his mother.
I know she is as proud of you, as you are of her, Mayor. We
are proud of you, too. And welcome.
STATEMENT OF HON. KWAME M. KILPATRICK, MAYOR, CITY OF DETROIT
Mr. Kilpatrick. Thank you, Mr. Chairman, and I feel right
at home in Washington because my mommy is here; and I do
appreciate you and Ranking Member Dingell from my home State.
To the rest of the committee members, thank you for the
opportunity. On behalf of the citizens of the city of Detroit,
we see this as a privilege and an honor to come before this
body and talk to you about what happened in the city of
Detroit.
I am coming from a little different perspective. I am a
Mayor, and mayors we don't have time to deliberate those macro
issues. We have to respond immediately. We have to send out
those first responders. We talk to the person that rides the
bus, the person that drives the bus, and also the person that
builds the bus and fixes the bus. So we have all of those
different things at our fingertips.
The city of Detroit we boast as being the first city to
deliver our homeland security plan to Secretary Ridge. We
delivered our 10-point plan in April 2002. It focused on
improving day-to-day service and preparedness to help us
detect, prevent, and respond to terrorist attacks and any other
critical issues, be it a tornado or the largest blackout in the
history of this country.
We appointed a homeland security director. We established a
homeland security council made up of key public safety, public
health and other entities. We upgraded our emergency operations
center and updated the department emergency response plans
which formed the foundation for operations during the blackout.
On August 14, a massive power outage hit the northeastern
United States and parts of Canada. The power outage hit the
city of Detroit area about 4:17 p.m. When Enrico Fermi nuclear
power plant lost power and shut down. The city of Detroit lost
all power at 4:21 p.m. The impact: Transportation was
paralyzed, communications disrupted, and many people,
particularly senior citizens, were placed in potentially life-
threatening situations without basic necessary services from
food to water to oxygen that they needed to survive.
2.1 million people in Detroit lost power. Children suffered
greatly. A lot of children who had asthmatic problems suffered
because they couldn't get to the hospital.
Half of the Detroit water system, which serves about 4
million people, half of those people lost water completely.
About 25 percent of the customers had low pressure, similar to
New York. Part of our system is gravity fed, so the power
stations didn't necessarily affect the same.
Transportation systems shut down. Traffic was critically
impacted especially at the border. Detroit-Windsor Tunnel was
shut down, stranding numerous workers. About 27,000 people use
the tunnel daily. Many of these people that use the tunnel work
in our hospital system, so there was a shortage of nurses
throughout the hospital system at the same time.
Detroit Metro Airport remained opened, but had limited
operations. About 216 flights were canceled by Northwest
Airlines which is our hub carrier.
The Marathon Ashland refinery, which is in southwest
Detroit, suffered an explosion due to the outage. Residents had
to be immediately evacuated from that area, and many of our
police officers and fire fighters had to be called to that
site.
Most Detroit hospitals remained opened, but as I said,
Children's Hospital had to immediately let people, who could be
released, go to make room for all the children with asthma who
had to come there immediately.
Our homeland security director could not use his cell
phone. This disrupted communications between the city and the
Federal Department of Homeland Security. Some cell phone
manufacturers told us that this could be used as a backup form
of communications. This did not work because their cell towers
was down. This is important to note, because to get in touch
with Secretary Ridge and Homeland Security and the White House,
we had to go through our consultant in Maryland to get to us to
talk.
Despite all of these things that were happening, it was
calm in the city of Detroit. Our response to the blackout was
quick and efficient due in large part to all of those planning
initiatives that I told you about. The city responded
efficiently with the rapid mobilization of first responders. We
proved yet again that local first responders are the first in
and the last out during critical incidents.
Our local homeland security office served as a hub for
sharing critical information between city and Federal, State
and other entities. During the blackout, the council convened
as a problem-solving team. The emergency operations center in
the city of Detroit was up within 45 minutes of the blackout.
The Detroit police officers were at every major intersection
within 20 minutes of the blackout. Our EMS operators handled
about 576 calls. It is the most in the city's history, and we
responded to those 576 calls, most of which were respiratory
problems.
The entire police force was immediately placed on
mobilization alert 2, which means all police officers, all
police officers' vacations and furloughs were canceled and all
of them were brought in. We were in all force, working 12-hour
shifts with no one being able to leave.
The Detroit fire department mobilized as well, establishing
backup water sources throughout the city of Detroit. We even
used some of our recreation pools for backup water because the
fire hydrants weren't working. We mobilized another team to
specifically go to the high-rise apartments where senior
citizens lived throughout the city, and we immediately took
them water. Every single door in senior citizen housing was
knocked on and they were delivered food and things they needed.
Over 230,000 bottles of water were delivered to senior citizens
within the 36 hours including 1,200 gallon jugs of water.
And thanks to the Governor of our State, 500 ``water
buffaloes'' from the National Guard came from northern
Michigan. They went to our hospital systems immediately and
then to secured locations in the city of Detroit. So residents
that needed water could bring containers to these sites and
fill up.
Our public lighting department moved in quickly to get
backup generators on line within a few hours. All of our
precincts, 13 precincts--the city of Detroit building was up
and all of our public housing system was up with backup
generation within a few hours.
We moved quickly to get timely and accurate information to
the public. We had periodic radio interviews and press
briefings to make sure the calm would be there. We worked
closely with State and Federal authorities. I personally
briefed the White House on what was happening in the city of
Detroit. And also I personally talked with Secretary Ridge on
what was happening in the city of Detroit.
What lessons did we learn? City personnel worked tirelessly
to respond to the needs of the community in the event of an
emergency. We also learned that our efforts to prepare for
catastrophic emergency strengthened our ability to respond to
the blackout of 2003. All of that preparation, all of those
meetings that my department heads did not feel like coming to
actually did pay off.
However, despite our level of preparedness, we still have a
long way to go. 911 and 311 communications and other
information systems must remain operational and be able to
handle a dramatic increase in use during a critical event.
Communication among local, regional, State and Federal
officials is vital during catastrophic events. A comprehensive
notification process must be developed quickly. Locals should
be contacted even in the midst of a crisis that is regional or
national in scope; and communication with the public is vital
especially during power outages.
Next was the section on suspected causes of the blackout.
As Mayor, I don't believe that it is our duty. I am Cochair of
the U.S. Conference of Mayors' Borders and Security Task Force,
and as mayors it is our job to stay out of that debate at this
particular time and let you ponder that here in Washington. And
I believe that it is fitting that our Governors are taking a
stand in also weighing in on this macro conversation.
The need in the future for local governments is that local
governments need to be prepared to respond to future incidents.
Thus, we expose the vulnerability in our security systems and,
of course, in our energy systems in this country. We need to
recognize the uniqueness of those systems. What may be needed
in Chicago or L.A. may not be the same thing that is needed in
Detroit.
So whatever broad-based policy is being proposed, we would
love the opportunity to talk about the unique needs of our
city. While there is concern that homeland security dollars
will be funneled off to fill budget gaps, or any dollars coming
out of this institution, it is bad policy to fund--to say that
funding cannot be used for salaries of first responders or to
buy key equipment like backup generators, fire trucks or
communication or information technology. Key systems like 911
and other communication systems must have redundancy and
capacity to be used during critical incidents like the
blackout, and we cannot afford to politicize this issue.
Cities need direct funding from the Federal Government,
because once it goes to State governments, it typically becomes
a Republican or a Democratic issue. I am glad our Governor--the
safety and security of the American people cannot be
politicized.
And how much did the blackout cost? And this is my
conclusion. It cost us over $10 million. Detroit is still
tallying the overtime numbers and the hit on the general fund,
and those numbers we want to present to the committee at a
later time.
Thank you, Mr. Chairman and Ranking Member Dingell and
members of this committee.
[The prepared statement of Hon. Kwame M. Kilpatrick
follows:]
Prepared Statement of Hon. Kwame M. Kilpatrick, Mayor, City of Detroit
introduction
Good afternoon Mr. Chairman, Ranking Member Dingell and other
members of the Committee. Good afternoon and thank you for this
opportunity to participate in this critical hearing about the Blackout
of 2003.
At approximately 4:00 p.m. on August 14, 2003, a disturbance within
the Eastern Interconnection power grid began a rapid chain of events
that resulted in a massive power outage affecting a significant portion
of the Northeastern United States. This outage disrupted service in
eight states (and parts of Canada), forcing 50 million people to lose
electrical power.
The outage hit the Detroit area at approximately 4:17 p.m. That is
when the nearby Enrico Fermi Nuclear power plant lost power and shut
down. The City of Detroit lost all power shortly after that at around
4:21 p.m. The blackout paralyzed transportation, disrupted
communications and left many people--particularly senior housing
residents--in a potentially life-threatening situation and without
basic, necessary services. Four million customers of the Detroit Water
and Sewage Department (DWSD) lacked drinking water, because the power
outage shut down the pumps that delivered that water to homes and
businesses throughout the region. Power was restored to the Detroit
area on Saturday, August 16. However, even with the power restored, the
region was forced to endure the threat of rolling blackouts, and
residents were advised to boil-water until the following Wednesday to
ensure that the drinking water was safe for consumption.
Despite these difficult circumstances, the people of Detroit
remained calm and showed a true sense of community. There was no panic
in the streets and neighborhoods remained calm. Much of the credit goes
to the hard-working men and women who are employed by the city. These
personnel worked tirelessly to confront the endless stream of issues
and problems that arose within the city during the outage. These
personnel (using updated emergency response plans and other protocols
developed as part of the city's homeland security planning efforts)
were able to respond to the needs of Detroit's communities.
I have learned a number of lessons from the events of those several
days. The most important of which is that this experience serves as an
indicator that our efforts to be better organized and prepared to deal
with catastrophic emergencies has paid off and that our homeland
security planning has pointed the city in the right direction. However,
at the same time, this experience tells me that as a nation, we still
have a long way to go particularly in addressing core vulnerabilities
of critical infrastructure and in giving local governments the
resources they need to be ready to respond to critical incidents.
What were the specific events leading to the blackout?
As all of you are aware, a comprehensive investigation has begun
into the causes of the blackout. But, based on information that has
already been publicly disclosed, I am greatly troubled. I am troubled
that we still do not know why the outage occurred and why the
safeguards built into the system to specifically prevent such a large-
scale power outage failed to work. Even more disturbing is that this
power outage is but one of a number of events that have occurred this
summer that call into question the stability of our nation's critical
infrastructure.
On July 30, there was a major pipeline ruptured spilling
approximately 10,000 gallons of gasoline and causing a massive
disruption in fuel supplies within the State of Arizona. As a
result gas prices shot up not just in Arizona, but also across
the country.
On August 20, a computer failure caused by two viruses shut down the
entire CSX Transportation system and halted train service for
hours in 23 states.
Published reports also indicate that computer viruses disrupted New
York City's 3-1-1 system, forced the closing of the Maryland
Motor Vehicle Administration offices, shut down the check-in
system at Air Canada and wreaked havoc on an unclassified Navy-
Marine Corps intranet.
And, the nation is still dealing with the ramifications of the latest
``Sobig'' and ``Master'' computer viruses, which spread to more
than a million computers in a matter of days and disrupted
critical public and private sector information systems.
When all these events are viewed together, there is only one
conclusion--the nation's critical infrastructures remain at risk and
highly vulnerable to attack or failure due to system weaknesses. And
despite two years of discussion and debate over how best to protect the
nation's critical infrastructures, we have yet to take steps to assess
the vulnerability of the infrastructures and mitigate the risks caused
by those vulnerabilities.
Which systems operated as designed, and which systems failed?
When the outage hit Detroit, approximately 2.1 million people lost
power. Additionally, a number of key systems failed to operate
effectively. For example:
Four million Detroit Water and Sewage Department customers lost
water.
While the city's 9-1-1 telephone system remained operational, the
computer aided dispatch system used by the police and fire
departments failed to operate at full capacity.
The phone system used by the city government failed to operate.
Cellular phones used by a number of key public safety personnel
failed to operate, because a number of cellular carriers
experienced partial network outages. This is particularly
important because one of these cellular telephone companies
advertises that its systems present a feasible back up to
public safety radio systems. In this case, one of the phones
that failed to operate was the one used by Detroit's homeland
security director. The failure of this particular cellular
phone actually disrupted communications between the city and
the Department of Homeland Security. DHS finally had to resort
to going through our homeland security consultants in Maryland
in order to get in contact with us.
The blackout shut down transportation systems and critically impacted
traffic, especially at the border. The Detroit-Windsor tunnel
had to close, stranding some workers. 27,000 people use the
tunnel daily to cross the U.S.-Canadian border. Many of the
commuters staff our city's hospitals.
Detroit Metropolitan Airport remained open, but with very limited
operations. Northwest Airlines, the main carrier out of
Detroit, cancelled 216 flights.
The Marathon Ashland refinery, which is about 10 miles south of
Detroit, suffered a small explosion because of the outage, and
police had to evacuate hundreds of residents who lived within a
mile of the complex.
Though most Detroit hospitals remained fully operational, they had to
utilize back-up generators and keep hospital employees from
using computers to conserve energy. Elective surgeries were
canceled. And at Children's Hospital of Michigan, everyone who
could be discharged was sent home in order to make room for
about 30 children who developed aggravated asthma problems due
to the lack of air conditioning in their homes.
Despite all of these issues, I am proud to say that city personnel
were able to respond to and manage the consequences of the blackout
quickly and efficiently. As I said earlier, much of the credit goes to
the hard-working men and women employed by the City of Detroit. Credit
also goes to members of the community who were able to come together
and weather this crisis. However, much of the city's success in
managing this crisis was due to the procedures and protocols developed
through Detroit's homeland security planning efforts. In April 2002,
the city released its comprehensive homeland security strategy that
focused on strengthening the day-to-day preparedness of the city. Since
the release of that strategy, Detroit has taken a number of steps that
improved the city's ability to detect, prevent and respond to terrorist
attacks and other critical incidents. These efforts directly enhanced
the city's ability to confront the myriad of problems that faced the
city during the blackout. For example, the city:
appointed a homeland security director who during the blackout served
as a hub for the sharing of critical information between the
city and various federal, state and other public and private
entities;
established a Homeland Security Council comprised of key public
safety, public health and other city officials to coordinate
strategic planning and operational coordination before and
during critical incidents. (During the blackout, this group
convened immediately and served as a problem solving team,
working together to address the various consequences of the
outage);
upgraded our Emergency Operations Center which was activated and
served as a command and control center during the entire
blackout; and
updated our departmental emergency response plans and utilized those
plans as the foundation for operational activity during the
blackout. For example, police, fire and emergency personnel
were either dispatched to the streets or put on alert to handle
any potential emergencies. Additionally, three public schools
were converted to ``cooling centers'' for the elderly and
others in need of relief from the heat.
What were the lessons learned from this event?
Despite our level of preparedness, what we learned from the
blackout is that we still have a long way to go. The lessons learned
include the following:
When a catastrophic event occurs--whether it is a terrorist attack or
a power outage--local agencies are the first to respond and the
last to leave. In Detroit's case it was the fire and emergency
departments that handled a number of calls for service. It was
Detroit's police that patrolled the streets and kept the city
safe. And, it was Detroit's housing workers, along with labor
and business leaders, who checked on and delivered food to more
than 1,200 public housing and senior housing residents. Local
first responders handled this crisis.
The same information networks, communication systems and personnel
that cities depend on to provide day-to-day emergency and non-
emergency service are critical to effectively dealing with the
catastrophic events. 9-1-1, 3-1-1 and other communications/
information systems must not only remain operational during any
crisis, but also have the ability to handle a dramatic increase
in use.
Communication among local, regional, state and federal officials is
vital when an incident like this occurs. We still need to make
improvements in this regard.
There needs to be thought given to how local jurisdictions will be
notified that they are in the midst of a crisis that is
regional or even national in scope. In this case, the city
first learned that the outage was not simply a local problem
from the news media. A comprehensive notification process must
be developed quickly.
Communication with the public is also critical. The city placed a
high priority on getting accurate and timely information to the
public. Within minutes of the blackout occurring, the city was
communicating with the public via radio. I held four press
briefings during the course of the blackout, updating the
efforts to restore power, directing residents to cooling
centers and just generally keeping them informed. But,
obviously, as this was a power outage situation, communications
were limited to those who had access to cable television (which
was functioning), car radios or battery powered televisions and
radios. The City of Detroit is exploring alternative means of
communicating with the public (such as reverse 9-1-1 systems).
How can we avoid incidents like the blackout?
Although there was no horrific loss of life, the power outage
``like the attacks of 9/11--illustrate that there are still a number of
steps the nation must take as we seek to improve our emergency
preparedness.
First and foremost, we need to take aggressive steps to assess and
address the vulnerabilities to our nation's critical infrastructure
(Agriculture and food, water, public health, emergency services,
telecommunications, energy, transportation, banking and finance, etc.).
As a first step, the nation needs to complete a national threat and
vulnerability assessment that identifies vulnerabilities to key
systems. Then, we must systematically proceed to address the risks
posed by those vulnerabilities. As we approach the two-year anniversary
of 9/11, I am concerned that this task has not been completed.
In the meantime, local governments need to be prepared to respond
should there be future incidents like the blackout (whether caused by
mistake, disrepair or attack). Accordingly, local governments need to
be given homeland security funding directly and have the flexibility to
use those funds in a way that best meets the needs of that individual
city. The needs of Detroit are different from the needs of Los Angeles,
and prohibitions against using these funds to enhance a city's service
delivery infrastructure are misguided and counterproductive.
I understand that there are those in Washington who believe that if
unchecked, homeland security dollars will get funneled off to fill
other budget gaps. But to say that these dollars cannot be spent for
salaries for first responders, key equipment such as fire trucks, or
for the communication and information technology that comprises a
city's service delivery infrastructure is just bad policy. Homeland
security funds must be available for use by local governments to do
things like improve and strengthen their 9-1-1, non-emergency and
information systems. These systems must have the redundancy and
capacity necessary to be of use during critical events such as the
blackout.
Projected Costs
Costs to the city based upon the blackout events, are projected to
exceed 10 million dollars. We are still compiling this information and
hope to have a final number before long.
Conclusion
We have been told that this outage was not the result of a
terrorist attack. But, even if terrorism has been ruled out, we should
hardly take comfort in that fact. We have certainly revealed to the
world some of our vulnerabilities, and it is now time to demonstrate
that we are taking the necessary steps to assess the critical issues
and address any weaknesses so that we will be prepared in the event of
any future crisis.
