 We're going to start up again, please, and as you can tell from the last panel, the design of this Wires University is to go from 101 to 201, we're getting further into the weeds and we have some really excellent speakers on our next panel. Two people I know very well primarily because they have done reports for Wires that I think stand as some of the best scholarship on the electric transmission system that's been done in North America. Honest Pfeifenberger is an economist with a background in electrical engineering. He's with the Brattle Group up in Cambridge. He lives and breathes transmission, transmission economics and has done a study for us two years ago on the benefits of transmission, which I think stands the test of times. It's the only place you can find a really succinct, well-rounded explanation of the multiple benefits that transmission projects can provide beyond reliability, beyond production cost savings. He is going to talk this morning about transmission as a market enabler, but that's a fairly big concept and Honest is one of the people that we rely on very heavily for some skilled analysis. He has an MA in economics and finance and brand eyes, an MS in power engineering and energy economics from the University of Technology in Vienna. We're not talking Vienna, Virginia, we're talking Vienna, Austria. You will be followed by another excellent economist, managing director at London Economics, Julia Freire. This little gem is what Julia did for us last year. Now both of these reports are available either outside or in the lobby as you leave, but I recommend them highly and if they're too heavy for you to put in your briefcase, you'll also find them on our website. Our website is www.wiresgroup.com and there's a lot of good stuff on there, but this is some of the best. Julia's piece here is on what FERC erroneously called non-transmission alternatives, what we call market resource alternatives, including storage, distributed generation, utility scale generation, demand response and so forth, and how that works with transmission to make a more robust, resilient transmission grid. Julia has a great deal to say and somebody we rely on, a great deal for her expertise in electrical bulk power matters. She has dealt with innumerable transmission projects, including the Montana, Alberta, Thailand, and a number of others. This is your chance to get some very, very good input and I hope you have good questions for both of them. Honest? Thank you, Jim. It's nice to be here again or as we say in Austria, I'm back or something like that, but let's talk about what we're going to do today and I'm going to briefly talk about how much we've invested in transmission and what we'll need, some of the key barriers to planning more effectively what we call a robust transmission grid. The often overlooked benefits of a flexible and robust grid, the high costs and risks of not having enough transmission when you need it, and the need for more effective inter-regional planning and then end with some recommendations for policy makers. Now this might be too far for you to see in the back and I apologize for not getting my slides in on time, but they will be posted so you'll have them electronically. This chart starts in 1960 and ends in 2015 and you see that most of the grid that we rely on today was built in the 60s and 70s. And it shows that draft in the middle, there were two decades where we basically have not invested much of anything in a transmission grid. So the grid we're using today for wholesale power markets for deregulate transmission of the last 10, 20 years is really the transmission that we build in the 60s and 70s. And that's getting old and that's getting inadequate in terms of not quite having built for the purpose that we need it for today. Now the good news is in the last 10 years or so we have started to invest again in transmission. So what this shows in the 90s we invested about $2 billion a year or so in transmission and that has increased to about $16 billion as of 2013 and the 2014 numbers aren't quite in yet. You see some projections that are supposed to stay quite high. Now this means a lot of different things. One is that because we haven't been investing, we do need to invest to catch up just like we have to rebuild bridges, we have to rebuild the grid. But if we have to upgrade aging facilities let's think about how to spend that money well. Just replacing one facility that was built in the 60s with an equivalent facility today may not make any sense. If you spend that kind of money let's think about what other options we have to make to get the most out of the money that we spend. There are numerous drivers for the need for new transmission. We have projected and you can find those studies on our website that will need about $120 billion a decade over the next 10, 20 years. And the numerous drivers not just aging facilities that we just talked about but we do need to integrate renewables and the lowest cost resources by far when it comes to renewables are fairly far from loads. Now here in the US we may not be quite as used to that but the fact is a lot of the best wind is in the Midwest in the Great Plains where there's very little transmission. But when we talk about the grid and I have to say we've seen all those maps today. You might not have noticed but Canada is actually on that map too and we're actually quite interconnected with Canada and the Canadians know that the low cost resources are often very far from the population centers and they have managed to do that and I think we need to