Security. And, lastly, and this is important particularly in light of the metcalf incident, that has been talked about here, and theyre in the early stages of this but the, they are working on working on a project to develop security, security protections, physical protections and others for substations. So thats going to be extremely critical also. Were very proud of the work that is done at the Idaho National laboratory. Like i said they are reknowned when it comes to Nuclear Energy but there are these new areas that they are developing and Grid Security is certainly one of the things that theyre going to be focusing on. The reason i wanted to say what ive said about this is i want to make sure that everyone in the industry, everyone in the government agencies, knows that these facilities are available because sometimes they have a tendency to fly under the radar. So i want to state that for the record and thank you for making the time available, madam chairman. Thank you, senator risch. Following up on that if i could, i definitely you were there. I definitely believe technology is one of our friend here in this solution. When you look at the spectrum of things weve tried to do, whether its encouraging cooperation on voluntary standard or requirements i think, obviously things like relay equipment, single phasers, Storage Capacity so you can move around problems, what do you, what do you think panelists, that we need to do to encourage more of the development of these smart grid technologies that give us the capacity to deal with these outages . So in the context of that framework, is it more tax incentives . Is it more regulation . Is it more cooperation . I would First Respond by echoing the comments of senator risch. I have actually been to the, both the Pacific Northwest lab and the Idaho National lab and they are very rich resources for the industry. Our industry, isac Information Center is plugged into them. We know of the scata testing and security capability. We use those resources for training purposes and behind the scenes analysis of threats. The grid is becoming more modernized, particularly in the west. There is the sincrophaseers have been deployed widely. I dont know there is any particular incentive that i would point out but were working to encourage industry to get better visualization, situational awareness, recovery tools, out of that increased capability and visibility into the grid through smart grid technologies and syncrophaseers. Anybody else . Miss kelly or miss lafleur. That technology is one of the main things fcc is working on partnership between industry and government to try to improve the tools we have to address these threats. I would note there is an emergency transformer program that the electric Power Institute is working with the department of Homeland Security and apb that con develop a more portable transformer that can be brought in quickly. We look for technological advances to assist us to deal with these issues and more r d money would always be he welcome. Miss la fluor lafleur. Most of regulation is care at and sticks. Phaser measurement unions and help people meet the standards because they make the grid more reliability. So the carriers rate regulation in 2005, Congress Gave us the section 219 of the federal power act that allows for incentives and we have rules allowing greater rate incentives for advance technologies to encourage people building transmission to put the latest technology because they can get a little higher return on equity if they put Better Technology on their line. We recently adopted a rule, for example, in pjm allowing them to require phaser measurement units for certain types of line so the rate regulation helps support those invests. Youre talking about new deployment and this is, if were talking about issue de jure and apparently we are because right now the 9 11 service in Washington State is down in part of our state. So it is the issue de jure. So if it is, why not look at ways to further incent, not just on new deployment but on the resiliency of the grid . To me the security measure is Smart Grid Technology and figuring out why we dont see a faster deployment . Yes, some of the technologies created in Washington State but then again, weve lived and breathed and benefited from an electricity grid with cheap hydropower for a long, long time. So it is more of an ethos for us. So my question is, isnt there a faster way . But unfortunately i have to go and vote. Thank you, madam chair. I would like to hear the answer to that so please continue. Thank you, senator cantwell. Who would like to answer the senators question . Well, im going to take that as a challenge to go back to look how we do our rate regulation for existing transmission but most of it is governed by formula rates. As people invest in those things they can recover if its a prudent investment on their line. The question is whether we need to do something to better insent those. Some of it is happening through market rules, through rules that encourage storage technologies. One of the things senator cantwell mentioned. But well look at some other rules and give a complete answer for the record. Thank you. Let me follow up on that question. I didnt catch all of it but im putting two and two together about what it might be about. It is an issue that has come up several times in conversations with the industry about federal and state requirements for distributive generation or distributive generation. And how that can both postively and sometimes negatively affect the price of electricity, for the ability and requirement for Utility Companies to buy back power at a certain price. Could some of you comment about the current status of some of that out west, particularly but also perhaps maybe, chairman honorable, you should start. I like you to comment. As members come back well finish line of questioning to this panel and start the next panel in about 10 minutes. Take that, if would. Madam chairman, thank you for that question. There is wide array of stakeholders