Thank you.
Chairman Tauzin. Let me thank you all.
First of all, Mayor, obviously you mentioned this, and I
know, Governor Granholm, you mentioned this, as did Governor
Taft, the failure of communication in the system.
First of all, communication is on the grid. I think you are
right; we are beginning to sense there were human errors caused
by communication failures. And second, Mayor, you pointed out
the communication problems of the responders, of yourself,
trying to talk to the White House and get messages back and
forth.
Our committee also has jurisdiction on telecommunications,
so we are extremely interested in the telecommunication aspects
of these emergencies, these disasters, and how we can have
smarter utility systems, smarter highways, smarter telecom
grids; and second, how we can make sure these systems stay up
when disasters hit.
If you recall, on 9/11 cell phones tended to be the manner
in which people communicated in New York. On the other hand,
cell phones failed in your case and we need to understand what
it is that worked or didn't work.
I want to invite all of your attention to the fact that one
of your members, Chairman Cox of California, is chairman of the
Select Committee of Homeland Security, and if you have any
thoughts or suggestions that you want to refer to both him and
this committee, we would deeply appreciate any thoughts you
might have about what we at the Federal level might be thinking
about in terms of not only improving the communication in these
grids, but inadequacies in the communications backup systems
when things do go down. So I would invite your comments on that
now or later, in writing.
I want to thank you, Mayor, for that excellent summary of
the effects of the blackout.
People don't realize how much we depend upon electricity.
When we started this meeting, I mentioned how in New York
people couldn't open the locks on their apartment doors because
they are electrically controlled now. And the toilets wouldn't
flush. Imagine being in the airport all night long and all
those people stuck in facilities that would not flush. I heard
from friends of mine that were there that said it was just
awful. So, I mean, we don't think about all these consequences.
I heard people on several of the news channels saying, why
did the water system fail; this was an electricity problem. You
need electricity to drive the pumps and keep filtration systems
going.
We are learning more as we go along, and I want to thank
you for sharing some of those extraordinary, sort of on-the-
ground experiences that you went through and again congratulate
you on the way you handled it.
I forgot to mention, I am not sure you know it, but right
after Chief Justice Edward Douglas White completed his term, I
believe it was your ancestor again who took over his position
as chief justice by appointment of President Harding. Again, I
thank you for that.
What I would like each of you maybe to indicate to us is in
terms of--Mayor, I know you can't get into some of the macro
debates of what went wrong and how we have to fix them and more
on-the-spot responding to the problem, and hope we can fix it.
I understand there was a declaration of emergency, right,
so there is going to be some assistance in terms of some of the
damage that was done. But tell me, if you can, Governors, how
you two deal with this issue, because we are facing it in our
debate as we go into conference on the energy bill. You
Governors of States, obviously the State would like to have, as
you pointed out, Governor Taft, some authority to make sure
these systems work; and there ought to be some body you can
point to and count on for reliability purposes. But we are
facing a situation where more and more of these electric grids
become interstate, that they reach out--I think Texas is the
only one that has a complete grid within their State. Most
other States depend on other regions for electricity, other
States, and electricity crosses State lines now.
Siting of those transmission lines becomes an interstate
issue. And I know States have jealously guarded their rights to
make siting decisions. I had a Governor and I am not going to
say who it was, call me last week and ask me if I would support
a provision that would allow the Governors of our country to
veto any electric project, generation project, in their State
for any reason they wanted to. I said, Governor, that sounds
like an interesting proposition; would you also agree if you
vetoed energy production in your State that you would also
disconnect yourself from any interstate grid? You are going to
rely upon your neighbors exclusively and just have the right to
shut down any project in your State for any reason you want?
You have to understand, we have some conflicts here that
need to be worked out on a State and Federal level. Any
thoughts you have right now? I know you are coming at it from a
State perspective, and we have to look at it from a Federal,
national perspective. Somewhere in between we have to set up
systems where we can arbitrate and resolve--as the Secretary
said, doing nothing is not a good answer anymore. We have to
have better grids. We have to have site improvements. We have
to site generation facilities where they are needed.
How do we solve this, Governor?
Governor Taft. Electricity does not stop at the State line
and in Ohio we are a great crossroads for the transfer of power
from west to east from south to north, serving other areas. So
we strongly support a strong regional approach under the
supervision of Federal standards.
Now, in terms of enforcing mandatory standards on the
reliability of transmission lines, that could be done by the
Federal Government, or if you wish to delegate that to the
States to enforce those Federal standards, there are precedents
for that type of a Federal-State partnership in the area of
rail and natural gas lines and other areas.
With regard to the issue of siting, we support and my
chairman of Public Utilities Commission supports the section in
the current energy bill, the electricity title that proposes a
compromise under which, if the States wish to consider regional
interests and base their siting decision on what is best for
the region, then that would be acceptable, but have FERC as a
backstop to settle disputes. So we think that kind of a
compromise is something we can accept in Ohio.
Chairman Tauzin. How about you, Governor Granholm?
Governor Granholm. I think if we are asking for some
Federal accountability, there obviously has to be Federal
involvement with respect to siting, but I think the States
should get the first crack. I think it can be a cooperative
arrangement.
Clearly, the States know where the sensitivities are in
their States, but clearly the States have an incentive, as
well, to ensure a reliable transmission system. So whatever
period of time is a reasonable period of time that can be given
to the States first to get the first crack at siting, I think
that is appropriate; and then perhaps it could go back to the
Feds if for some reason that is not able to be obtained.
For State sovereignty reasons and for the ability of States
to determine their own landscape, if you will, the States
should get the first crack at it.
Chairman Tauzin. Let me describe what we have in the House
bill that is in conference. It basically says that in areas of
national significance, national corridors where States are
first given the opportunity for a year to settle the siting of
a transmission improvement, if they don't settle it, the
Federal Government, can step in and decide it; but it gives the
States first opportunity and only in those areas where the
national corridors of high density, if you will, movement of
electricity and bottlenecks.
Second, as a trade in our bill, we gave the States new
authorities in siting on Federal lands, which you don't
currently have, so you would have a role in Federal lands. Is
that a fair trade?
Governor Granholm. I am open to that as long as the time
period is a reasonable one in which the States can resolve
those siting issues first.
Chairman Tauzin. Governor, do you have a comment?
Governor Taft. I would also support that particular
approach.
Chairman Tauzin. Let me recognize Mr. Dingell,
distinguished ranking member of our committee, for a round of
questions.
Mr. Dingell. Mr. Chairman, I thank you.
I would like to extend my personal welcome to you, Governor
Taft, and to Governor Granholm. And, Mr. Mayor, we are always
delighted to see you. We have three distinguished public
servants down there who have given us good counsel. We thank
you, Governors and Mayor.
And I have no further questions.
Chairman Tauzin. Mr. Upton?
Mr. Upton. Thank you, Mr. Chairman. I would join the
accolades for the panel. But I always hold my hand like this.
And I want to thank my two Michiganders here. We call it the
``Big House.''
And, Governor Taft, we welcome you.
I just want to say, and I said in my opening statement a
few hours ago that I know, Governor, we appreciated your visit
to the west side of the State this last week for an extended
period of time; and I know, as I was home during the August
break, one of the visits I did was up in South Haven. And in
talking to some of the local power officials there, of course,
we had lost the Campbell plant, the coal-fired plant up in
Grand Haven, and we were really very close to losing the
Palisades nuclear plant because of the surge as it pulled out.
And literally the finger was at the button for the shutoff. And
had that happened, it would have likely gone right around the
horn.
As you know, one of the two reactors at the Cook nuclear
plant down in Bridgman, Michigan, further down is already out
for maintenance. But clearly this would have taken it all the
way across to more of the heartland of the Midwest in terms of
Chicago and all of the western part of the States. So in
addition to the Detroit area, we would have had a massive
economic problem. We appreciate your emergency declaration.
And I guess, to follow up on the Chairman's question with
regard to the RTOs, in the energy bill we passed last March, we
had a Barton amendment or a Barton provision which was a sense
of Congress urging that the utilities, in fact, join an RTO.
Governor Taft, you talked about it in your testimony. Governor
Granholm, you referenced it as well. It is not a mandatory
challenge though, it is just the sense of Congress that they
ought to be part of one.
One of the problems we see if that language sticks, and
certainly I would like to see it stick if not strengthened,
though we have problems with the Senate, is because we have so
many different power companies in my district and we have not
only Consumers Energy, but we also have American Electric
Power, American Electric Power headquartered in that Buckeye
town of Columbus, with a small C, but they operate one of the
facilities and obviously provide--used to be the old Indiana
and Michigan, but obviously they operate in at least three
States. And the question would be, which RTO are they going to
be part of and how do we manage this?
And those are some of the things we are grappling with as
we try to pursue and enact legislation that will, in fact,
prevent what happened on August 14 from ever happening again.
But in the interest of time, I would be interested in your
comments about the Barton provision and whether or not you
believe it ought to be strengthened, knowing full well that
some of the Governors in the western States don't appreciate
that at all. In fact, they are looking for language to relax
what we passed in the House.
Governor Granholm. This electric experiment over the past
few years has been, I think, a real opportunity for us to step
back and see what works and what doesn't work.
Clearly, electricity does not stop at the border of a
State, and so a regional approach seems to make some sense. The
problem is, when we have regionalized the transmission grid, we
have not mandated the enforcement, so I think those provisions
must be strengthened.
Our State public service commission has no authority to
mandate liability on the grid, on the transmission grid. Nobody
has a requirement; the system is voluntary, as you suggest.
That leaves nobody with anything. So we need to strengthen it
if we are going to proceed down this path and hold, A, an
entity responsible. Is it FERC? Is it NERC? Do they devolve it
to the RTOs? This is acronym heaven, I recognize, but I think
we have to make a decision about who is responsible.
Perhaps FERC or NERC does some sort of regional--but at
some point some entity must make those--that accountability
enforcement decision. And if they contract or if they have an
agreement with RTOs to do it, that is fine. I don't care about
the RTOs so much as the enforcement of reliability on the
electric system.
Mr. Upton. Governor Taft.
Governor Taft. I agree with Governor Granholm, someone has
to be in charge of our transmission system in this country or
we risk another calamity or another disaster of even greater
proportions.
This is a map of the existing RTOs and ISOs, and you can't
really see it very well, but it looks in some respects like a
patchwork quilt. You notice a big section of Ohio is not really
fully integrated into any RTO yet. The reason for that is that
AEP wants to join the PJM transmission organization, but it is
being prohibited from doing that by regulation in two States
that don't want it to join. They are making it impossible,
either by law or by the regulatory power, for them to join a
system. It would be excellent if an AEP was in that system.
Then you have the problem of what about the seam, the
border between PJM and Midwest. I know that the FERC is working
on trying to close that area off, develop partnerships, develop
greater coordination, develop operating agreements. That would
go a long step forward.
That would go a long step forward if we had an integrated
system, Midwest over to the east coast there for regional
transmission.
Mr. Upton. Thank you.
I know my time has expired. I yield back.
Chairman Tauzin. For the record, I want to point out,
Governor, that in the House-passed bill that is in conference
now is the mandatory authority given to NERC under the
supervision of FERC, very analogous to the authorities that the
National Association of Securities Dealers has to make
regulations under the SEC's power to enforce those regulations.
So we patterned it very closely under that. I would ask to you
look at it and see if you have any comments on it as we go
forward.
The Chair recognizes Mr. Brown from Ohio.
Mr. Brown. I thank the chairman; and I welcome Mayor
Kilpatrick, nice to see you; and Governor Granholm, nice to see
you. I especially welcome my friend and Governor, Bob Taft, and
thank you for the responsiveness you have provided to members
of our delegation, both sides of the aisle, in your frequent
visits here and what you do with us.
Governor Taft. Thank you.
Mr. Brown. Just one question of Governor Taft. Your
comments offered insight into the need for Congress to promote
not only modernization of America's bulk power system but also
the modernization of the wholesale electric marketplace. You
identified the enactment of mandatory reliability standards for
the industry as the first priority that we should pursue in
this Congress. I think most people agree with that. I certainly
do. You also spoke of a broader piece of legislation, a broader
energy bill, including things I also agree with, ethanol, clean
coal provisions, both of which are important for a lot of
reasons to our State.
Some of us are concerned that holding reliability
provisions hostage to something more, especially if those
something more are environmental issues, or something where
there is provisions about which there is more disagreement, and
I think the issue boils down and Congressional action really
boils down to two choices, and I would like to hear your
comments.
We can move quickly and bipartisanly, and it is--on
legislation to ensure reliability for the electric power grid,
or we can try to pass a significantly more comprehensive bill
that includes some of the--both some of the President's pet
projects, drilling in ANWR. You know how controversial that is.
Even our own Senate Republican Senate delegation, one is for
it, one is against it. Tax breaks for oil companies, many of
the other wish lists the President has for the oil industry.
What should we do?
Governor Taft. First of all, I want to thank you,
Congressman Brown, for your attention to this issue, for
attending the hearing, as well as Congressman Gillmor,
subcommittee chairman, and Congressman Strickland from Ohio. We
appreciate very much your focus on this issue which is so
important to the State of Ohio.
Clearly, an improved transmission system is very important,
but we are also, of course, facing high energy costs in other
areas in the State of Ohio. Gasoline prices right now are
spiking. We are concerned about the cost of natural gas in the
winter for heating our homes. We know that the Congress has
been working on an energy bill for a long, long time. We know
the issues are tough. I don't pretend to tell you how to do
your business. We have got enough problems just getting
agreement in the State of Ohio on what we are trying to do in
the State.
But I would really encourage all of you to try to do what
you can to enact, at the earliest possible date, a
comprehensive energy bill that deals with all of these issues.
And perhaps there is a way that you can use the impetus of what
happened on August 14 to build bridges and to make compromises
and make agreements that will get this country a strong energy
policy that addresses, among other issues, the important
challenge of improving our electrical transmission system in
this country.
Thank you.
Mr. Brown. Ms. Granholm.
Governor Granholm. I respectfully disagree. I think if you
have something you agree on, that you can enact in a bipartisan
fashion, just from our perspectives, we need a quick response.
And if you can get the other quickly, more power to you.
But something tells me that it might take a little bit
longer than that. So if you can get agreement on this area that
is so critical to our Nation's citizens, I urge you to do so in
the most expeditious of fashions.
Mr. Kilpatrick. You know, I didn't weigh in on this
discussion because of some cognitive misunderstanding. It was
more common sense. I need to stay out of this.
But I will weigh in on this point. I agree with our
Governor for a different reason. And going back to the mayor's
perspective, we are closest to people; and the quality of life
of people and citizens can't wait 2 or 3 years while this is
deliberated. We need quick resolution because the vulnerability
that has been exposed can also lead to some future security
problems as well if we don't close this gap.
Chairman Tauzin. Thank you, Mr. Brown.
I take a chairman's prerogative here just to point out to
all of you, however you may feel about the issue, Governor
Granholm, you said ``if you could do it quickly.'' I would ask
you all to ever try to pass a bill through the House and Senate
of the United States quickly, with Senators having the right to
hold up a bill without even knowing who they are. Under their
rules, they have a right to stop passage of a bill and attach
amendments onto it. They have no germaneness requirements on
the Senate. They can put an amendment dealing with something
across the globe on an energy bill with no restrictions on the
Senate side, and all of a sudden it gets Christmas-treed and
you end up with a mess in your hands. The notion of passing
something quickly, even something we think we have general
agreement on--believe me, there is still controversy over what
an electric title would look like--is not that easily
accomplished.
I just want to point out to you, this is the second
Congress, the House and Senate have both passed comprehensive
energy bills. We are in conference now. We are one vote away in
the House and the Senate, assuming we can reach those
compromises, give those give and takes, of getting a
comprehensive energy policy bill.
As much as I know you want to see this done quickly, this
may be our best chance to get it done in a long, long time. I
would just urge you to, if you can, help us do that in any way
you can. I thank you.
I want to yield to our colleague from the great State of
Ohio first, Chairman Gillmor. Paul.
Mr. Gillmor. Thank you very much, Mr. Chairman.
I want to welcome our Governor here. I don't have any
questions for them. I had the opportunity to meet with them
earlier. But I do agree with his comments on the desirability
of moving the comprehensive bill.
The issues related to electricity reliability are also
greatly affected by the other provisions of the bill. For
example, dealing with conservation affects the grid, global
energy supply. So it is real difficult, if you are really
concerned about reliability, to just isolate this one piece.
They are all related.
And I do want to welcome Governor Granholm, our neighbor of
the great State to the north, with whom we get along very well,
except for 1 day a year. I do want to, however, follow up a
couple of the points that you made for you to elaborate a bit.
But before I do that, I want to commend you, Mayor, for the
actions you took in Detroit.
You mentioned three items that you felt were contributing
factors,and one of those was the lack of maintenance of the
transmission system. I wonder if you would elaborate on that a
little more as to why you think that happened. Is the reason a
financial one in terms of the incentives to invest in the
system? Is it a technical problem? If you could just elaborate
a little more on why you think that happened and what can be
done to prevent it.
Governor Granholm. Clearly, we have to wait until the
outcome of the investigations that are being jointly conducted.
But I think, you know, as we say in the law res ipsa loquitur,
the thing speaks for itself. Clearly, there was a problem with
the lines. And since electricity seeks the path of least
resistance and the wires were not big enough, if you will, in
very simplistic terms to hold the voltage that was seeking to
go through it, there needs to be an investment in the system so
that does not occur again.
Now, what can that be? It is possible, certainly, that
Congress can provide some incentives to invest in the grid. As
I was mentioning during my remarks, I think that there is an
incentive which exists right now for the return on equity which
currently is--if they belong to an RTO, is 13.88 percent, which
is a good return. It gives enough confidence in investors that
they will be able to maximize their investment. So there is an
ability right now to invest.
I do think the best way to provide an incentive for
investment in the grid is to have a reliable and enforceable
standard that is enforced by an entity that is not just
voluntary; and that will be the--in my view, the hammer, the
carrot, the stick, however you want to frame it, to get that
transmission investment, which I think needs to happen.
But, again, I think you are going to see more, and those
who follow me will probably talk about this issue of
maintenance of those power lines.
Mr. Gillmor. Let me just ask you a little bit on one of the
other factors which you mentioned, which is human error, which
is a comment that we have heard from a number of people on the
panel and elsewhere. And recognizing we don't know the causes
but that you have instigated an investigation, in your
investigation, have you made any contact with a company or
companies or people who supposedly have made human error as to
what actually transpired, or is--are we all just dealing with
kind of hearsay here?