integrate some renewable resources. It will take transmission but it will save you way more on the cost of producing power than what you spend on transmission. We also have coal plant retirements. We have unexpected load growth in places like western Texas where there's a lot of oil and gas drilling. So we do have to invest. Now we might just as well now figure out if we have to spend $160 billion over the next decade how do we spend it best? And so we are coming out with a new study in two days where we looked at how effective current transmission planning is and we're not talking about just reliability planning. The industry really knows how to keep the grid reliable. This is not a rickety old grid. It is actually a very reliable grid. But economically it doesn't quite do what we what it could do in terms of keeping the costs low and meeting public policy objectives and there are really three barriers. One is our planning processes do not adequately consider the wide range of benefits that transmission provides in terms of reducing the cost of delivering power. We also not accounting in those economic planning processes the high risk of high cost events. The California power crisis could have been avoided had there been more transmission studies have shown but we're not even thinking about those economic events. We are thinking about reliability but the fact is prices spike way before there's a reliability event and we have many more price spike event than we have reliability events. And then we talked a lot about the regions like PGM. The planning of transmission between these regions is just ineffective right now. We're trying to set that up but the processes that exist right now even though they exist they are not really effective in terms of getting inter regional transmission identified planned and built. And in fact some of these seems between the regions look like demilitarized zones where nobody has built a new line in quite some time. Of course that challenges to cost allocation siding and permitting and so on. But if we don't get this right we're either not investing in enough transmission to keep power prices low. We have to think about transmission is about 10% of what we pay for electricity. If we double spending on transmission and we are reducing the rest of the cost by 10% we're still paid off right because there's a huge leverage that transmission provides in making the power system work and be more cost effective. But we are just not identifying the right projects that the money that we have to spend can get us if we don't even understand the economics and the risks of that. So the study that Jim mentioned in 2013 goes through the full range of benefits and of these eight squares or whatever we are only in the economic planning processes that most regions are doing today they're considering half of that middle square. We are looking at production cost savings but not even doing that very well. We are not considering that even if you don't build a new project for reliability it will improve reliability. We are not considering that it would reduce the cost of investing in generation. We are not considering that transmission makes markets more competitive. We are not typically considering the environmental and public policy benefits of transmission infrastructure and many projects specific benefits such as storm hardening and many others. In our study we have the big checklist of benefits that we recommend people consider when evaluating new transmission projects but that's way too much detail. So why is this important? Well here's an example the red line is a cost the annual cost of a new power line a specific power line that has been evaluated by the California ISO in 2004 and the production cost savings that most people calculate these days in the planning process are that blue bar and you look at this and say well this is not cost effective because the production cost savings are less than the annual cost of the line. Well that's where the other benefits come in. You see once you consider the other benefits that transmission provides the benefits are far larger than the cost of the line and this is it's a space case. Well what does space case mean? That typically means under normal conditions, normal weather, nothing unusual, no big transmission outages, no big generation outages but we all know that if everything is normal and we don't have a heat wave and the summers are nice we don't need that much transmission. The Calaiso did a study on some of the more extreme cases that you might encounter and they found I mean this line is the bar on the right is a hundred million. There's about a ten percent chance that in any particular year these benefits could be between 200 and 700 million dollars and compare that to the cost of 70 million dollars. So there's a big risk insurance, risk mitigation factor but we don't really plan for these risks. Not the risks in the short term, not in the long term. We do it for reliability but we don't do it for economics and I think we don't have that much time so I'm not going to get into these things but the risk mitigation is very important. We have this planning paradigm that has evolved called least regrets planning process. So what it usually means is let's only focus on those projects that are beneficial under almost any circumstances. Well what this forgets about is that there could be many regrettable circumstances that could result in very high cost outcome but we're not planning for them. Now think about insurance. We focus too much on the cost of insurance