in this issue of generation. Weariededucating ourselves he learning about the importance of being innovative and allowing Customer Choice but at the same time it is important, particularly from an economic regulator perspective balance the interests to avoid cost shifting. To insure that reliability is maintained in the first instance certainly distributed generation is an important innovation, quite frankly happening all across the world but from an economic regulator perspective it is something we continue to be challenged with, making sure that all interests are balanced, pardon me, the interests of the industry. That does have to be able to receive back this energy at anytime. The interests of consumers from all walks of life, from all ratepayer classes and insuring the inherent equities of permitting those who would like to put solar panels on their rooftops, while insuring that the least of these isnt carrying the cost of that. These are issues were exploring. Were educating our commission. Quite frankly our commissions are leading the way in being responsive. I will come back to that question. Now that senator portman and senator manchin, i think senator portman is next. Are there scheduling conflicts i should know about, senator manchin with you . Not now. Okay, senator portman. Thank you, madam chair. That u thank you for holding this hearing. I really appreciate it. This is focus of this panel on cybersecurity but we also talked about reliability real quick and i know the next panel will focus on that. I appreciate moving forward to this hearing so quickly after your taking the chairmanship. I like to ask reliability questions because we have great experts on this panel that will give us a preview what well hear next and compare and contrast what well hear from some. Industry folks. First i guess, chairman lafleur i would like to hear from you a little bit what you think we ought to be doing in terms of reliability and price spikes. At a ferc Technical Conference last week you were quoting having said, im also very concerned about the price. Both absolute magnitude of the price spikes an creases we saw this wouldnter and variability when. When you see the price spikes symptom protecting reliability is causing this issue. Can you elaborate a little on that . By the way is that an accurate quote . You never know. Yes. The quote was in the context we had, somebody said were here mainly to worry about reliability and not about price. I made the comment theyre closely related. When you see the extraordinary price spikes we saw in some regions of the country in january and february, that means the grid operator is doing very unusual things to keep the lights on. And that ultimately goes into customerrers pocketbooks. We need to say why is that happening and what can we learn from it . Were in the middle of one of the biggest power supply changes weve ever seen, particularly increased reliance on natural gas to generate electricity and what we looked at very much in the tech Conference Last Week was how we can get the rules right to make sure, number one, we have the Gas Infrastructure in place so the pipelines are there and constraints dont cause the gas prices to spike up. Secondly, market rules, sometimes geeky specific rules are written in a way to allow people to buy their gas at more economic time of the day to avoid some of the spikes we saw this winter. And ferc has a number, were trying to change the timing of the gas electric markets to make that happen. More fundamentally one of the things ive been leading is a look at the capacity markets. These are the forward markets. We look three years or five years out to say what capacity is needed on the system. And we have to make sure that the rules are written so were properly rewarding the base load facilities that are very stressed by the shortterm gas prices. Were seeing a lot of retirement of base load that could ultimately be detrimental to reliability. So were taking a very focused look at our base load and what it needs to survive at the market to make sure the market price is right for both new resources and old. A very geeky answer but that is very much what the tech conference was about. What can we learn and get the rules right next year. I dont think it is very geeky. I think it is an answer that goes to a lot of the important issues. Well discuss these further in the next panel but one thing you didnt discuss is the impact of federal regulations on the system and i think thats, thats also not geeky but its important. And in your testimony you said that ferc should help epa better understand some of the implications of individual regulations and, what their impact might be on electricity particularly and reliability. You mentioned that you had worked with epa on finalized mercury and air toxic standards and ferc should follow the development of epa Greenhouse Gas emissions rules. Let me just ask you this. As you know epa is currently working on a lot of rulemaking. That would include, it affects the utility sector. Certainly the 316b cooling water intake rule, the ozone rules, the particulate matter, 2. 5 rules, regional haze, coal ash, let me ask you this with regard to those regulations what is ferc doing to help epa understand how these rules might affect grid reliability . Well, we tried to be a source of reliability, expertise to epa. A lot of our work has been focused on mats because that has such short timelines. My colleague commissioner molar who is behind me will be on the next panel. Next panel. Cochaired a forum that nate with naruc and epa and we had meetings on 316b and coal ash and now a lot of focus is on Greenhouse Gas. I think as rules are developed we need to be come mentors in the comment ores in the draft stage, in Greenhouse Gas rules coming out on june 2nd i had believe to make sure the rules achievable while reliability can be preserved. Look at our knitting, if you look at the Greenhouse Gas rules they could potentially make changes for the markets and infrastructure. Make sure were doing what we