Governor Granholm. I would defer that question to Peter
Lark who will be following me, who heads up our public service
commission and is responsible for the investigation. I don't
want to repeat hearsay. I know generally what the impression
is, but, again, I didn't speak directly with somebody myself.
Mr. Gillmor. And the third factor which you mentioned,
which I am not going to ask you about because I am running out
of time, was the factor possibly that the Michigan law had some
effect in your view.
Governor Granholm. It had an effect on the inability to
determine who is responsible.
Mr. Gillmor. Thank you.
Chairman Tauzin. Thank you, Chairman Gillmor.
The Chair recognizes Mr. Stupak for a round of questions.
Mr. Stupak. Thank you, Mr. Chairman. Thank you, Governor
Taft, Governor Granholm, Mayor Kilpatrick, for coming today.
Governor Taft, has your State started an investigation as
to what happened? I know Michigan has.
Governor Taft. Yes, we have. In fact, sitting right behind
me is Allen Schriber, the Chair of our public utilities
commission, who is going to testify later today. I asked him to
prepare, based on Ohio information, a second-by-second account
of what transpired; and he is still working on that and will be
providing that of course to the public and also to the
binational commission task force.
Mr. Stupak. Leads me to my next question. The binational
commission--I had asked Secretary Abraham earlier whether the
meetings with this binational commission are going to be open
so there can be public input. Are there going to be public
hearings so we can see what is going on. Have any of you, the
Governors or mayor, have you been invited to participate in
this binational or Canadian-U.S. Task force? Have you been
invited to submit your comments or concerns and/or do you have
any reps on those task forces?
Governor Taft. Let me state for Ohio, and I think other
States as well, that Secretary Abraham has offered us, and I
believe other States, the opportunity to have one person that
we would appoint on each of the three subcommittees of the
tasks force. We have submitted our names to the task force.
Mr. Stupak. Okay. Same?
Governor Granholm. Same here.
Mr. Stupak. How about you, Mayor?
Mr. Kilpatrick. Cities have not been invited.
Mr. Stupak. Governors have.
The deregulation question--and, Governor Granholm, if I
may, I am looking at your testimony on page 6. You said: Before
restructuring or deregulation, Michigan's two big utilities,
DTE and Consumer's Energy, shared a power pool and were able to
monitor and control production and movement of power between
each other and their customers in a centralized fashion. Under
PA-141, movement of power on the grid is now controlled less
directly by the power companies in Michigan and is much more
widely influenced by power supply and demand in the region.
You go on and say that the bottom line is that this
contributes to a system where no one, myself included, knows
who is ultimately responsible for ensuring reliability, and
that is unacceptable.
Governor, I think Michigan deregulated, if you will, in
2000, before you were Governor. Do you have any idea how much
they spent on maintenance of their lines prior to deregulation
and what they spend now after deregulation?
Governor Granholm. I don't have those figures, Congressman.
But perhaps Peter Lark, who will be testifying after me, would.
Mr. Stupak. Okay. Governor Taft, Ohio has deregulated. They
have been deregulated for a while?
Governor Taft. We are in the process of phasing in
deregulation right now.
Mr. Stupak. Do you have any idea what the utility companies
would have spent for maintaining their lines and services
before deregulation and after?
Governor Taft. I don't have that information. Again, Allen
Schriber, the chairman of our commission, would be better
prepared to testify on that particular issue. But he has
indicated to me, in response to my questions, that there is no
indication that they were spending any more on transmission
lines before deregulation than after deregulation.
Before deregulation, they had to come and get a rate case
to get a rate increase. Those were far and few between. Often
many years between those. So the same pressures existed from
that standpoint before deregulation as might exist now.
Governor Granholm. Congressman, for those who may be
watching, of course in Michigan we went to this experiment of
partially deregulating. And before the law changed, the
distribution system, which are the wires to people's homes, the
transmission grid, which are those big A-frame objects you see
out there, and the generation, which are the power plants, were
all owned by one company. So it was easy to point at who is
responsible for investing and who is not.
This issue of investing in the lines is really a
distribution question. But the issue of investing in the
transmission grid, which I think is what you are looking at, is
one that is so difficult to penetrate, because that is the part
that partial deregulation has spun off elsewhere, and nobody is
enforcing that investment.
Mr. Stupak. Which leads me to my next question, because you
mentioned the enforcement and who is responsible. I cited
earlier for Secretary Abraham that NERC as we call it, North
American Electric Reliability Council, indicated in the year
2002, 97 planning standard violations, and 444 operating policy
violations. Who enforces them? NERC has no enforcement power.
What happens to these violations? Were the Governors ever
notified that in your States there may have been a violation?
What power do you have under deregulation to say to a utility
that is providing a service in your State, we have these
violations, repeated violations, how are you--how do you get to
enforce it? How do you get a remedy? How do you make sure
things are done properly in your State with this deregulation
or loosening of responsibility?
Governor Granholm. These are the perfect questions that you
are asking. Because those are exactly the questions that our
public service commission is asking. I know that when he gets
up here to testify he would say, well, we would assume that we
have the responsibility for enforcing. But they would be taken
to court by one of the transmission operators saying, no, you
don't have the ability to do that. So the question is, who
really does? You all need to provide the mechanism for that
enforcement and reliability to occur. Perfect questions.
Mr. Stupak. I think the Dingell bill would do it. Thank
you.
Chairman Tauzin. The Chair recognizes Mr. Rogers from the
great State of Michigan.
Mr. Rogers. Thank you, Mr. Chairman.
Governors, thank you very much for taking the time to be
here from busy schedules. Governor Taft, I want to thank you
and your fellow Ohioans for that action in the 1830's, that you
guys got Toledo and we got the Upper Peninsula and Bart Stupak,
and believe me, we got the better part of that deal. All day
long.
Governor Taft. Come and visit us.
Mr. Rogers. Actually, Congressman Gillmor just informed me
that there was apparently a casualty in that exchange, and a
mule was shot, which I didn't know until today. But we
certainly.
Governor Taft. Let's not revive these old conflicts.
Governor Granholm. Let's move forward.
Mr. Rogers. Thank you for the trade. Thanks, Bart, for
being part of the Michigan delegation.
Mr. Mayor, I want to thank you very, very much. You know,
the Big Apple gets lots of the credit in that turmoil. But you
did some pretty extraordinary things, and thank you, Governor
Granholm, for assisting in that. The Motor City was running,
too, in that blackout. Your outreach program was particularly
impressive when you went to the senior centers, and the amounts
of water that you were distributing throughout the city was
very, very impressive. My hat is off to you. Congratulations,
thanks for doing such a great job for the State of Michigan and
Detroiters. You are making us proud down here in Washington,
DC.
Governor, I hope you can help me understand on the 141
question, PA-141. So your sole concern is the ability to have
at least some oversight? You are not necessarily concerned that
it has to be in the State of Michigan, but at least some point
in the system there has to be a catch in the system for
oversight?
Governor Granholm. Right. I think that having it at the
FERC or through NERC is fine. It has to be an entity that is
responsible, though.
Mr. Rogers. I was encouraged to hear you say that you would
support at least some measure that fixes this problem, no
matter where it falls, and if we can do it quickly under the
energy bill that is in conference, fine with you. If you can do
it on a free-standing bill, fine with you, as long as it gets
to the President's desk. Do I understand you correctly?
Governor Granholm. We need the reliability standards
passed. I am not so interested in the other stuff. But the
reliability standards are what need to be passed in my opinion.
Mr. Rogers. Thank you. Thank you for taking the time to be
here. We know you are busy. And thank all of you for what you
are doing. Appreciate it.
Chairman Tauzin. The Chair now is ready to recognize
another Ohioan. Congressman Strickland is recognized for a
round of questions.
Mr. Strickland. Thank you, Mr. Chairman.
I also want to welcome my Governor. I am not sure exactly
why it is, but it just feels good to look out there and see the
Governor of Ohio and the Governor of Michigan sitting side by
side.
Governor Taft. That is a good thing.
Mr. Strickland. Well, you both represent the heartland of
our Nation.
I was sitting here listening to your comments, and I was
reflecting upon all of our opening statements and sort of
contrasting and comparing. And what you said, the two of you--
the three of you--said to us was understandable, it was
practical, it was doable; and maybe that is the difference
between a Governor and a legislator, I don't know. But I think
we can learn from what you have said to us; and if we would
follow your advice, perhaps we could solve this problem.
My dear chairman, someone that I respect a lot, made a
comment about the Senate rules and the fact that the Senate can
sort of muck things up and a single Senator can have so much
power and anonymously stop things from moving forward. I agree
with him that probably in the Senate individuals have too much
power.
But, Mr. Chairman, I would just like to say to you that I
think here in the House that I think that maybe individuals,
especially in the minority, have too little power. So maybe we
can modify both the Senate and the House Rules.
I say that for this reason. It is my firm belief that the
differences which separate us in an approach to a comprehensive
energy bill are so deep and so great that it is highly unlikely
that we will be able to deal with that kind of bill in the
short term. But we can agree on what you have said and what I
think nearly all of us believe needs to happen. So what we
need, I think, is a free-standing bill, the Dingell bill, which
will speak to the questions raised by Mr. Stupak and will go a
long way toward solving the problem that we are all here
discussing today. Then there will be other days and weeks,
months and perhaps years that we can spend arguing about ANWR
or a whole host of other issues. But I think the Dingell bill
is the bill that can solve the problem we are dealing with
today, and that is why I would hope that we would move on it
and try to solve this problem.
I want to thank you, all three of you. I think you have
given us words of wisdom today. We ought to listen to them.
Thank you so much.
Chairman Tauzin. The Chair thanks the gentleman.
Are there further requests on this side for questions? The
gentleman from Pennsylvania, Chairman Greenwood.
Mr. Greenwood. Thank you, Mr. Chairman. I will be brief and
don't need to use all of my time, but I wanted to address a
couple of the questions to Governor Granholm.
When I first read your testimony, it seemed that you were
in some way implicating the deregulation legislation. Rereading
it, you really aren't, because you have--there are many who
seem to want to point fingers in that direction. But what you
are acknowledging is that in fact it probably--the deregulation
was responsible for putting more power plants and more
transmission capability into your system.
And in rereading your testimony, it seems to me that your
real complaint here is not so much that reregulation may have
created vulnerabilities, but it is a question of
accountability, that your problem with it is that you are not
sure who is responsible and you are not really quite sure if
anyone is ultimately responsible. Could you clarify that?
Governor Granholm. Yes. The way it has played out is that
because of this diffuse responsibility that there has not been
this command and control situation that is necessary, causing a
communications breakdown. So there is sort of two potential
factors involved in that. One is, because of the way it has
played out--I am not saying that deregulation caused this. But
the way it has played out because of the lack of accountability
there is a contributing factor to a lack of communication that
occurred in this particular instance and therefore also a
problem with respect to who is responsible.
So both of those are factors. They are not the cause of the
problem. But I do think it is an important time to step back
and say, what works with this deregulated environment? What
doesn't work? And it may be time to take a look at the whole
array and say, what can--what worked before? What works now? Is
there a way to blend? Is there a way to make sure that we are
doing what works?
Mr. Greenwood. We probably need to wait until we have the
final answers on exactly what happened here before we do that.
Governor Granholm. Yes.
Mr. Greenwood. Why, in your opinion, is the Midwest
Independent Systems Operator, MISO--it seems to me that entity
was designed and created to provide the command and control and
to be responsible for the communications. Is it your early
assessment that it didn't handle that function well?
Governor Granholm. Well, under the current rules that
exist, there is not a mandatory requirement that they engage in
that command and control environment. These are the facts as I
know them: Two minutes before the power went down in Michigan,
our operator got word--our transmission operator got word that
it was going down. An hour and 5 minutes before the power went
down, the provider in Ohio and the MISO had information that
there was trouble. So there was a lot of time in there that
somebody could have been communicating this information.
Mr. Greenwood. So when you say ``got word,'' somebody
telephoned somebody? It was not an automated system?
Governor Granholm. I want Peter Lark to testify to this,
but it is my understanding that they--2 minutes before the
blackout occurred, our independent--our transmission company
saw that there was problems on the grid. It was not a formal
communication it is my understanding at this point.
Mr. Greenwood. Okay. Thank you, Mr. Chairman. I will yield
back the balance of my time.
Chairman Tauzin. The gentleman yields back.
Further requests from this side?
Mr. Engel first. I will get you, Mr. Rush.
Mr. Engel. Thank you, Mr. Chairman.
A lot of the questions have been asked. I wanted to just
follow up with Mr. Greenwood's question. I was also going to
ask a question about deregulation.
I was on a panel on the BBC when this happened, and one of
the so-called experts on the panel said that the root of this
all stemmed from deregulation, and therefore if we didn't have
the deregulation this wouldn't have happened. And when he was
questioned about what do you do, do you go back to
reregulation, he said, you can't put the genie back in the
bottle, but one of the things that he would do is break the
country into smaller regions.
I am wondering if any of you have any opinions on that. The
country now, as you know, is broken down into four regions; and
he was saying perhaps 12 or more would make it easier to ensure
that a blackout of this magnitude wouldn't happen again.
Governor Taft. Well, we have an interconnected grid today
pretty much across the country, Congressman; and we had that
before deregulation as well. So there would have been the
potential for the cascading effect even before deregulation
would have occurred.
But I really believe that we have to move toward larger
regional wholesale markets for electricity and larger regional
oversight direction and control of the transmission grid if we
are going to make rederegulation work, if we are going to make
our system work. You have to have an efficient wholesale
market, you have to have good standards of reliability, and you
have to have the ability to coordinate what happens in systems
over a larger geographical area to prevent this cascading
national--almost a nationwide blackout that occurred.
So, you know, I would be in favor of somewhat larger
regional transmission organizations, No. 1, and, No. 2, a
Federal authority with the ability to require that, require
participation in that and also to require certain types of
coordination, integration or even partnership agreements among
regional transmission organizations so that you deal with the
issue of what happens across the seam, between one region and
another.
Mr. Engel. What about reregulating to some degree?
Obviously, you cannot go back to the way it was. But in looking
at the totality of what happened, would you move in that
direction? And, if so, where and how?
Governor Taft. Well, in a sense that is what Governor
Granholm and I are proposing here with regard to transmission.
As she was pointing out, at one time it was all under a State's
jurisdiction. Now we have transmission under nobody's
jurisdiction, and we are saying that needs--someone needs to be
in charge of transmission. And, you know, we think that needs
to be at the Federal level. If you are talking about the
enforcement of standards, you know, that could be delegated to
each State to enforce national standards with regard to
reliability. But someone needs to be in charge. Someone has to
be accountable for the development, the maintenance, you know,
the reliability of that national transmission grid on which we
are all so dependent today.
Mr. Engel. Governor Granholm, I assume that you essentially
agree with Governor Taft?
Governor Granholm. I agree that the transmission
reliability now is--the system is completely unacceptable. It
needs to be monitored and enforced in an entity responsible for
it. So, yes, with respect to the transmission grid, yes. With
respect to some stability over pricing, I think that is very
important for our residents.
I do think the wholesale market has been effective; and the
bigger players who want to be able to compete on the open
market to purchase large amounts, it has worked well. So that
is why I think we have got to get out of the sort of
ideological hats that everyone always tends to wear and just
figure out what works and what doesn't work.
The system is a natural monopoly. And when you have a
natural monopoly with respect to the transmission grid and the
distribution lines then it is difficult to have full
competition. So what is it that we create that protects our
citizens, that makes sure that there is reliable electricity?
That is what we have got to come and take a look at.
Mr. Engel. Thank you.
Mayor Kilpatrick, I want to talk to you about a novel
program that Detroit is dealing with to get more power into the
city. As you know, I represent parts of New York City and the
suburbs, and that is replacing copper transmission lines with
superconductors. I had an amendment which would do that here in
the Congress. I just wanted to ask you how is that going?
Because I know you have been a pioneer in that. I really
commend you for that. How much is it expected to cost and how
much will it save? Also, how have you dealt with the siting
issue?
Mr. Kilpatrick. First of all, let me say, Congressman, that
the program is going fairly well. When we came into office 2
years ago, we actually had to look at it all over again, and we
actually put an RFP out for a study to answer those questions.
Because when I walked in the office, no one could tell me
how much it would save or how much it was going to cost us when
it was completed. Now we know. We are moving forward with the
project and the program. It actually picks up on the
conversation before and deregulation, of which I was a member
of the Michigan legislature at the time when this happened.
Municipalities like the city of Detroit actually got a
chance to compete in the commercial part of power and also
generate our own power, which in this crisis our power in the
city of Detroit from our public lighting department came back
up before our commercial utility, and we were able to light up
a whole lot of things and actually get generation from there.
So it helped us.
But we believe that moving to this conductor will help us
push out more power but also enable us to compete in the market
for generating power and selling power to different entities
inside our city.
Mr. Engel. Thank you. I want to say that the fine job you
are doing is surpassed only by the fine job your Congressperson
is doing. I think you are related a little bit.
Mr. Kilpatrick. I can never be as good as she is.
Chairman Tauzin. Just remember that.
The gentleman's time has expired.
Let me point out for the record the only deregulation
occurred up here. States have done some deregulation. The only
thing we have done up here in 1992 with EPAC was to deregulate
the wholesale markets. And EIA has reported, since 1992 when
that occurred, wholesale electric rates have dropped 20 percent
to consumers, wholesale rates. In addition, they have reported
that is about a $13 billion savings to America's consumers. So
we have got to keep that in perspective as we move forward.
I might mention also, to keep the record honest, that was
also the period of time in which combined cycle natural gas
technology was developed, which also helped reduce those rates.
But the question is, did one inspire the other or not? All we
know is that rates have gone down since that act in 1992.
Mr. Shimkus.
Mr. Shimkus. Thank you, Mr. Chairman; and I appreciate you
all being here and for your patience, Governors and Mayor. I
really appreciate your testimony, especially initially on the
siting issue. I think maybe we perceive that as more of a
contentious issue that what you all have presented.
Governor Granholm. I don't know that we both speak for all
of the Governors on this either.
Mr. Shimkus. You are 2 of 50. That is what we need to hear.
Because that is we have--the perception is that we have tried
to address the siting issue somewhat.
I would also encourage you to talk to some of the
independently owned units and ask them why they are not
investing in the transmission grid. For the sake you say--there
is the Federal Power Act says 13.8 percent return. There has
got to be a reason.