and not enough on the cost that you might be exposed to if you don't have insurance. If you buy insurance are you focused more on the cost of insurance or are you focused more on the cost that you might expose to if you don't have insurance? Well you have to look at both but transmission planning for the most part forgets about the economic aspects of the insurance of the cost of not having transmission when you need it. And a brief word on inter-regional planning that's sort of the stepchild of the industry and it just doesn't work. It you know we're getting there we're making progress but it's going to be a while. One of the reasons why it doesn't work is for economic planning at least we have this we're stuck in this least common denominator process where two neighboring RTOs they all have their own sets of benefits that they consider but for lines between the regions I said well we only consider on the benefits that we both agree on. So what happens is that you have the full range of benefits each RTO internally considers one of these circles but when it comes to going to evaluating lines going across the regions they only look at the overlap of these two circles. So the economic benefits of inter-regional projects are hopefully understated and with that kind of approach no sizeable project will ever pass these tests because you're ignoring 90% of the economic benefits. We all have a problem that this is a busy chart but transmission planning is compartmentalized. People plan separately for reliability projects, for market efficiency projects, for public policy projects and sometimes for multi-value projects. So if you have two RTOs next to each other and they insist well we have a tariff for inter-regional reliability project and we have a tariff for inter-regional market efficiency projects that framework cannot evaluate a project that might be reliability in one RTO but market efficiency in the other. So of all these 16 squares on there these inter-regional planning processes are only good for three of them. So we're a whole host of projects that have different purposes in the neighboring RTOs will be automatically excluded from the inter-regional planning processes because it doesn't fit into the definition of these projects. So a few recommendations and that will be elaborated in the report that's coming out today from now. We really recognize that policy makers are the key here, state and federal policy makers. And so this is a recommendation to policy makers, not so much to the planners because the planners won't be able to go there unless policy makers are to consider all transmission related benefits, otherwise we're being penny wise and pound foolish. And we have to better understand the high risks of not having a flexible, a robust transmission grid, particularly if the future is uncertain. We need to plan for the uncertainty. We can't wait for the uncertainty to resolve itself because it takes five to ten years to build a line and if we wait we won't have the low cost options available because if we have to act within two or three years the lowest cost options will not be available to us because it takes more time to build good new transmission projects. And we need to get away from compartmentalizing transmission planning. Every transmission line has multiple values and we need to recognize that. And finally, we ought to do something about inter-regional planning. And with that, let me turn it over to Julian. How do you get? Well, we're changing over. Does anyone have a question for Honest? That's a boatload of information. I should mention that the Brattle Group, Honest and his colleagues have developed another study, which is partly reflected in this PowerPoint, and you'll see that maybe as soon as this week. So good morning, almost good afternoon, ladies and gentlemen. I'm pleased today to present a few thoughts. I think I always say to my kids when they complain about school being repetitive that in fact that's how we learn. So I will in advance note that I think there's repetition between what Honest has said and what I say and actually even repetition from some of the discussions this morning as well. And I hope that serves you all well because I think we're trying to make sure we hit at the key messages from different directions. So let's take it down this direction. Specifically, what I wanted to do today was to talk about a white paper that Jim had mentioned earlier in his introductions, a white paper about market resource alternatives. And this fits well, I think, with the topic that I'm supposed to speak to, which is transmission as a technology partner. So some high-level findings and maybe to start off, I should define what is a market resource alternative? And I think the best way to think about it, Adrienne did a wonderful job this morning telling us about what transmission is. So think of market resource alternatives as everything else. And in fact, in your packets you had a figure that we excerpted from our white paper report issued last year that categorizes and lists some of the technologies we think of today as market resource alternatives. Jim also hinted in his introductions that there was a misnomer used, a misnomer that called market resource, oh my gosh, I can't speak this morning, market resource alternatives as non-transmission alternatives. And I hope from the discussion today in the presentation you'll understand why I think of that as a misnomer as well. And frankly, it's because it implies that transmission has a substitute, an alternative. If you really do think about