need to do to support reliability as those rules come in. So commenting to the epa and looking to make sure the infrastructure is keeping up. I hope on the front end you will do not just commenting but analysis for them as to what the impact is. Kind of like this cost benefit analysis, we talk about a lot. This is certainly a cost. Reliability is a cost. As you say to consumers. You talked about the price spikes. You didnt talk about potential for brownouts which is also there and blackouts. And weve gone through tough winter admittedly and we really stressed system. Now were looking at a potentially hot summer too. So were, we are at a point where we need your input on the front end here to give them comments but also to be sure these regulations are not going to make it even more difficult for to us have reliability with all the issues. In the historic regulated model, states in conjunction with regulated utilities were responsible for insuring the construction and maintenance of adequate generation, adequate reserves. Who is in charge now . Who do you think is responsible for insuring adequate generation reserves are constructed and maintained in socalled organized competitive market . Well the states still play the Critical Role in deciding where the generation goes. And. And a lot of generation permitting and siting. 2 3 of country including ohio rely on competitive markets. Were relying on the competitive markets to send a signal that the generation can be paid so that it will stay on line or get built. And that means ferc has a big role to play. Thats why the competitive markets have done a very good job over the last 12 to 15 years in deploying a the assets already built before we went into the system but now were in a major investment cycle and we need to make sure that they draw the investment we need to keep the resources online, or bring resources online for reliability. I think ferc has a big role to play. I know my time is up, we need to get into the issue next panel on base load. Im sorry pass ask miss kelly and chairman honorable and others on this because i think this grid reliability issue is critical and look forward to following up with you personally but also with the panel on this issue. Thank you. Thank you, senator. Senator manchin. Thank you, madam chairman, and to Ranking Member murkowski, she will be back, she is in voting now, as you know my colleague, senator portman, who just spoke and i wrote to you both last month urging the, having a hearing on the group reliability and stability. I want you to thank you diane, did it in expedited manner. That is important considering what we came through this winter. There are two fuels to keep the lights on, just two right now, keep lights on 24 7, 365, nuke and coal. Gas will get in that position but not in the position yet but they will get there. These two base load fuels provide almost 60 of the power this country demand. And without these baseload fuels our grid cant function. We know that and you all said that and we can not keep the lights on. Heres, im having a difficult situation. You can imagine in my side of the aisle with the administrations attitude towards what were dealing with. I just want the facts to come out. Thats why i asked for this today. I want you all on the frond line, people relying on their life basically depending on can we have electricity, keep the lights on when they turn it on, when they need it for, rather airconditioning heat or for vent late tore or their oxygen, withwhatever it may be. What we come through right now, coal is still 30 of our power on national mix, 30 plus. As youre doing, you think about nearly 20 of the coal fleet is being retired. 20 of the coal fleet is being retired. Add to the fact that epa proposed new source performance standard what it is going to do will effectively ban the construction of any new coal plants. So then you start looking at reliability. How do we maintain the system . How do you keep it running . That is all im asking this administration to look at. How do we keep the lights on so peoples lives will not being in danger and we not lose people. Coal isnt the only baseload feel you know, nukes too. In the current market condition unlikely well build any nukes. Yet we may need to replace 100 Nuclear Units by 2050 if the licenses are not extended again as you know. How can the system continue to work for the long haul under this sort of strain . Any expert i asked they say it cant. And were setting ourselves up for a major reliability crisis. During the polar vortex this winter a whopping 89 of aep, i have two providers in my state, aep and first energy. Aep said 89 of the coal units slated to be closed are going 100 just to keep up with the demand. Pjm is the rto that handles our area as you know. We spoke to them and they are here represented. I appreciate they came and spoke to me. They are saying this is critical time. You knew, chairman, that they were taking Emergency Action to keep the system up. They have done a great job. Theyre johnnyonthespot. I appreciate all that. Even they can be strained. They were down anywhere 500 to 750 megawatts out of 140,000 plus megawatts theyre responsible if the system went down. They had another tool in tool books reducing voltage on the line 200 megawatts. You have 200,000 megawatts of coalfired power coming offline. What happens . Youre growing to be short next year. I would like to know and i will start with you chairman lafleur, your view of this. And should ferc be pushing certain kind of fuel or should it be looking at basically the portfolio and mix that our utilities have . Well ferc, you touched on it, fercs proper role. Yeah. Well, thank you for that question. I do not think its fercs job to pick certain kinds of fuels. The whole concept of a market is that it uses a generalized product that allows different fuels to compete fairly and so, if there are preferences for certain kinds of fuels that is not a fair market by definition. I think ferc should try to keep the, be guided by reliability and what the cust