Otherwise--so I would suggest that it might be siting
issues, legal cases, environmental lawsuits, Federal lands
issues, maybe crossing or not crossing. There is a reason why
they are not investing, if it was just an ROE of 13.8 percent,
and I think we should look at that. That is what we are trying
to address here.
In our bill, we have the FERC that would set a rate, in
essence doing what the State public utility commission did
years ago. Now we do it based on the whole regional aspect of
expanding a transmission grid.
So I think your testimony was very, very helpful and very,
very appreciative. Because, as much as reliability is
important, you can set all of the reliability standards that
you want, but if you have a bottleneck on the transmission
grid, you have got a problem. You have got a problem if the
system goes down, and you have a problem for market
manipulation. So the more pathways we have, the more that the
market can work, and we get the return on the wholesale power,
and we are in a much better position.
Mayor, I know you are about ready to return. I apologize.
But the question quickly for you is--and you said it in your
testimony--how much did the movement to homeland security and
the re-evaluation of your needs help in the power outage? Was
it helpful? Did it help you focus? Or did you have plans in
place? Can you just briefly talk through whether--because I
think if it was helpful it is a story that probably hasn't been
told yet.
Chairman Tauzin. If I can interrupt, the mayor is only
going to be here for about 5 or 6 minutes. I know Bobby wants
to get in. He has to catch a plane. I don't know about the
Governors. I want to try to honor your commitment to us. So if
you will respond, and we will try to get Bobby Rush in and
perhaps anyone else.
Mr. Kilpatrick. Thank you.
Congressman, it not only helped us focus, it prepared us.
Those every 2 week meetings in setting up that homeland
security council, it actually worked.
After the power went out, to dispatch and go to our
mobilization alert 2 for our police department automatically
going out to these intersections, major intersections in the
city of Detroit and directing traffic, we didn't have gridlock.
Getting our emergency operations center up in 45 minutes, with
all of the phones plugged in and able to communicate with
water, fire, police, human services, housing, it actually did
work.
So the setup, as we originally planned for--whether it was
a tornado or it was a weapon of mass destruction, we would
react and respond the same, to go to the emergency operations
center and really command the event. And we did that. We
reported to the citizens of the city who didn't have power, but
they had radios. So many of them were in cars or were listening
to battery-powered radios, and actually the angst went down
immediately, which also helped us in every other aspect of the
city of Detroit, from crime to everything else.
So, I mean, yes, the preparedness, the emergency
preparedness, homeland security, moving over, getting that one
person in place, that is the homeland security director,
Derrick Miller, who is our chief administration officer, all of
those people showed up at the EOC and really took control of
the situation.
Mr. Shimkus. Thank you.
Chairman Tauzin. Bobby Rush.
Mr. Rush. Thank you, Mr. Chairman.
Mr. Mayor, I want to welcome you; and I wanted to welcome
the other witnesses here, both of the Governors. But I am
particularly concerned about the effect on local government and
local governments' responsibility.
Because, as you have so articulately illustrated, you know,
really you--the mayors and the members of the city council, you
are all on the front line. We are all here in Washington, we
can have these hearings, but you have got to produce. You know,
when the lights go out, the electricity goes out, you have got
to produce; and I think that your role should be expanded.
Can you inform us, what role do you think the local
governments could play or should play in helping to develop
this whole overall national policy as it relates to the
upgrading of our grid systems and other ancillary issues? Can
you explain to us what role would you like to play in this
whole effort?
Mr. Kilpatrick. Well, thanks, Congressman, for the
question. And earlier Congressman Stupak asked the question
also, have we been invited to this binational task force on
this issue? I think that the macro issues involved with
transmission and RTOs should be discussed between Governors and
the Federal Government. Where I believe mayors should come in
is how that impacts cities to doing other things, because all
of the different discussions on energy don't surround the
blackout. They also surround the future economy of this
country, whether it is the hydrogen economy, which is the next
wave of the manufacturing industry.
In a city like Detroit what is unique about us is the
largest corporation in the world, General Motors, sits on our
border, which is tremendously dependent on this committee
making good decisions. DaimlerChrysler, Ford, they are all
housed in our city, and therefore they are all a big part of
our economy.
When the Windsor border shut down in Detroit after 9/11, we
had 2-mile backups at the border, which essentially stopped the
American economy. So mayors at some point, after we really
decide whether we are going to have reliability or whether we
are going to have an energy bill, or all the issues that need
to be worked out in this arena, we need to sit at the table and
talk about also how we move the economic issues involved in
energy forward, as well, for our citizens' sake.
Also dollars that flow from whatever bill that comes out of
this place, we really need to be involved in getting those
dollars first.
I love our Governor. She was there every step of the way
throughout this entire crisis. But there is no State fire
department, there are no State EMS workers. There aren't any
State police--we have State police officers, but they are on
the roads giving tickets; they are not really going into those
homes, really doing the things that our local police officers
have done.
We really need to be involved in conversations also when
this shuts down, how do mayors respond? What is our role? How
do the dollars follow the problem?
Mr. Rush. In my city, Chicago, our local utility company,
you have to, I think it is every 10 years or so, enter into a
franchise agreement in order to use the public ways for
transmission lines, things like that. And we in Chicago have
not used it as well as we should. But we are beginning to
really use that as an opportunity to make sure that there are
certain reliability issues that are addressed within that
franchise agreement.
Do you all have the same kind of situation in Detroit?
Mr. Kilpatrick. No. In Detroit--actually we do. We have our
Detroit Public Lighting Department. We do have an agreement
with our major utility on some transmission issues. I don't
know the exact--if it is similar to Chicago's agreement. But we
do, yes, use some of the transmission lines from our major
utility. We do have agreements, rights-of-way, all of those
types of things.
Mr. Rush. Is there any intercity or intracity collaboration
among mayors, as it relates to--especially concerning the
blackout, in terms of what can be done at the local level?
Mr. Kilpatrick. Not from the blackouts. But, what I can say
is that Mayor Daley has called together the Great Lakes mayors
and asked us to come together surrounding policy to create some
type of interstate working relationship. I went to the first
meeting we just had, and we are going to try to establish--now,
since the blackout we have a lot to talk about, but before it
was surrounding the water, you know, the sharing of information
on manufacturing and the manufacturing industry, how to further
diversify the economy with the service industry, a lot of our
key cities in the Midwest of the United States.
Mr. Rush. I want to take a moment. I know that a couple of
years ago we had a blackout in Chicago. And although there
weren't a lot of Federal or national concerns about it--or the
issue wasn't really discussed on a national level, rather--I
have to give credit to the mayor, because he used the bully
pulpit of the mayor's office to make sure that public utility
company in Chicago, that it invested money into the
transmission system there in the inner city of Chicago.
And he castigated them. He was very hard, hard-nosed on
them, and they basically responded somewhat. And so I know the
role that mayors can play in regards to making sure that we
avoid this kind of problem in the future.
Mr. Kilpatrick. For 30 or 40 years in the city of Detroit
the conversation has been whether we need to be in the electric
business at all, in the utility business at all.
The conversation after the blackout is, how do we continue
to work together to make sure all of the lights are on.
So I believe the beginning of that type of relationship
that you just spoke of may be able to happen now.
Mr. Rush. Thank you very much.
Chairman Tauzin. Thank you.
Any further questions for the Governors and Mayor? Before
we dismiss you, I wanted to mention something that I know that
you have all read of the star quality of Governor Granholm, we
have read a lot about it.
But the real star at this table is the Mayor of Detroit. A
recent report: Actor-Comedian Chris Rock directed and stars in
a movie entitled Head of State which opens this weekend. And he
did it with Detroit Mayor Kwame Kilpatrick in mind. The film is
about a struggling young black alderman from Washington, DC,
who goes from being an unknown to running a successful campaign
to be the next President of the United States.
Here is a quote from Chris Rock. ``I just saw Kwame 1 day
on C-SPAN with that big earring, not realizing that he was the
Mayor of Detroit,'' Rock, 37, says. ``I didn't know who he was.
I thought that he was a baseball player's agent or something.
Then I started listening to him. What he was saying was right
on.'' He used the mayor as his model for his character in the
new movie just starting out.
So you not only have been a good example of a mayor who
reacted in a crisis, you are star quality, man.
Mr. Green. Mr. Chairman, was that a compliment from Chris
Rock?
Mr. Kilpatrick. Well, he made about $100 million on that
movie, so I guess it was a compliment.
Chairman Tauzin. We appreciate all of you being here and
would deeply appreciate your continuing to stay in touch with
us as we finalize this work. Obviously your perspectives are
extraordinarily valuable to us. We thank you for the time you
have shared with us.
Any other members' final comments?
Mr. Green.
Mr. Green. Mr. Chairman, I don't have any questions of the
Mayor if me needs to leave. But I had a couple of questions for
the Governors. I will be real brief, because I think there are
questions to both of you.
One, I believe that the electricity crisis is broader than
just reliability. I think it is the reliability of humans and
our operating equipment. I think we have had a problem with
generating capacity. And we saw what happened in California
with transmission problems and pipeline problems; and it just
seems like our infrastructure is not what we expect it to be.
To build a natural gas-fired generating plant, you have to
have a new pipeline or a new transmission line from there to
the end; and the siting is an issue, I think.
Governor Taft, as demand for electricity continues to grow,
what are the plans in Ohio, particularly for encouraging new
power generation development and the associated infrastructure
that will support it?
Governor Taft. We have a very favorable climate for
construction, approval, siting of new power plants, new
generating facilities. We have had a great number sited in Ohio
in recent years, perhaps in part in response to deregulation.
Most of these are gas-fired, but our capacity has expanded
very, very significantly.
Of course, we are all struggling with this transmission
issue that we are talking about today. That is the fundamental
problem in the system today.
Mr. Green. So transmission you would identify. It is not
necessarily the generation of the power, but transmission of
the power?
Governor Taft. Generation of power is very adequate in Ohio
today.
Mr. Green. Okay.
Governor Granholm, I understand from your testimony you
inherited recently an electricity restructuring effort from a
previous Governor. And do you have any plans for considering
encouragement of new generation development and also the
associated infrastructure, for example, the problem with
transmissions?
Governor Granholm. I think that every Governor is taking a
look at their generation capacity and making sure that you have
got enough. But we, like other States, purchase on the open
market as well. So that--you know, we want to see enough
generation for us to be able to either buy or generate
ourselves.
We will be taking a look at that. And my chairman of the
Public Service Commission will be testifying immediately after
me. You can ask that question of him, too. We know there are
several proposals to be able to get new plants up in Michigan.
Mr. Green. Thank you, Mr. Chairman.
Chairman Tauzin. Thank you, Mr. Green.
I think that concludes this section of our hearing. I again
deeply appreciate your attendance. And, again, stay in touch
with us. We will try and keep in touch with you.
We have a distinguished panel yet to be heard from. The
panel includes the man that you have heard a great deal about,
as we are going to discuss the jurisdiction of the FERC. That
will be the Chairman of the FERC itself, Mr. Patrick Wood, and
representatives of State PUCs, as well as some utilities.
We invite all of our guests to take chairs again as we say
good-bye to Governor Taft and Governor Granholm with our
thanks.
The committee will please come back to order as we ask our
guests to take seats. We invite our next panel to come forward
and welcome them.
Let me introduce, first of all, the panel to you: The
Honorable Patrick Wood, Chairman of the Federal Energy
Regulatory Commission, who has been a frequent visitor to our
committee room. We thank you again, Pat, for your steadfastness
in working with us on these technical and very difficult
issues.
We also have with us the Honorable Dr. Alan Schriber,
Chairman of the Ohio Public Utilities Commission; the Honorable
Peter Lark, Chairman of the Michigan Public Service Commission;
and the Honorable William Flynn, Chairman of the New York State
Public Service Commission.
By the way, as a caveat, let me mention that we had invited
Governor Pataki and Mayor Bloomberg, who were scheduled to
come, and then commitments interrupted, and they could not be
with us today. But we certainly appreciate their efforts to be
with us today.
And, Mr. Flynn, thank you for coming.
Also Michael Gent, President of the North American Electric
Reliability Council, a man who we have heard and seen on
television recently--Michael; Mr. Brantley Eldridge, the
Executive Manager of the East Central Area Reliability Council;
and Charles Durkin, the Chairman of the Northeast Power
Coordinating Council of New York, New York.
We certainly want to welcome you all. And again under our
rules, you will have 5 minutes to tell us the most important
things you have to tell us. Your written testimony is a part of
our record, so please don't read it to us, but summarize your
statement to us and highlight the important parts of that
statement for us in 5 minutes.
Chairman Wood, we welcome you first. And, again, thank you
for your attendance again.
STATEMENTS OF HON. PAT WOOD III, CHAIRMAN, FEDERAL ENERGY
REGULATORY COMMISSION; HON. ALAN R. SCHRIBER, CHAIRMAN, OHIO
PUBLIC UTILITIES COMMISSION; HON. J. PETER LARK, CHAIRMAN,
MICHIGAN PUBLIC SERVICE COMMISSION; HON. WILLIAM M. FLYNN,
CHAIRMAN, NEW YORK STATE PUBLIC SERVICE COMMISSION; MICHEHL R.
GENT, PRESIDENT, NORTH AMERICAN ELECTRIC RELIABILITY COUNCIL;
BRANT H. ELDRIDGE, EXECUTIVE MANAGER, EAST CENTRAL AREA
RELIABILITY COUNCIL; AND CHARLES J. DURKIN, JR., CHAIRMAN,
NORTHEAST POWER COORDINATING COUNCIL
Mr. Wood. Thank you, Mr. Chairman. I will actually go from
my statement to respond to some of the questions that have been
raised.
Chairman Tauzin. Let me interrupt you, first. I want to
thank you for a couple of things.
I noticed you were here all day attending in the audience,
listening to our other presenters and gathering information
along with us. I don't know that other heads of Federal
agencies would do that. I deeply appreciate that. I hope the
American public understands how deeply and seriously you take
your job and how tough it is. We thank you, Pat.
Mr. Wood. Thank you. It is part of my job. I appreciate
being thanked for it, anyway.
As the Secretary testified early this morning, we are a
very active participant in the joint U.S.-Canadian task force
on reviewing the events of August 14 and 15.
I do think, just in answering an earlier question, that is
a very efficient and effective way for the Federal Government
to combine its resources and move forward. It was the same
method that was used in past recent blackouts since the
Department has been formed. I think it is a good template for
going forward.
If there are, however, issues that are within the FERC
jurisdiction that require further activity from our agency,
whether they be enforcement or other kinds of inquiries, we
will of course proceed as an independent agency should.
It is not clear what happened on 8/14, and I will not
prejudge this event until the engineers and all other technical
experts have looked at it and explain to me exactly what
happened, as an engineer. We have a lot of competent
professionals working together.
But, I should say that this is not the first region-wide
blackout that we have ever had in this country. In 1996, while
I was a Texas regulator, citizens in El Paso, Texas, were shut
off when a line went down in Oregon, and 13 Western States were
blacked out for the better part of a day. We have tended to
forget about that.
In 1999, I think, Mr. Chairman, you said about half a
million citizens in your home State and mine were both blacked
out during the summer for some rolling blackouts. Of course, we
know about the blackouts that happened in 2000 and 2001 in
California for other reasons. But, these are a series of events
from which I think we have learned, and I think give us a
legitimate base from which to start, that may or may not be
germane to what happened 3 weeks ago.
But, I think we would be derelict in our duty--I would be--
if I did not inform the committee the fact that we have been
here before, and that as an agency, and collectively as a
country, we have been working to address these problems in a
thoughtful way.
One key issue in these previous blackouts and perhaps in
this one is investment in infrastructure--specifically
regional, not local, infrastructure. What sort of actions have
we taken to learn from the past? In repeating my strong support
for regional transmission organizations in my testimony, I
stand on long-standing bipartisan policy of our commission,
which I should say predates the current administration, that
well-structured RTOs will help foster a more robust and
competitive power market and help contribute to a reliable grid
operation for each region. Both of these are in the best
interests of customers in every region of the country.
The power industry needs an air traffic controller. I know
all of you have flown in and out of airports recently, as I
have. In the past, when electricity was chiefly a local
commodity, the second-by-second balance of supply and demand
was done by the local utility in about 150 to 200 small
regions, small islands in the country.
The New York City blackout of 1965 spurred the
interconnectivity of local utilities into more regionally
connected reliability groups, and thus was born NERC, that Mr.
Gent heads today. Advances in technology and ultimately legal
changes by this body in 1992 broadened the interconnectivity of
the grid for greater commerce among utilities and increasingly
nonutility providers of power.
So, now with this greater regional scope and diversity of
suppliers, who should be the air traffic controller making sure
that supply and demand stays in balance, i.e., that the system
stays reliable?
Almost all agree that it should be someone independent of
commercial interests and competent to do the job. That power
traffic controller must be accountable and have the ability and
the money to address the problems that exist on the system.
And, as to how many there should be, so we don't have these
communications issues that have been raised, I think less is
better. When we had separate air traffic controllers for every
utility, we had 140 little islands in the country, which is
hard to personally coordinate certainly by phone, for a product
that moves at the speed of light.
So, when we consolidate or bring together these little
islands, we call them control areas, and we put them under a
regional traffic controller, who can ensure efficient dispatch
and a highly reliable system, provided that it has a modern
communications system and real-time controls to keep the supply
and demand in balance.
I don't care what we call these air traffic controllers,
EROs, RTOs, whatever. They are and will be regulated entities,
but we just need the Congress to tell us, or someone
appropriate, to make this happen and we will do it. We are and
will be accountable to you and to the public for this activity.
We await congressional guidance on these broader policy issues,
but I should say we are moving forward to fully understand the
events of August 14, and I am personally committed to going to
wherever the facts may lead.
Thank you, Mr. Chairman.
[The prepared statement of Hon. Pat Wood III follows:]
Prepared Statement of Hon. Pat Wood, III, Chairman, Federal Energy
Regulatory Commission
i. introduction and summary
The blackout experienced in the Midwest and Northeast on August 14,
2003 serves as a stark reminder of the importance of electricity to our
lives, our economy and our national security. All of us have a
responsibility to do what we can to prevent a repeat of such a
blackout.
The United States-Canada Joint Task Force, with assistance from the
Federal Energy Regulatory Commission (FERC or the Commission) and
others, is working to identify the cause of the blackout and the steps
needed to prevent similar events in the future. Analysis of the
blackout is ongoing, and it is too early to know what caused the
blackout or why the blackout cascaded through eight states and parts of
Canada.
ii. steps taken by ferc in response to the august 14 blackout
FERC staff based in Washington, D.C., and at the Midwest
Independent System Operator (MISO) in Carmel, Indiana, have monitored
blackout-related developments from the first minutes.
Directly after the blackout began, FERC staff members went to the
U.S. Department of Energy (DOE) to coordinate our monitoring with DOE's
emergency response team. At about the same time, FERC staff in the MISO
control room began monitoring and communicating the events around the
clock until most of the power was restored.
During this time, FERC staff was involved in nearly 20 North
American Electric Reliability Council (NERC) telephone conference calls
with the reliability coordinators, assessing the situation. These calls
also involved close coordination with our Canadian counterparts. Also,
the on-site staff monitored other calls between MISO, its control
areas, transmission-owning members, and other Independent System
Operators (ISOs) and Regional Transmission Organizations (RTOs) in
their joint efforts to manage the grid during restoration.
In Washington, D.C., FERC staff immediately mobilized to provide
relevant information to the Commissioners and to others, including DOE.
These communications included, for example, data on output by
generating facilities and markets adjacent to the blackout area. FERC
also gathered information from ISO and RTO market monitors for each of
the ISOs or RTOs in the affected regions. Our staff closely tracked the
markets to make sure that no one took advantage of the situation to
manipulate the energy markets. Working with the market monitor for the
New York Independent System Operator (NYISO), we tracked the New York
market especially closely during the period when that market was coming
back on line and during the first unusually hot days later in the week
of August 18.
Currently, members of the Commission's technical staff are
assisting the United States-Canada Joint Task Force on its
investigation of the blackout. The Commission will contribute resources
to this effort as needed to ensure a thorough and timely investigation.
iii. background
A. The Current State of the Electricity Transmission Grid
The Nation's transmission grid is an extremely complex machine. In
its entirety, it includes over 150,000 miles of lines, crossing the
boundaries of utilities and states, and connecting to Canada and
Mexico. The total national grid delivers power from more than 850,000
megawatts of generation facilities. The grid is operated at about 130
round-the-clock control centers, some large and others small. The large
number of these control centers derives from the historical development
of utility-franchised territories.
When a generating facility or transmission line fails, the effects
sometimes are not just local. Instead, a problem may have widespread
effects and must be addressed by multiple control centers. The utility
staff at these centers must quickly share information and coordinate
their efforts to isolate or end the problem. Given the speed at which a
problem can spread across the grid, coordinating an appropriate and
timely response can be extremely difficult without modern technology.
In recent years, the use of the grid has expanded significantly.
The growth of our economy, and its increasing reliance on electricity,
is the principal driver. Greater competition among power sources
(wholesale power competition) has also increased use of the grid. The
grid was built originally to interconnect neighboring utilities and to
allow them to share resources when necessary but is now used as a
``superhighway'' for broader, regional trading.
Transmission capital investments and maintenance expenditures have
steadily declined in recent years. In the decade spanning 1988 to 1997,
transmission investment declined by 0.8 percent annually and
maintenance expenditures decreased by 3.3 percent annually.
(Maintenance activities include such items as tree-trimming, substation
equipment repairs, and cable replacements, all of which affect
reliability). Power demand increased by 2.4 percent annually during
this same time period.
Finally, perhaps even more important than adding transmission
capacity, is improving the tools available to control center staff for
operating the grid. One example is installing state-of-the-art digital
switches, which would allow operators to monitor and control
electricity flows more precisely than the mechanical switches used in
some areas. Installing additional monitoring and metering equipment can
help operators better monitor the grid, detect problems and take
quicker remedial action. Improved communication equipment can help
control centers coordinate efforts more quickly. The level of
investment in these technologies has been varied.
B. Today's Regulatory Framework
Currently, there is no direct federal authority or responsibility
for the reliability of the transmission grid. The Federal Power Act
(FPA) contains only limited authorities on reliability.
For example, under FPA section 202(c), whenever DOE determines that
an ``emergency exists by reason of a sudden increase in the demand for
electric energy, or a shortage of electric energy or of facilities for
the generation or transmission of electric energy . . . or other
causes,'' it has authority to order ``temporary connections of
facilities and such generation, delivery, interchange or transmission
of electric energy as in its judgment will best meet the emergency and
serve the public interest.''
Under FPA sections 205 and 206, the Commission must ensure that all
rates, terms and conditions of jurisdictional service (including
``practices'' affecting such services) are just, reasonable and not
unduly discriminatory or preferential. These sections generally have
been construed as governing the commercial aspects of service, instead
of reliability aspects. However, there is no bright line between
``commercial practices'' and ``reliability practices.''
The explicit authorities Congress has granted the Commission in the
area of reliability are very limited. For example, under FPA section
207, if the Commission finds, upon complaint by a State commission,
that ``any interstate service of any public utility is inadequate or
insufficient, the Commission shall determine the proper, adequate or
sufficient service to be furnished,'' and fix the same by order, rule
or regulation. The Commission cannot exercise this authority except
upon complaint by a State commission.
The Public Utility Regulatory Policies Act of 1978 (PURPA) also
provides limited authority on reliability. Under PURPA section 209(b),
DOE, in consultation with the Commission, may ask the reliability
councils or other persons (including federal agencies) to examine and
report on reliability issues. Under PURPA section 209(c), DOE, in
consultation with the Commission, and after public comment may
recommend reliability standards to the electric utility industry,
including standards with respect to equipment, operating procedures and
training of personnel.
Since the electric industry began, reliability has been primarily
the responsibility of the customer's local utility. Depending on state
law, utilities may be accountable to state utility commissions or other
local regulators for reliable service. Typically, the local utility
keeps statistics on distribution system interruptions in various
neighborhoods, inspects the transmission system rights-of-way for
unsafe tree growth near power lines, and sets requirements for
``reserve'' generation capability to cover unexpected demand growth and
unplanned outages of power plants. Many state and local regulators
exercise the authority of eminent domain and have siting authority for
new generation, transmission, and distribution facilities.
In 1965, President Johnson directed FERC's predecessor, the Federal
Power Commission (FPC), to investigate and report on the Northeast
power failure. In its report, the FPC stated:
When the Federal Power Act was passed in 1935, no specific
provision was made for jurisdiction over reliability of service
for bulk power supply from interstate grids, the focus of the
Act being rather on accounting and rate regulation. Presumably
the reason was that service reliability was regarded as a
problem for the states. Insofar as service by distribution
systems is concerned this is still valid, but the enormous
development of interstate power networks in the last thirty
years requires a reevaluation of the governmental
responsibility for continuity of the service supplied by them,
since it is impossible for a single state effectively to
regulate the service from an interstate pool or grid.
Northeast Power Failure, A Report to the President by the Federal Power
Commission, p. 45 (Dec. 6, 1965).
In response to the 1965 power failure, the industry formed NERC.
NERC is a voluntary membership organization that sets rules primarily
for transmission security in the lower 48 states, almost all of
southern Canada, and the northern part of the Baja peninsula in Mexico.
More detailed rules are prescribed by ten regional reliability
councils, which are affiliated with NERC. However, neither NERC nor the
ten regional reliability councils have the ability to enforce these
rules. And these rules are administered on a day-to-day basis at over
130 utility control areas.
iv. next steps
Regardless of the actual cause of this blackout, the event, like
earlier blackouts, has demonstrated that our electrical system operates
regionally, without regard to political borders. Electrical problems
that start in one state (or country) can profoundly affect people
elsewhere. Preventing region-wide disruptions of electrical service
requires regional coordination and planning, as to both the system's
day-to-day operation and its longer-term infrastructure needs.
Currently, the Congress has before it, in conference, energy
legislation which could address a number of issues that have arisen in
the debate in the last few weeks over reliability in our wholesale
power markets.
First, both the House and Senate bills going to conference provide
for mandatory reliability rules established and enforced by a
reliability organization subject to Commission oversight. Many
observers, including NERC and most of the industry itself, have
concluded that a system of mandatory reliability rules is needed to
maintain the security of our Nation's transmission system. I agree.
That leads to the question of what entity will be in charge, on a
day-to-day basis, of administering the mandatory reliability rules that
are developed by the independent reliability authority. In Order No.
2000, the Commission identified the benefits of large, independent
regional entities, or RTOs, in operating the grid. Such entities would
improve reliability because they have a broader perspective on
electrical operations than individual utilities. Further, unlike
utilities that own both generation and transmission, RTOs are
independent of market participants and, therefore, lack a financial
incentive to use the transmission grid to benefit their own wholesale
sales.
In the six years since the Commission ordered open access
transmission in Order No. 888, the electricity industry has made some
progress toward the establishment of RTOs, entities that combine roles
relating to reliability, infrastructure planning, commercial open
access and maintenance of long-term supply/demand. H.R. 6 endorses this
effort in a ``Sense of the Congress'' provision. Congress can direct
this effort to be completed.
While coordinated regional planning and dispatch are sensible steps
to take, we still need to attract capital to transmission investment. I
understand that there is significant interest in investing in this
industry already; however, to the extent the Commission needs to adopt
rate incentives for transmission or other investment to alleviate
congestion on the grid, including new transmission technologies, we
should do so. While the Commission has recently taken steps in this
direction, action by Congress on this issue, and in repealing the
Public Utility Holding Company Act, can provide greater certainty to
investors and thus encourage quicker, appropriate investments in grid
improvements. The provisions in H.R. 6 would provide legal certainty to
the Commission's recent efforts.
In addition to ratemaking incentives from the Commission, Congress
can also provide economic incentives for transmission development.
Changing the accelerated depreciation from 20 years to 15 years for
electric transmission assets, as in H.R. 6, is an appropriate way to
provide such incentives. Similarly, Congress can provide tax neutrality
for utilities wishing to transfer transmission assets to RTOs.
To the extent that lack of assured cost recovery is the impediment
to grid improvements, regional tariffs administered by RTOs are an
appropriate and well-understood vehicle to recover these costs. The
Commission has accepted different regional approaches to pricing for
transmission upgrades, but the important step is to have a well-defined
pricing policy in place.
Getting infrastructure planned and paid for are two of the three
key steps for transmission expansion. The third step is permitting.
States have an exclusive role in granting eminent domain and right-of-
way to utilities on non-federal lands. Under current law, a
transmission expansion that crosses state lines generally must be
approved by each state through which it passes. Regardless of the rate
incentives for investment in new interstate transmission, I suspect
that little progress will be made until there is a rational and timely
method for builders of necessary transmission lines to receive siting
approvals. Providing FERC (or another appropriate entity) with backstop
transmission siting authority for certain backbone transmission lines,
in the event a state or local entity does not have authority to act or
does not act in a timely manner, may address this important concern.
H.R. 6 contains such a provision.
v. conclusion
I look forward to visiting further with the Committee as the US-
Canada Task Force continues to get to the bottom of what happened
before, during and after the Blackout on August 14, 2003. Thank you.
Chairman Tauzin. Thank you, Mr. Chairman. We deeply
appreciate it.
We will now turn to the honorable Dr. Alan Schriber, who is
Chairman of the Ohio Public Utilities Commission from Columbus,
Ohio; and we are deeply interested in your thoughts on this
crisis.
STATEMENT OF ALAN R. SCHRIBER
Mr. Schriber. Thank you, Mr. Chairman.
Also, I will note that I am chairman of the Ohio Power
Siting Board board, too, which will play into this also.
On August 14 at 4 o'clock I got back to my office after
having a workout to relieve the stress of the day. By 5
o'clock, I was ready to go back. But I think the stress that I
experienced was far less than that experienced by people in
other parts of the State and, of course, the eastern part of
the United States, as was so aptly articulated by the Governors
whom we have already heard from. What happened on that day is
something that I am looking forward to being a part of the team
to determine, as I have been appointed to the binational task
force.
I just want to make several points that are in my
testimony.
First of all, I am prepared to argue that the outage that
we experienced is not a result of deregulation, and I would be
glad to elaborate on that later.
Second, I don't believe that we have anything remotely
approaching a Third World grid, as has been articulated. This
is not unlike the interstate highway system where you have
great spots along the road and then sometimes it breaks down,
sometimes it gets old and needs replacement, sometimes we get
population shifts which cause demand for highway space, if you
will, to increase in other areas, which is similar to that
which we find on the electric transmission system.
I think reliability is an absolute necessity that has to be
addressed right away. I think among the very many press calls I
got immediately following the incident, a lot of questions
were, well, who is responsible for the transmission system? I
said, you know, at the State level, we are responsible, for we
regulate, we have terms and conditions, prices, all kinds of
issues related to and standards related to the distribution
system. But when it came to the transmission system, well, I
knew that the FERC regulates the rates, transmission rates,
prices and what have you along the system, but I had no idea,
it had not occurred to me, of who is it that regulates
transmission. As it turns out, it is generally accepted utility
practices that regulate, that takes care of the transmission
issues.
Now, does that mean a transmission line is 12 feet above a
tree or 14 feet above a tree? I don't know, and I don't know
which would be the most appropriate. As I said, we do the
distribution; we don't do the transmission. I am strongly in
support and would urge you to move forward with either NERC or
FERC promulgating rules that do and standards that do address
transmission, the physical properties of the transmission
systems.
As far as enforcement goes, I would propose that
consideration be given to States. Currently in Ohio and many
other States, we enforce Federal rules. For example, the
Department of Transportation, we enforce their rules with
respect to natural gas pipeline safety, with respect to
hazardous material transportation, rail, rail crossings. It
could seem a logical leap, therefore, to be able to have the
opportunity to enforce rules with respect to transmission
lines, rules that are promulgated again by a Federal authority.
Furthermore, I think that a comprehensive law is important
to the following extent: I really believe we need to unshackle
the Federal Energy Regulatory Commission. I think they need to
be able--I think they must be able to move forward in order to
establish their mission of a large regional footprint, if you
will, a large regional transmission system. I think it relates
to reliability.
I think that a large regional transmission system best
allocates resources, and as an economist I like to talk about
the allocation of resources. If you have multifragmented
transmission systems, each one would be throwing money, if you
will, at that part of the system, of its own system that needs
fixing, if you will, in contrast to a regional approach which
will allocate dollars most optimally toward where they need to
be.
Furthermore, I think that attracts capital more readily. I
think those investments that are made in the reliability of the
transmission system, the more capital will be attracted at more
favorable rates. So the more optimal the application of money,
the more capital will be attracted.
Also, I think there are a lot of pricing issues and pricing
strategies that can be dealt with better in a super-regional
transmission system.
I know there is a lot of push-back on the transmission
systems, the regional transmission systems. There is no
compelling reason that we have to address all regions
simultaneously. Pat and his group can clearly carve out a
region and say, we are going to do X region, the Eastern
region, the Midwest, the Mid-Atlantic, the Northeast first. If
at some point in time the West wants to buy in, we can do that
or the Southwest or whatever, we can do that. But I think it is
absolutely essential that in order to have a successful and
appropriate reliability system that we have been talking about
that we must have a governance that singularly has oversight
over a large regional organization in terms of its operation.
At this point, I will stop. I appreciate the opportunity to
testify and would look forward to some questions.
[The prepared statement of Alan R. Schriber follows:]
Prepared Statement of Alan R. Schriber, Chairman, Public Utilities
Commission of Ohio
Mr. Chairman, Members of the Committee, my name is Alan R.
Schriber. I am the Chairman of the Public Utilities Commission of Ohio
and the Ohio Power Siting Board and am here today to answer what
questions can be answered to date and express our views. I appreciate
the opportunity to appear before the House Energy and Commerce
Committee. I respectfully request that the written statement submitted
under my name on behalf of the Public Utilities Commission of Ohio be
included in today's hearing record as if fully read.
The Public Utilities Commission of Ohio is charged with the duty of
regulating the retail rates and services of electric, gas, water and
telephone utilities operating within our jurisdiction. Specifically,
with respect to electricity, we regulate the distribution of power but
not transmission. Additionally, since Ohio has restructured the
industry, we no longer regulate generation. We have the obligation
under State law to assure the establishment and maintenance of such
energy utility services as may be required by the public convenience
and necessity, and to ensure that such services are provided at rates
and conditions which are just, reasonable and nondiscriminatory for all
consumers.
You have asked what factors and events led up to the blackouts that
occurred on August 14. I am personally honored to be able to serve on
the U.S.-Canada Joint Task Force on the Power Outage, and I am certain
causes will be identified as expeditiously as possible. Following that,
recommendations as to remedial action will undoubtedly be forthcoming.
To this point, many of the events that took place in Ohio have been
documented via timelines. However, the entire picture of what happened
August 14th will take serious analysis well beyond the scope of Ohio
alone. Its effect upon the citizens and businesses of Ohio were
documented for you earlier by Governor Taft. In the aftermath, the
Governor charged my Commission with the challenge of scrutinizing
events as they occurred in Ohio and will complement those of the U.S.-
Canada Joint Task Force.
As we pursue our quest for causes and solutions to the outage, I
think that we will find that the electrical system in this nation is by
no means ``third world''. It is a very complex, interconnected system
that has in fact worked very effectively. The system operated as it was
designed to operate on that unusual day in August. Lines tripped,
plants tripped, and systems were isolated to prevent further blackouts,
just as they were designed to perform. If the systems had not operated
as above, not only would the loss of power been far more extensive, but
severe damage would have resulted to our infrastructure.
While it is reassuring that the situation was ``contained'' to some
degree, and that remarkable restorations were implemented, we cannot
ignore the fact that weaknesses exist that call for repair. Much like
the Interstate highway system, traffic patterns on the wires have
changed, congestion has increased, and wires need fixing. Above all, we
learned how vulnerable we are, and how dependent we are on our electric
system.
You will undoubtedly hear from opponents of deregulation that
states such as Ohio that have promoted retail competition collectively
contributed to the 2003 outage. I must take issue with this stance. The
type of competition that has been promulgated at the state level is one
of retail competition, wherein end users purchase their power from
marketers who, in turn, buy in the wholesale market. The grid as we
know it today has always been the vehicle over which wholesale
transactions take place. It was built to accommodate transactions
between utilities. This is nothing new.
Nothing has really changed that principle except for the number of
transactions that travel the wires, which is a measure of the overall
increase in the demand for electricity. The electrons know nothing
except that the quickest way to get somewhere is along the shortest
path. Therefore, if you live in Illinois and buy electricity from New
Jersey, you'll write a check to the generator in New Jersey. However,
the electrons that you end up with will come from close by, while the
New Jersey generator's electrons will stay closer to home. That is the
difference between the contract path and the physical path. All of this
is to say that deregulation, which has been adopted by less than half
the states with a modicum of success, should not be a relevant
consideration.
The real challenge that lies ahead, and one that Congress must
confront, is molding the electric grid into one that can accommodate
the economic realities of today. The reality is that demand has shifted
and so to have the suppliers. Parenthetically, one should note that, in
the aggregate, generation supply is sufficient to meet demand. The
problem is that the suppliers are not necessarily lining up through the
grid with the demanders. The reason for this misalignment is a
patchwork of overseers of the grid; regional transmission systems,
private transmission systems, and systems within the vertical
structures of utility companies are accountable to no single boss even
though they all interconnect at some point.
If we had many discreet, non-interconnected systems, I suspect we
would have more blackouts than fewer, although of less duration, since
there would be no interconnected neighbor to help out on a hot day. On
the other hand, a regionally coordinated transmission system with a
super-large geographical footprint would enhance the ability to work
through all kinds of contingencies, some of which are simply beyond the
scope of smaller control areas.
Everyone should want to see our transmission resources allocated in
an optimal manner. I am prepared to argue that its achievement is
predicated on the super-regional transmission system alluded to above.
To this end, FERC is the federal agency endowed with the authority to
make it happen. Congress should support FERC's efforts to enlist
participation by all transmission owners into a regional grid that
recognizes the economies of centralized management.
I do not know how many billions of dollars it might take to upgrade
the grid, but I do fervently believe that whatever dollars are expended
are done so most economically when the needs of the grid as a whole are
evaluated as objectively as possible. Given the myopia associated with
the fragmented systems of today, dollars may be thrown at ``fixes''
that often do nothing but add an asset to the utility rate base; not
only are the needs of the region ignored, but the utility that has
determined to fence itself in does very little at the margin to benefit
its own customers. Regional approaches must be adopted to appreciate
the needs and recognize the benefits.
An independently administered regional transmission system, on the
other hand, could prioritize its investments based upon marginal
benefits. Dollars would flow to the points on the grid that would yield
the most benefits, for example, the amount of regional congestion that
is relieved, regardless of whose ``backyard'' it resides. Why would a
single state permit the construction of a high tension wire within its
boundaries if there were not a single ``drop'' along the way? The
answer would be that it probably would if it understood that the
congestion relieved by the line significantly increased the level of
unobstructed power flows within the state. The problem is in the
``understanding''. The manager of an independent, integrated, profit
maximizing transmission organization understands the resource
optimization process because it has the bigger picture.
In addition to rational planning, the aggregated grid system is
also more likely to attract capital. Investment dollars move to the
places where the potential yields are the greatest given the risks. We
might conjecture that the greater the number of electrons that flow,
the greater the dollars that flow to the construction of wires that
carry those electrons. A unified super-regional grid maximizes power
flow through the grid and should be politically indifferent as to the
points of need located within. In contrast, sub-optimal investments in
electric facilities are made when a single entity, without regard for
the region around it, is more interested in closing itself off from the
greater good. Those who provide the dollars are more likely to follow
the path of investment with the greatest potential for risk/return
optimization, which from my point of view resides with the regional
grid.
I have been talking to this point about the physical conditions
that bind the grid for better or worse. However, the economics of all
of this must not go unmentioned. Different transmission systems, as
fragmented as they might be, often employ pricing strategies that are
inconsistent with one another. When the price of moving electricity a
number of miles across different operating areas varies according to
whose area is being crossed, the outcome can be quite confusing for
those paying the freight. Without belaboring the point, another strong
argument that favors super-regional management of the grid is pricing
consistency and the concomitant higher level of economic certainty
conferred upon users of the grid.
This aggregation of transmission systems or control areas is the
cornerstone of the FERC's endeavor. To be thoroughly effective,
however, it must also draw lifeblood from Congress as Congress
deliberates its Energy Bill. It is antithetical to our interests to
delay FERC's attempt to implement its design for a rational
transmission market.
If Congress must do any one thing immediately, it must address the
issue of system reliability. While the states have the authority from
their legislatures to set and enforce rules for distribution systems,
the federal government must confer power upon someone to do the same
for the transmission system. Whether it be the North American Electric
Reliability Council (NERC) as currently proposed in the Energy Bill, or
whether it be the FERC, the rules of the road must be mandatory. Once
in place, the enforcement of the rules can follow the course taken by
other federal agencies.
A unique and efficient means of enforcement of some federal rules
has evolved over the years. Ohio, as well as other states, undertakes a
number of such tasks on behalf of federal agencies. For example, the US
Department of Transportation has very specific rules that speak to
natural gas pipeline safety. Ohio's Public Utilities Commission
receives funds from USDOT to inspect and enforce those rules within the
state's borders. Ohio also participates in the inspection protocols for
the transportation of hazardous materials. The same process has evolved
with the Federal Railroad Administration which has prescribed rules for
rail crossings. The Ohio Commission has personnel evaluating and
prioritizing grade crossings for the purpose of supporting communities
with safety devices. Given the fact that Ohio and other states already
support federal agencies in rule enforcement, does it not make sense to
consider the same for the transmission of electricity?
The events of the past couple of weeks speak clearly to the need
for Congress to do two things. First, Congress must focus on endowing
some agency or organization, e.g., the FERC or NERC, with rule-making
authority that locks-in our quest for a reliable grid.
Second, it must enable the FERC to move forward in its initiatives
to bring about a physically and economically rational structure and
governance to the transmission system.
I appreciate the opportunity to have appeared here before you today
and look forward to clarifying anything that I have said.
Chairman Tauzin. Thank you, Dr. Schriber.
I will turn to the Honorable Peter Lark, the chairman of
the Michigan Public Service Commission in Lancing, Michigan.
Peter.
STATEMENT OF J. PETER LARK
Mr. Lark. Thank you.
Good afternoon, Mr. Chairman and members of the committee
and, in particular, members of the Michigan delegation,
Congressmen Stupak, Upton, Dingell, and my own Congressman
Rogers. I appreciate the opportunity and the honor to address
this committee today to discuss the blackout that ripped
through our country and Canada on August 14.
The question on everybody's mind is what caused the
blackout? Well, in Michigan, we have opened an investigation
into the cause of the blackout, as have, as you know, many
others. While I can't pinpoint the exact cause, I will leave
that to the various inquiries presently under way. I think I
may be able to help with the answer to the next question, and
that is, what can be done to reduce the likelihood of another
similar event recurring?
In a word, the answer is: create a system with
accountability. I think it would surprise a great number of
Americans to know that there is presently no governmental
oversight of the reliability of this country's electric
transmission system. This shortcoming, in my view, must be
eliminated. The buck must stop somewhere. Our citizens need to
know who to turn to and the government needs to know who to
hold accountable for ensuring a reliable system.
In Michigan, Detroit Edison and the transmission system
that serves it, ITC, have reported they received no
communications prior to the blackout from the northern Ohio
utility that has been reported as the likely system on which
trouble began. As the Governor before me said, ITC has traced
the time line on actions that contributed to the blackout back
1 hour and 5 minutes before it occurred. While ITC was able to
provide this information after the blackout occurred, it is
vital to understand that neither entity had any idea what was
happening at the time. What we have here is a failure to
communicate.
You have to ask yourself, did a single utility make
imprudent decisions that jeopardized the integrity of many
utility systems? Again, the buck must stop somewhere. Congress
must pass mandatory and enforceable reliability rules
applicable to all users, owners, and operators of the
transmission network. Reliability rules must be mandatory
throughout the industry within the footprint of the North
American Electric Reliability Council.
While the authority to establish reliability rules should
repose in the Federal Energy Regulatory Commission, NERC may
well be the best candidate for developing the rules. Where
regional transmission organizations or RTOs are deemed
essential, such as in the upper Midwest, these RTOs must have
the authority to order its members where necessary to shed load
or add generation. Whether or not RTOs are mandated throughout
the country is less important than having in place a set of
reliability standards that will govern the entire grid.
There are sections of the grid where membership in an RTO
makes a good deal of sense, such as the upper Midwest, and
areas of the country where it may make less sense. The
enactment of mandatory reliability standards that are
enforceable by an entity with the power to sanction violators
must not be postponed by regional squabbling. One thing is
clear, the situation we presently find ourselves in where
reliability rules are voluntary and there is no oversight or
regulation of the grid is a prescription for disaster.
Michigan's transmission companies are presently members of
the Midwest Independent System Operator, or MISO. Unlike some
other RTOs, MISO does not enjoy security coordination control
over its 23 utility members. At most, as I understand its
operation, MISO can make only suggestions to its members. This
arrangement lacks the teeth necessary to reliably run a
transmission system. Moreover, at present MISO is not the sole
RTO in the upper Midwest. If power is to move reliably across
this area of the country, there can be but one RTO and FERC
must have the authority to order membership in that RTO.
Anything less invites gamesmanship on the system.
In conclusion, it is my view that Congress must pass
legislation that does three things: First, that directs the
development of a set of reliability rules applicable to all who
use the grid; second, that gives oversight authority on the
rules to the FERC; and, third, that requires the creation of
RTOs where necessary that are geographically correct, that have
security coordination control and have the authority to
sanction scofflaws. If Congress gives FERC the authority to
ensure a reliable transmission system, we can say with
confidence, ``the buck stops here.''
I appreciate the chance to share my thoughts with you, Mr.
Chairman, and members of the committee. Thank you.
[The prepared statement of J. Peter Lark follows:]
Prepared Statement of Hon. J. Peter Lark, Chair, Michigan Public
Service Commission
Mr. Chairman and Members of the Committee: My name is J. Peter Lark
and I serve as Chairman of the Michigan Public Service Commission. I am
very pleased to have this opportunity to address this Committee today,
although I wish it were under different circumstances.
The topic of today's hearing, ``Blackout 2003: How Did It Happen
and Why?'' allows exploration of some of the complex issues involved
with keeping the nation's lights on. But it's much more than that. A
safe, reliable electric utility industry is the heart that pumps
America's blood. It was recently stated that the electricity business
accounts for only two percent of the Nation's economy. But the other
ninety-eight percent relies one hundred percent on the reliable and
economic operation of that two percent. We are occasionally reminded,
as we were on August 14th, just how significant the loss of electricity
can be to our economy and to our daily lives.
As you well know, Michigan was one of the State's that was hit hard
by the blackout on August 14th. More than 2 million utility customers
lost electricity on that day, the majority of them on the Detroit
Edison utility system, which lost power to all of its customers for the
first time in the company's long history. Detroit Edison estimates that
about 6.1 million people lost power. The City of Detroit, and much of
the southeast region of Michigan, was without electricity and other
essential services such as water and sewer. The effect of the blackout
on Michigan's residential, business, and major industrial electric
users was devastating. For small and medium-sized business operations,
the loss of revenue for even a single day can have dire implications.
And the effect on the general citizenry cannot be downplayed. Although
we are still in the process of assessing the damage, we have an initial
estimate of the direct cost of the emergency to state and local
government of approximately $20 million. In addition, we know that
Detroit Edison claims $35 to $40 million in losses. Over 70
manufacturing companies in Michigan were forced to shut down.
Facilities such as hospitals and nursing homes were left scrambling to
provide care to those in need. In short, we cannot afford to have this
kind of failure on our electric system happen again. For every story we
heard of how some people found creative ways to make the best of a bad
situation, there were countless others for whom the loss of electricity
meant the loss of essential services.
It is incumbent that we take the steps necessary to ensure that
future blackouts do not occur.
what were the specific factors and events leading up and contributing
to the blackouts of august 14?
The Michigan PSC has initiated an investigation into this matter
(Case No. U-13859), as has the U.S. Department of Energy in conjunction
with our Canadian counterparts, so I would like to reserve a final
determination on the cause of the blackout pending the outcome of the
investigations. While we believe we know the sequence of events that
resulted in the power outage--power plants and transmission lines
tripping off--we do not know why those events occurred, and I believe
we need to await the outcome of the pending investigations before
jumping to conclusions.
What we do know is that, based on information provided by our
utilities, our transmission companies, and through other accounts,
there is a strong likelihood that the outage can be traced to at least
a couple of factors. None of these probable causes necessarily
represents the smoking gun; but rather, one needs to look at the entire
set of events, and the existing systems that allowed them to get to a
point of criticality, before reaching a conclusion on the causes of the
blackout.
One apparent contributing factor appears to be a communication
failure. Michigan's utilities and owners of the state's transmission
system have stated that they had no warnings that there were problems
on the system. To the extent other utilities were experiencing
difficulties, those utilities failed to offer even a ``heads up'' to
their neighboring utility systems. With even a little warning,
safeguards could have been put in place that may have minimized, or
even prevented, the outage.
The International Transmission Company has traced the timeline on
actions that contributed to the blackout back to 1 hour and 5 minutes
before it occurred. While ITC was able to develop and provide this
information to us after the outage, it is important to understand that
ITC was unaware of what was happening during that period. Both ITC and
Detroit Edison tell us they had no idea there were problems on the grid
until 2 minutes before power went out in Michigan when power flowing
from Michigan to Ohio jumped by 2,000 MW in 10 seconds. ITC describes
this as the point of no return. One-and-one-half minute later, power
flowing into Michigan from Ontario jumped by 2,600 MW. Thirty-seconds
later, Detroit Edison's system was dead.
Also cited in various accounts is power line failure, which may be
attributed to, among other things, inadequate maintenance. Certain
power line failures on August 14th, however, appear to have been due to
overloading. How and why line maintenance was allowed to lapse to a
breaking point, or why power was redirected to lines incapable of
handling the added capacity are questions that I cannot answer at this
moment, although I suspect the extensive investigations currently
underway will give us a precise set of factors and events that caused
the blackout.
Last week Michehl Gent, who serves as the President of the North
American Electric Reliability Council, was quoted in an article that
ran in an August 26, 2003 issue of the Toronto Sun, that he believes
rules ``were willfully broken'' on August 14th and that ``happens more
or less routinely.'' That rules are broken routinely with no ability of
any agency to enforce the rules on the transmission grid is a recipe
for disaster. Plainly, a lack of enforceable standards for the reliable
operation of the transmission system was a significant contributor to
the blackout.
Moreover, Michigan's transmission utilities chose to join a FERC-
approved Regional Transmission Organization known as the Midwest
Independent System Operator. MISO's obligation is to help control
movement of power across the grid, and ensure that the situation that
occurred on August 14 does not happen. However, the federal government
does not mandate participation in an RTO, and MISO possesses no command
and control requirements to ensure reliability. Even more important,
because membership in an RTO is not mandated, some of Michigan's most
critical partners--utilities in Ohio and Illinois--are missing from the
MISO's membership.
which systems operated as designed and which systems failed?
It is my expectation that the answer to this question will be
clearly explained in the reports that will come out of the
investigations presently underway. While I am reluctant to speculate as
to those systems that worked and those that did not, it is clear that
the cascading outage stopped its westward travel after coursing through
Michigan. Thankfully, millions of Michigan's utility customers were
protected from the blackout, as well as those customers in states to
the west of us.
what lessons were learned as a result of the blackouts?
While I believe there are a number of valuable lessons that will
become apparent the further we get into our investigation, a couple of
thoughts clearly stand out. First, an electric utility industry where
reliability rules are voluntary with no enforceable oversight is not
acceptable. The necessity of maintaining a safe, reliable and efficient
electric transmission system should be critically apparent to all as a
result of this blackout. Second, a balkanized regional wholesale market
for electricity, where some utilities are in and some are out; where
more than one RTO is operating in a single discrete area; and where
rules are unclear and unenforceable, does not work. There must be
certainty in the operation of the transmission grid, and that cannot be
achieved where reliability rules are optional, and RTO membership is
voluntary. Far too much is at stake to have a transmission system that
allows a single utility to jeopardize the safe, reliable and economic
electric utility operations of entire regions of the country.
how can similar incidents in the future be prevented?
First, Congress must pass legislation that will create a system of
mandatory and enforceable reliability rules applicable to all users,
owners and operators of the transmission network.
Reliability rules should be mandatory throughout the industry
within the footprint of the North American Electric Reliability
Council, which includes Canada. Reliability rules must be enforceable
and must include the ability to impose sanctions on market participants
that violate the rules.
The security and reliability of the interstate electric
transmission system is unmistakably under the purview of the federal
government. Yet, the Chairman of the FERC has stated that ``right now,
there is no federal regulatory authority over reliability.'' This
deficiency must be eradicated by passing legislation that requires
enforceable standards for the safe and reliable operation of the
nation's power grid.
The NERC is the best candidate for developing reliability rules.
The NERC currently has such responsibility and is best positioned to do
the job effectively. However, oversight of the development of the
reliability rules should be given to the FERC.
Reliability coordination and enforcement functions should be
outside of the NERC, due to the potential conflicts between the
financial interests of the utilities who constitute NERC's membership
and reliability decisions. Coordination of the grid should be
administered through an independent and strong RTO, while enforcement
authority and the ability to impose sanctions should be vested in the
FERC.
Second, Congress must support the FERCs initiative to require
transmission owners to join RTOs, at least in those regions where RTOs
are recognized and either fully operational, or moving toward full
operation.
While I recognize that some parts of the country are opposed to
mandating RTOs, in the Midwest and throughout the Northeast, strong
RTOs are necessary. The transmission grid in these regions is highly
interconnected and regionally responsive. Coordination of the grid is
at the heart of preventing problems and RTOs must have this reliability
coordination function. In these regions RTOs are well along in the
developmental process. Backing off now would be a major setback to both
economic efficiency gains and regional reliability improvements.
In conclusion, whether we learn that the causes were systemic or
human error, mechanical or electronic, an obvious starting point to
address the problem is the passage of legislation that requires
enactment of mandatory and enforceable standards and rules for the safe
and reliable operation of the Nation's transmission grid. I urge
Congress to act quickly to address these problems and meet the need
that was so clearly demonstrated on August 14, 2003.
Thank you for the opportunity to share these comments with you.
Chairman Tauzin. The Chair thanks you, Mr. Chairman.
We are now pleased to welcome the chairman of the New York
State Public Service Commission, the Honorable William Flynn.
Mr. Chairman.
STATEMENT OF WILLIAM M. FLYNN
Mr. Flynn. Good afternoon, Chairman Tauzin, Ranking Member
Dingell and other distinguished members of the committee. I
would like to thank you for the opportunity to testify before
this committee on the matter of the August 14 blackout.
What we know for certain is that on 4 p.m. on August 14,
immediately preceding the outage, New York State generation
facilities and transmission and distribution systems operated
normally to serve customers with reserves well in excess of
minimum requirements. The State was serving a load of about
28,000 megawatts, with available generating capacity of as much
as 33,000 megawatts, more than enough to ensure reliable
electric service in the State. There is no information of any
unusual transmission system occurrences or events in New York
preceding the outage. It appears that more than adequate
generation capacity was available to serve the State's needs
and that no difficulties on the in-State transmission
distribution system impeded its delivery.
There are a total of approximately 7.5 million customers in
the State, representing the State's population of 19.2 million
residents as well as thousands of commercial, industrial, and
municipal facilities. About 6.7 million of those customers, or
nearly 90 percent, were without power for some period of time,
including virtually all of the customers in New York City who,
unfortunately, went without power for the longest period of
time.
While we are concerned about outages in any part of the
State, you can imagine how that concern is heightened when
outages strike New York City. New York City not only serves as
the financial capital of the world but is heavily reliant on
electricity to power a subway system that carries more than 7
million passengers each day, as well as for air-conditioning
and lighting to the high-rise commercial and residential
buildings that characterize the cityscape. For these reasons
and others, New York State strives to maintain the highest
reliability standards in the Nation.
In terms of responding to the blackout, the State commenced
emergency public communications programs by contacting radio
stations to urge customers to curtail usage if they still had
power or turn off electrical equipment and appliances while
their electric service was being restored. In addition,
Governor Pataki declared a State of emergency within an hour of
the event and called for emergency demand reduction measures to
be implemented across the State to conserve power and aid
restoration efforts. In the end, the call for emergency demand
reduction played a critical role in restoring power throughout
the State in a timely and effective manner.
The electric utilities and generators responded to the
event by stabilizing the energized portions of the transmission
systems, ascertaining any damage and following plans for
service restoration. By necessity, system restoration was a
deliberate and carefully measured process. Customer service
could not be restored until generation was available and,
because of the extent and nature of the outage, careful
balancing of the loads and supply was required.
Under the circumstances, the quick response of the
utilities and generators and the restoration of electric
service in New York State represent a significant
accomplishment. Power was restored to about 95 percent of the
upstate area by 4 a.m. on Friday. Con Edison, the utility
responsible for delivering power to customers in New York City
and Westchester County, managed to restore service to its
essentially entire service area by 9 p.m. on Friday. Most
noteably from a national perspective, Con Edison restored power
to Wall Street roughly 3 hours before trading opened on Friday
morning. In less than 30 hours, service was effectively
restored to the entire State. This achievement is a testimony
to the commitment and hard work of the men and women engaged in
the power restoration, given the virtually unprecedented nature
of this event, the complexity of the systems involved, and the
magnitude of the effort required.
In addition to the international effort, at the request of
Governor Pataki I have directed my staff to lead a formal
inquiry into the effects of this outage on New York State,
including the circumstances of the outage, the effect of the
events occurring outside of New York on electric service
operations within the State, recommendations for actions or
procedures to prevent, to the maximum extent possible, a
similar outage from reoccurring, and any other relevant issues
that arise during this formal inquiry. I hope to have
information pertaining to New York State's inquiry available
before the end of the year, but suffice it to say this is the
agency's top priority.
Yet, while New York reliability criteria are mandatory for
New York electric corporations and the New York system operator
is authorized to control the system pursuant to all rules
established by the North America Reliability Council, the New
York State Reliability Council and the Northeast Power
Coordinating Council, this is not necessarily true for other
parts of the country. While, based on what we know, the outage
does not appear to have been caused by any flaw in New York
State's transmission or generation system, the independence of
regional power grids does leave us susceptible to disruptions
and problems emanating from events outside of our jurisdiction.
To minimize this susceptibility, the public service commission
has supported mandatory national reliability standards,
provided that New York State can retain the right to implement
higher standards than might be required by the Federal
Government. These national standards should serve as a floor
and not a ceiling.
To that end, I am aware of language Congressman Fossella
has included in a bill before Congress concerning national
electric reliability standards, H.R. 6, that suggests New York
should retain the right to set higher standards than might be
imposed at the national level, provided that such standards do
not have any negative consequences for reliability outside of
New York State. I would urge the conferees to support that
language.
As I mentioned earlier, New York's response to this crisis
was exemplary, but we must seek ways to minimize the risk of
repeated occurrences. The economic and social costs are simply
too high. We would certainly support broader language to extend
the ability to implement higher reliability standards to other
States as well.
Much has been written since the outage about the lack of
appropriate regulatory financial incentives for upgrading the
transmission infrastructure. It is FERC that creates these
incentives for transmission investments by establishing
appropriate rate recovery levels for utilities. The Federal
regulatory framework for transservice must allow for cost
recovery certainty and fully recognize and capture the multiple
benefits to the market and reliability that are created by
transmission system improvements. We look forward to continuing
an open dialog with FERC and other stakeholders on the issues
surrounding transmission infrastructure.
In summary, the outage is of immense importance to all New
Yorkers and the public service commission has taken the lead to
inquire into the effects of the outage in New York. Right now
we have many more questions than answers. Please be assured
that we will commit every effort and resource necessary to
conduct an exhaustive and comprehensive inquiry and to provide
recommendations that hopefully avoid any repeat of the blackout
and its effect on New York State. Once the report is complete,
we would welcome the opportunity to come back in front of this
committee and report its findings.
Thank you, Mr. Chairman, for this opportunity; and I, like
others, would be more than happy to answer any questions.
[The prepared statement of William M. Flynn follows:]
Prepared Statement of William M. Flynn, Chairman, New York State Public
Service Commission
Good afternoon Chairman Tauzin and distinguished members of the
Committee on Energy and Commerce. I would like to thank you for the
opportunity to testify before this Committee on the matter of the
August 14th blackout, which appears to have affected more than 50
million people in the United States and Canada, including nearly 90
percent of New York State's customers. I commend this Committee's
efforts to better understand the causes behind the blackout and
possible solutions to prevent an event like this from happening again.
What we know for certain is that as of 4:00 p.m. on August 14,
immediately preceding the outage, New York State generation facilities
and transmission and distribution systems operated normally to serve
customers, with reserves well in excess of minimum requirements. The
State was serving a load of about 28,000 megawatts, with available
generating capacity of as much as 33,000 megawatts, more than enough to
ensure reliable electric service in the state. There is no information
of any unusual transmission system occurrences or events in New York
preceding the outage. It appears that more than adequate generation
capacity was available to serve the State's needs and that no
difficulties on the in-state transmission and distribution systems
impeded its delivery.
The early reports we have received indicate that a rapid series of
events occurring outside of New York State in the period before the
outage likely set the stage for occurrences resulting in power losses
within New York State and elsewhere. The outage appears to have started
on a transmission system outside of New York State and spread across
the affected states in a matter of minutes. The reasons for the
failures on these systems have not been identified with any certainty
at this time, but according to preliminary New York Independent System
Operator (NYISO) reports, approximately 3,000 megawatts of power surged
into New York State over lines that connect us to the interstate grid,
causing transmission lines and generators to trip and resulting in
power outages. Significant power surges and frequency fluctuations
occurred in New York State during 30 critical seconds, culminating in
the blackout. To put this power surge into perspective, it is estimated
that 3,000 megawatts is roughly enough power to supply 3 million
typical households in New York State. I am not aware of any
transmission system in the world that is designed to handle a surge of
that magnitude.
There are a total of approximately 7.5 million customers in the
state, representing the state's population of 19.2 million residents as
well as thousands of commercial, industrial, and municipal facilities.
About 6.7 million of those customers, or nearly 90 percent, were
without power for some period of time, including virtually all of the
customers in New York City who unfortunately went without power for the
longest period of time. While we are concerned about outages in any
part of our state, you can imagine how that concern is heightened when
outages strike New York City. New York City not only serves as the
financial capital of the world, but it is heavily reliant on
electricity to power a subway system that carries more than 7 million
passengers each day, as well as for air conditioning and lighting to
the high-rise commercial and residential buildings that characterize
the cityscape. For these reasons and others, New York State strives to
maintain the highest reliability standards in the nation.
In terms of responding to the blackout, the state commenced
emergency public communications programs by contacting radio stations
to urge customers to curtail usage if they still had power, or turn off
electrical equipment and appliances while their electric service was
being restored. In addition, Governor Pataki declared a state of
emergency within an hour of the event and called for emergency demand
reduction measures to be implemented across the state to conserve power
and aid restoration efforts. In the end, the call for emergency demand
reduction played a critical role in restoring power throughout the
state in a timely and effective manner.
The electric utilities and generators responded to the event by
stabilizing the energized portions of the transmission systems,
ascertaining any damage, and following plans for service restoration.
By necessity, system restoration was a deliberate and carefully
measured process. Customer service could not be restored until
generation was available; and, because of the extensive nature of the
outage, careful balancing of the loads and supply was required.
Under the circumstances, the quick response of the utilities and
generators, and the restoration of electric service in New York State
represent a significant accomplishment. Power was restored to about 95
percent of the upstate area by 4:00 a.m. on Friday. Con Edison, the
utility responsible for delivering power to customers in New York City
and Westchester County, managed to restore service to essentially its
entire service area by 9:00 p.m. on Friday. Most notably from a
national perspective, Con Edison restored power to Wall Street roughly
three hours before trading opened on Friday morning. In less than 30
hours, service was effectively restored to the entire state. This
achievement is a testimony to the commitment and hard work of the men
and women engaged in the power restoration given the virtually
unprecedented nature of this event, the complexity of the systems
involved, and the magnitude of the effort required.
Given the impact that this outage had on the lives of all New
Yorkers, particularly the residents and commuters in New York City, I
would like to take this opportunity to commend New Yorkers for their
response to this crisis. Once again, crisis has brought out the best in
New Yorkers and I am proud of the way in which we responded, as well as
the public's cooperation in helping to restore service. Our focus now,
however, must be on understanding the events that took place on August
14th as well as on how to avoid a reoccurrence of this type of event in
the future.
I have every confidence that the U.S./Canadian Task Force led by
U.S. Energy Secretary Abraham and Canadian Minister of Natural
Resources Dhaliwal will identify the events occurring outside of New
York State that led to the outage. I pledge the full cooperation of my
staff to support that effort in any way possible and am pleased to see
that my staff will be represented on the task force. In addition to
this international effort, at the request of Governor Pataki I have
directed my staff to lead a formal inquiry into the effects of this
outage on New York State, including the circumstances of the outage;
the effect of the events occurring outside of New York State on
electric service operations within the State; recommendations for
actions or procedures to prevent, to the maximum extent possible, a
similar outage from reoccurring; and any other relevant issues that
arise during this formal inquiry. I hope to have information pertaining
to New York State's inquiry available before the end of the year.
Suffice it to say, this inquiry is the agency's top priority.
While I have attempted to lay out the facts leading up to the
outage as we know them today, I must make it clear that we do not fully
know the exact sequence of all the critical events, and their cause and
effect relationships at this time. I cannot emphasize enough that it is
very important for the success of our inquiry on the New York State
system, the federal and international inquiries on the outage, and for
development of any recommendations for changes, that speculation and
conjecture is avoided. There have been countless reports in the media
drawing conclusions as to the reasons behind the blackout based on
limited, and at times erroneous, information. This speculation has
placed blame for the blackout on factors ranging from lightening
strikes to deregulation of the electric industry. Only after a
complete, rigorous, and professional study and analysis is performed,
will we be able to provide specific answers to the many questions about
the outage and recommendations for future action.
Based on historical precedence, it is very likely that this
blackout will lead to regulatory, legislative, or policy changes, at
either the federal or state level, in an effort to try to prevent an
event of this magnitude from happening again. The blackouts of 1965 and
1977 both resulted in significant changes at the national level as well
as within New York State. The 1965 blackout provided the impetus for
interconnecting individual state systems into more of a national grid
structure, as well as the formation of the North American Electric
Reliability Council (NERC) to establish reliability standards, albeit
voluntary standards. The 1977 blackout provided the impetus for
increased reliability standards in New York State that are now the most
stringent in the country, and in fact are mandatory. As a result, we
have since maintained what I believe is the most reliable system in the
country. Yet, while New York reliability criteria are mandatory for New
York electric corporations, and the New York Independent System
Operator is authorized to control the system pursuant to all applicable
rules established by the North American Electric Reliability Council,
the New York State Reliability Council, and the Northeast Power
Coordinating Council, this is not necessarily true for other parts of
the country.
While, based on what we know, the outage does not appear to have
been caused by any flaw in New York State's transmission or generation
system, the interdependence of regional power grids does leave us
susceptible to disruptions and problems emanating from events outside
of our jurisdiction. To minimize this susceptibility, the Public
Service Commission has supported mandatory national reliability
standards, provided that New York State can retain the right to
implement higher standards than might be required by the federal
government. These national standards should serve as a floor, and not a
ceiling.
To that end, I am aware of language Congressman Fosella has
included in a bill before Congress concerning national electric
reliability standards, HR 6, that suggests New York should retain the
right to set higher standards than might be imposed at the national
level, provided that such standards do not have any negative
consequences for reliability outside of New York State. I would urge
this Committee and Congress to support that language. As I mentioned
earlier, New Yorkers' response to this crisis was exemplary, but we
must seek ways to minimize the risk of repeated occurrences. The
economic and social costs are simply too high. We would certainly
support broader language to extend the ability to implement higher
reliability standards to other states as well.
The systems on the interconnected grid support and supplement each
other through periods of stress. In some instances this interconnection
has allowed New York State to support other states' systems in
difficult times, while other states' systems have likewise provided
assistance to New York State. On August 14th however, it appears that
the regional interconnection may have enabled a problem in one state to
cascade across borders into neighboring states as well as Canada. While
I remain convinced that interconnections among states and regions
represent a strength of the system rather than a weakness, mandatory
reliability standards at the national level should help to reduce the
likelihood of regional blackouts by requiring the bulk power systems to
meet a minimum threshold for reliability. Admittedly, I cannot say with
certainty that such mandatory standards would have prevented the
blackout of August 14th, but with our economy more dependent than ever
on reliable, uninterrupted access to electric power, we can no longer
afford to simply leave consumers vulnerable to the voluntary compliance
of national standards. The current reliability environment may or may
not have contributed to the August 14th blackout, but given the
interconnectedness of the nation's power grids and a future of growing
demand for electricity, the current standards must be recognized as
mandatory and minimum to prevent, to the greatest extent possible,
systems in one region negatively affecting systems in other regions.
Much has been written, since the outage, about a lack of
appropriate regulatory financial incentives for upgrading the
transmission infrastructure. It is FERC that creates those incentives
for transmission investments by establishing appropriate rate recovery
levels for utilities. The federal regulatory framework for transmission
service must allow for cost-recovery certainty, and fully recognize and
capture the multiple benefits to the market and reliability that are
created by transmission system improvements. We look forward to
continuing an open dialogue with FERC and other stakeholders on the
issues surrounding transmission infrastructure.
In summary, the outage is of immense importance to all New Yorkers,
and the Public Service Commission is taking the lead to inquire into
the effects of the outage in New York. Our formal inquiry will include
a report on the circumstances of the outage; effects that occurred
outside the State on electric service operations in the State;
recommendations for actions or procedures to prevent, to the maximum
extent possible, a similar outage; and other relevant issues. Right
now, we have many more questions than answers. Please be assured that
we will commit every effort and resource necessary to conduct an
exhaustive and comprehensive inquiry, and to provide recommendations
that hopefully avoid any repeat of the blackout and its effects on New
York State. Once the report is complete, we would welcome the
opportunity to come back in front of this committee and report its
findings.
Thank you again Chairman Tauzin for this opportunity to discuss the
circumstances surrounding the August 14th blackout. I would be happy to
answer any questions you may have regarding this event.
Chairman Tauzin. Thank you, Mr. Chairman.
We are now pleased to welcome the President of the North
American Electric Reliability Council from Princeton, New
Jersey, President Michehl Gent. Michehl, we have seen you on
television discussing this a lot, and you can maybe give us the
latest news.
STATEMENT OF MICHEHL R. GENT
Mr. Gent. Mr. Chairman, I am retiring my celebrity status
and I hope not to appear again on TV, but I thank you and Mr.
Dingell and other members of the committee for having me here
today.
Let me start with the obvious. This outage simply should
not have happened. NERC's standards for reliable operation and
planning of electric systems have at their core prevention of
widespread, uncontrolled, cascading outages such as the one
that occurred on August 14. NERC is working with the United
States Department of Energy in support of a joint U.S.-Canada
task force to determine precisely the sequence of events during
the blackout, the causes of the outage, why it spread as far as
it did, and what needs to be done to prevent any reoccurrence.
In the end, we will know if our NERC reliability standards were
not adequate to prevent the cascading outages or if the
responsible parties did not comply with our standards or
possibly some combination of the two.
Regarding our ongoing investigation, the industry answered
our call for experts to help us very quickly. We had between 15
and 30 people in our Princeton offices examining the data. We
have had them there every day since the blackout, all working
to determine what happened.
In addition to our staff, we have systems operations people
from each of the affected regional councils, the ISOs and RTOs
and most of the affected companies. We also have dedicated help
from several utilities that were not even in the affected area.
The Department of Energy has up to five people onsite at all
times. The FERC has a dedicated person and occasionally more
than that, and we expect to have somebody from Canada onsite
very soon. We must keep in mind that Canadian utilities and
customers are also part of the blackout. We also have a
steering group for the investigation that is comprised of the
best experts the industry has to offer, and I have some of
their bios in my prepared testimony.
Every party that has been asked for data has responded
quickly and thoroughly. Our initial call for data brought us
tens of thousands of records. Fortunately, most of this was
electronic, but not all of it. The handwritten logs are now
beginning to arrive. We have built huge electronic data bases
to house much of this data to go along with dozens of maps and
diagrams that are plastered all over our walls. We will need to
be able to use all of these to be able to understand the
sequence of events.
National security is a concern that I did not address in my
written testimony. Even though we are certain this was not an
act of terrorism, we do not want to be creating a blueprint for
would-be terrorists and have therefore implemented standards
for security processes and procedures in our offices and
elsewhere.
Our partnership with the Department of Energy has been
outstanding. We jointly hosted a meeting in Newark on August 22
to get the views of the affected parties, and we have continued
to use that channel to develop a time line of events. The
Department has the hammer and we have the expertise.
We intend on holding other meetings as we proceed to the
``why'' phase of the investigation. Obviously, we are too early
in the investigation to draw any conclusions. To that end, we
have agreed with the Department that all public information
regarding the investigation will be released through the
Department of Energy, thus freeing NERC to concentrate on the
investigation. NERC's efforts will be a key component of the
work of the joint U.S.-Canada task force that has been
mentioned so many times here today.
One important step Congress can take now is to enact the
reliability legislation that has been proposed one way or
another for the last 5 years by me and others and to make those
reliability rules mandatory and enforceable. The comprehensive
energy bills that have passed both the House and Senate have
versions of that reliability language.
I will close by repeating, NERC is fully committed to
finding out what happened and to see that steps are taken to
prevent a reoccurrence. I thank you again for this opportunity,
and I look forward to your questions.
[The prepared statement of Michehl R. Gent follows:]
Prepared Statement of Michehl R. Gent, President and Chief Executive
Officer, North American Electric Reliability Council
Good afternoon Mr. Chairman and members of the Committee. My name
is Michehl Gent and I am President and Chief Executive Officer of the
North American Electric Reliability Council (NERC).
NERC is a not-for-profit organization formed after the Northeast
blackout in 1965 to promote the reliability of the bulk electric
systems that serve North America. NERC works with all segments of the
electric industry as well as electricity consumers and regulators to
set and encourage compliance with rules for the planning and operation
of reliable electric systems. NERC comprises ten Regional Reliability
Councils that account for virtually all the electricity supplied in the
United States, Canada, and a portion of Baja California Norte, Mexico.
NERC is uniquely qualified to set standards for the reliable
operation of North America's high voltage, interconnected grid system,
and we hope soon to be able to enforce those standards. We are also
uniquely qualified to assist the U.S. Department of Energy (``DOE'')
and the U.S.-Canada Joint Task Force on the Power Outage in
investigating the August 14, 2003 blackout that encompassed parts of
the upper Midwest and Northeast United States and eastern Canada.
NERC is governed by a board of ten independent trustees and brings
together the best electrical system technical expertise available in
the world. We are an international organization, integrating
reliability across North America's electricity grids. In short, our
mission is bulk power system reliability--it's what we do.
As a standing procedure, NERC reviews and reports on disturbances
that occur on the bulk electric systems in North America. As the entity
responsible for reliability standards for the bulk electric system,
NERC must understand and communicate to its members what happened on
August 14 and why it happened. NERC must also determine whether any of
its standards were violated and whether its standards and procedures
require modifications to take into account the ways in which the bulk
electric system is being used. Finally, NERC must assure that measures
necessary to avoid a recurrence of the August 14 outage are taken.
Immediately after the onset of the blackout on August 14, 2003,
NERC began assembling a team of the best technical experts in North
America to investigate exactly what happened and why. Every human and
data resource we have requested of the industry has been provided, and
experts covering every aspect of the problem have been volunteered from
across the United States and Canada. Shortly after the investigation
began, representatives of DOE and the Federal Energy Regulatory
Commission (``FERC'') joined the investigative effort. The
investigative team has numbered between 15 and 30 individuals from day
to day, and all members of the team, regardless of their affiliation,
have worked side by side to help correlate and understand the massive
amounts of data that are being received.
To lead the NERC effort, we established a strong steering group of
the industry's best, executive-level experts from systems not directly
involved in the cascading grid failure. The steering group scope and
members are described in Attachment A.
NERC and DOE representatives, including people from the Consortium
for Electric Reliability Technology Solutions (``CERTS''), have been
jointly conducting the fact-finding investigation of the events leading
up to the August 14th blackout. We expect to have representatives of
provincial and federal agencies from Canada join the investigative team
shortly. The investigation is ongoing, and no causal conclusions can
yet be drawn. DOE is a part of the United States-Canada Joint Task
Force on the Power Outage. NERC has provided its information to DOE in
support of the Joint Task Force effort. DOE has requested, and NERC has
agreed, that DOE, as a member of that Joint Task Force, coordinate
release of that information.
NERC and DOE collaborated on the data request that NERC issued on
August 22, 2003, to those organizations who were directly involved in
the August 14 outage, as well as surrounding systems. DOE and NERC are
jointly developing a data warehouse to manage the thousands of data
records being submitted in response to that request and all subsequent
data requests. DOE and NERC also co-hosted a meeting of the major
entities involved in the outage to help focus the investigation and
begin to develop an understanding of the events that led to the outage;
we expect to co-host additional fact-finding meetings in the future.
Understanding exactly what happened and why is an enormously
complex task requiring a methodical investigation by experts from many
disciplines. Analyzing what happened and why it happened has both a
technical side and a people side.
The technical side begins with a reconstruction of what happened on
the electrical system, within fractions of a second. The investigative
team has already received many thousands of data records from control
center event logs, disturbance recorders, and other system data that
must be pieced together one at a time to understand how the power
system broke apart and cascaded into a blackout. Unlike an airplane
that has a single ``black box,'' the power grid has thousands of event
and disturbance recorders that measure events at critical points on the
system. Each event, which might be a relay or circuit breaker
operation, or an electrical fault, is ``time stamped'' as it occurs.
However, we discovered that many of these time stamps were not accurate
because the computers that recorded the information became backlogged,
or the clocks from which the time stamps were derived had not been
calibrated to the national time standard. As our data analysis
progressed, we have been able to confirm those events that were
accurately time-stamped, and from those events, we are in the process
of aligning the event data for each system event from multiple sources
until we are confident we have the precise time for each event.
I assure you this painstaking effort to synchronize event data down
to fractions of a second is not an academic exercise. Most of the
electrical operations in the system failure on August 14 occurred
automatically over a very short period of minutes and seconds. Without
such a deliberate, methodical reconstruction of events, it would be
impossible to determine the exact sequence, and therefore the cause of
the cascading failure and how it propagated to result in the ultimate
blackout condition.
To ensure that the investigation is complete, NERC and DOE have
requested data from the affected organizations starting at 8:00 AM EDT
on August 14. This data will enable the investigators to form a clear
picture of how that day started and what events through the course of
the day may have contributed to or set the stage for events later in
the day. Because that data is still being accumulated and has not been
evaluated, it is too soon to determine whether events earlier in the
day may have contributed to the outage.
To complete the technical investigation of ``what'' happened, we
must also construct electrical models to simulate the exact conditions
of August 14 and then subject those models to the events that occurred
during the time preceding the outage to understand better its causes.
These simulations will examine the electrical stability of the grid--
that is, how strongly the generators were synchronized to one another--
and whether there was a voltage collapse of the transmission system. We
will also focus on why operating procedures that should have detected
problems that developed on the grid and kept them from spreading did
not prevent the cascading outage across such a wide area.
Preparing these simulations is a complex task requiring the
reconciliation of power system data snapshots from multiple data
recorders on August 14. I am confident that the investigation, when
completed, will allow us to describe exactly what happened to the power
system and why it failed.
The investigation also includes a ``people'' aspect. Working
jointly with DOE as part of the U.S.-Canada Joint Task Force, we will
be seeking to discover such things as: What were system operators and
reliability coordinators doing leading up to the blackout? What
indications of problems did they see or not see? What were their
qualifications and training to recognize and respond to system
emergencies? Did they follow established NERC and regional reliability
standards and procedures? Were those standards and procedures
effective? Were responsibilities clearly assigned and did operating
personnel have the necessary authority to act in a timely manner to
avoid the blackout? How effective were the control center computers and
displays in providing information to the operators? What communications
took place among system operators and reliability coordinators in
different parts of the grid prior to and during the outage?
After determining what happened on August 14th, the investigation
will analyze the root causes of the cascading failure--looking once
again at both technical and human factors. From the root cause
analysis, we expect to develop a clear set of recommendations to ensure
that our system operators, equipment, and reliability standards will
successfully handle the kinds of events that led to the blackout.
It is too soon to identify specific equipment, measures, and
procedures that worked as intended on August 14, but large parts of the
Eastern Interconnection did not suffer the blackout. (Attachment B to
my testimony is a map showing the Eastern, Western, and ERCOT
Interconnections.) Protective relays within the distressed area
operated to remove transmission lines, transformers, and generating
units from service before they suffered physical damage. The system is
designed to do that. It was the action of those individual relays,
operating to protect individual pieces of equipment, that eventually
isolated the portion of the grid that collapsed from the remainder of
the Eastern Interconnection. The fact that the transmission lines,
transformers, and generating units did not suffer physical damage is
what made it possible to restore the system and service to customers as
quickly as happened.
Another factor in the successful restoration was the restoration
plans themselves. Restoring a system from a blackout requires a very
careful choreography of re-energizing transmission lines from
generators that were still on line inside the blacked-out area as well
as from systems from outside the blacked-out area, restoring station
power to the off-line generating units so that they can be restarted,
synchronizing those generators to the Interconnection, and then
constantly balancing generation and demand as additional generating
units and additional customer demands are restored to service.
We will learn many additional lessons from this event that will
enable us to improve the overall reliability of the grid. We can also
build on some of the positives from this event, such as the
extraordinary efforts to quickly put the system back on line and
restore electric service to consumers.
I will close with one final point--the need to establish mandatory,
enforceable reliability standards. NERC has developed a world-class set
of planning and operating standards, and I expect we will find areas of
those standards that need improvement based on the events of August 14.
However, as long as compliance with these standards remains voluntary,
we will fall short of providing the greatest possible assurance of
reliability that could be achieved through mandatory verification of
compliance and the ability to impose penalties and sanctions for non-
compliance.
Apart from the particulars of the August 14th outage and without
knowing whether or not violations of our reliability standards
occurred, one important step Congress can and should take to strengthen
the reliability of the bulk power system in general would be to pass
legislation to make the reliability rules mandatory and enforceable.
NERC and a broad coalition of industry, government, and customer groups
have been supporting legislation that would authorize creation of an
industry-led self-regulatory organization, subject to oversight by FERC
within the United States, to set and enforce reliability rules for the
bulk power system. The comprehensive energy bills that have passed both
the House and the Senate have versions of that reliability legislation.
NERC looks forward to working with the conference committee to achieve
passage of that legislation this year.
NERC is fully committed to finding out what happened on August 14,
why it happened, and to see that steps are taken to prevent a
reoccurrence. We are committed to supporting the U.S.-Canada Task Force
in fully disclosing all the facts, the reasons for the cascading
failure, and recommendations that will make the electricity grids in
North America more reliable.
Thank you.
[Attachments are retained in subcommittee files.)
Chairman Tauzin. Thank you, Mr. Gent.
Now we hear from the two area councils. I understand they
operate under the umbrella of NERC. We will hear first from the
Executive Manager of the East Central Area Reliability Council,
Mr. Brant Eldridge.
STATEMENT OF BRANT H. ELDRIDGE
Mr. Eldridge. Thank you, Mr. Chairman and members of the
committee. We appreciate the opportunity to assist your review
here. For brevity, I will simply summarize my written
testimony.
ECAR is one of the 10 regional reliability councils of
NERC. We were formed in 1967, and our membership is voluntary
and open to any entity impacting the reliability of bulk power
systems in the ECAR region. Our membership includes entities
that own and operate electric systems in all or portions of the
States of Michigan, Ohio, Indiana, Kentucky, Virginia, West
Virginia, Pennsylvania, Maryland and Tennessee.
It is important to note that ECAR itself is not a system
planning or operating entity. Rather, ECAR is the forum through
which the regional entities that are responsible for real-time
assistance operations and planning coordinate reliability
matters. The responsibility for planning and operating the ECAR
region's bulk power systems rests with ECAR control area
members.
The August 14 blackout impacted electric systems in Ohio
and Michigan, among several other States and provinces. In the
ECAR region the most severely impacted systems were those of
First Energy, Detroit Edison, and International Transmission
Company. To a much lesser degree, Consumers Energy, Michigan
Electric Transmission Company, and American Electric Power were
also affected.
Every effort is being made to properly coordinate the
parallel investigations currently being conducted by the
affected regional reliability councils and NERC. ECAR has an
investigation under way, and ECAR members have provided
information and other assistance to NERC's inquiry. As others
have noted, the results of NERC's investigation, which we will
be inputting to, will be an important input to the U.S.-
Canadian effort.
As stated by others, the various investigations are not
complete and will certainly take several more weeks at a
minimum to finish. A massive amount of technical data is still
being accumulated, which will be analyzed and evaluated to
determine the cause or causes of the blackout.
Over the years, NERC and its regional councils, including
ECAR, have developed operating and planning standards and other
reliability criteria that are aimed at keeping the
interconnected bulk power systems reliable. A large, complex,
interconnected power system cannot be made 100 percent fail-
safe. The goal of NERC and its regional councils, including
ECAR, is to prevent the inevitable local problems from
cascading out of control to other areas. Adherence to both NERC
and ECAR reliability criteria is a fundamental obligation of
ECAR membership.
The August 14 blackout did not spread throughout the
eastern interconnection. A basic reason is that the automated
controls for systems that did not shut down detected abnormal
operating conditions and disconnected their lines from the
affected systems. Such automated system control operations
prevent possible damage to major equipment, limit the extent of
service disruption to customers, and enable the restoration
process to proceed much more quickly than would otherwise be
possible.
Apart from any specific actions the blackout investigations
may identify, there are several parallel issues that should be
addressed. There have been relatively few new transmission
lines built in the U.S. in the last 15 years, even as the
demand for electricity has continued to grow and new generation
has been installed to meet these demands. In addition, the
existing transmission infrastructure is now being used in ways
for which it was not designed. It was initially designed
primarily to enable neighboring utilities to exchange power in
the event of a loss of generation. But, today, many
transmission lines are often heavily loaded as large amounts of
power are transferred across multi-State regions. Therefore, a
significant priority is to move forward with necessary
modernization upgrades and expansion of the Nation's
interconnected high-voltage transmission systems. Appropriate
economic incentives are urgently needed.
Federal and State governmental agencies should also enable
utilities and merchant generators to site new generation
facilities in locations that would relieve constraints and thus
help reduce the need for major new transmission lines. However,
where new transmission is required, we must have the political
will to proceed.
Also, resolution is needed to the ongoing national debate
regarding FERC initiatives for the establishment of regional
transmission organizations and standard market design. Finally,
Congress is urged to adopt Federal reliability legislation that
would make compliance with bulk power system reliability
standards mandatory and enforceable.
Mr. Chairman, ECAR is committed to doing its part to
determine the cause or causes of the August 14 blackout and to
help ensure that the bulk power system reliability is
maintained in the future. I thank you for your leadership of
this effort and will be pleased to respond to the committee's
questions.
[The prepared statement of Brant H. Eldridge follows:]
Prepared Statement of Brant H. Eldridge, Executive Manager, East
Central Area Reliability Council
Chairman Tauzin, Ranking Member Dingell, and Members of the
Committee, thank you for the opportunity to assist the Committee's
review of the August 14 blackout events through participation in this
important hearing.
ECAR is one of the ten regional reliability councils of the North
American Electric Reliability Council (``NERC''). ECAR serves as the
forum for addressing matters related to the reliability of the bulk
power systems in the east central region of the U.S.
Parts of the ECAR Region were among the widespread areas affected
by the blackout events. Among the major questions to be answered are:
what caused the blackout and why did it spread so far?
ecar overview
Formed in 1967 in the aftermath of the 1965 Northeast Blackout,
ECAR is a non-profit, member funded, unincorporated association.
Membership in ECAR is voluntary and is open to any entity having an
effect on or interest in the reliability of the ECAR bulk power systems
(generation and high voltage transmission).
The membership of ECAR includes entities that own and operate
electric utility systems in a geographic area covering all or portions
of the states of Michigan, Ohio, Indiana, Kentucky, West Virginia,
Virginia, Pennsylvania, Maryland, and Tennessee. Since ECAR's
formation, all key entities in the ECAR Region that are involved in the
planning and operation of bulk power systems in ECAR have been and are
members.
ECAR Structure
The core ECAR governing document is the ``East Central Area
Reliability Coordination Agreement'' (``ECAR Agreement''). The stated
purpose of the ECAR Agreement is ``to augment reliability of the
parties' bulk power supply through coordination of the parties'
planning and operation of their generation and transmission
facilities.''
Under the ECAR Agreement, the governing body of ECAR is the
Executive Board. Each member of ECAR is represented on the Executive
Board. Reporting to the Executive Board is the Coordination Review
Committee (``CRC'') which, like the Executive Board, is composed of
representatives of ECAR members. The CRC directs and oversees all
technical activities of ECAR. To carry out its responsibilities, the
CRC is supported by nine member-populated technical panels.
ECAR also has a Market Interface Committee that serves as the ECAR
forum for addressing issues related to the interface between the NERC
and ECAR reliability criteria and the wholesale electric market. A
small full-time staff located in Canton, Ohio provides support
necessary to perform the ECAR's various functions.
Currently, there are twenty one (21) ECAR ``Members'' and seventeen
(17) ECAR ``Associate Members.'' Members have voting rights and provide
most of the technical and financial support for ECAR activities.
``Associate Members'' do not have voting rights and provide relatively
little of the technical and financial support of ECAR, but are
represented on the ECAR Executive Board and in other ECAR groups, and
participate in deliberations regarding the reliability of the ECAR bulk
power systems.
ECAR members commit to (i) adhere to the reliability policies,
principles, procedures, criteria, and practices adopted by the
Executive Board pursuant to the ECAR Agreement; (ii) furnish all system
data, studies, and other technical support necessary to coordinate
planning and operation of ECAR's bulk power supply; and (iii) provide
necessary financial support.
Reliability Criteria and ECAR Role
The ECAR Members have developed a set of reliability criteria
called the ``ECAR Documents.'' There are currently fifteen (15) ECAR
Documents that have been approved and adopted by the ECAR Executive
Board. The ECAR Documents are written to be in concert with the NERC
Operating Policies and Planning Standards (collectively, the
``reliability rules of the road''). The ECAR Documents also address
certain ECAR-specific reliability criteria. Compliance with the ECAR
Documents and the NERC Operating Policies and Planning Standards is
considered a fundamental obligation of all ECAR members.
It is important to note that ECAR is not a system planning or
operating entity. Rather, ECAR is the forum through which those
entities in the ECAR Region that are responsible for system planning
and real-time system operations address and coordinate matters related
to the reliability of the bulk power systems in ECAR. The
responsibility for the planning and operation of the ECAR bulk power
systems rests with ECAR Members. Each ECAR Member has the obligation to
plan and operate its generation and/or transmission system in
accordance with the NERC Operating Policies and Planning Standards and
the ECAR Documents.
blackout investigation
As the Committee is aware, the August 14th blackout impacted
electric systems in Ohio and Michigan, |