our system, our system isn't about transmission pieces here, generation located there, wind generators in another location. The transmission that you and I use when we turn on the light switch and expect electricity to flow through our house or business is really being delivered from an integrated system, a machine, I heard somebody say a marvel of the 21st century, and it's the reliable service at least cost that we expect is really about the various components of that system working together. The transmission, the generation, the distribution systems, the smart technology, which I'll speak to a little bit, and also even consumers, which there's a new tag word in the industry, prosumers, consumers that are actually also generating electricity by the devices they have installed on their homes and properties, consumers that are also being more intelligent with time in the choices they make about consumption of electricity. So with that in mind, you may ask, so MRAs, what are they? Well, MRAs in this chart would be everything that we can think of, but the transmission wires, so it is the energy storage, the wind and solar generation, the light bulbs represent energy efficiency projects, it is the demand response and distributed generation and smart grid technologies represented by that house with appliances. It is also the conventional generation technologies that we drive by and some of us work at define the landscape for market resource alternatives. So with that, before we start examining in a little bit more depth MRAs and the key findings of our report, I wanted to speak about why MRAs are now a prominent topic of discussion. And in my opinion, it can be traced to the restructuring of the electricity sector to some degree. And I know on this next slide, I used the word that I shouldn't be using given the discussions we just had deregulation, but it really is the restructuring or deregulation that has occurred in the last two decades that has changed our thinking about investment and has also raised the discussions we're having today about transmission or MRAs or both before in the integrated resource planning days when we had a vertically integrated utility. It was the utility that was deciding on which resources to invest in and build, generation, transmission. It was the utility funding energy efficiency conservation programs which have frankly been with us for decades upon decades. That is no longer the case for many parts of the U.S., even parts that still have local vertically integrated utilities because planning now involves a lot of different entities. It involves what I would call independent power producers, IPPs in the green tax box, that make decisions about where to put their generation investment. It involves RTOs, ISOs as you've come to learn today, as well as member utilities who are planning the system, planning where distribution investments should take place, where transmission investments should take place. And it also involves consumers who through their own interests and financial considerations through utility funded programs and other types of incentives are looking at demand response, energy efficiency and distributed generation. So I think this leads me to the discussion. So why this misnomer about NTAs as a term for MRAs? And it's because this graphic to the right shows the generation and transmission in silos, independent of each other. So there is a fallacy I think in this industry that transmission can be substituted for through generation investment or demand side management and vice versa. But I think it's actually much more common if we think about the realization of our integrated system that transmission investment motivates generation investment and generation investment as well serves as a catalyst for transmission investment. So today I wanted to share two examples with you. And these are examples that are actually real world applications. I'm not making up stylized case studies here. And in fact, in our white paper, we talk about some other examples of investments we have seen that highlight the complementarity or the integrated nature of our grid system and present a different way to think about investment planning and making sure that we are considering MRAs on equal footing with transmission. So we have to the, I'm always confused, and it's not very clear, I see either. But again, these slides will be available. We have two case studies. One of them is in California. It's the Tehachapi Renewable Project. And another is in lovely Texas with a competitive renewable energy zones. In both instances, these transmission development projects were instilled in order to unlock and motivate new generation investment. So the transmission was a leader and a catalyst for generation investment. And in fact, when you think about the timing of the investments that need to take place, transmission as we've heard today takes five to ten years to develop from initial idea through construction and permitting. Generation, on the other hand, can sometimes be developed on a much shorter time cycle. So we do need to think, if we're considering about who goes first, chicken or the egg, there's a natural order of things with transmission leading generation. The Tehachapi Project, if you're interested, there's a lot of information on the Cal ISO in Southern California Edison website. But effectively, that project was meant to bring about. It started in 2004 and it's nearing completion at this point, but it had multiple segments that meant that was gearing to bring 4500 megawatts of new wind generation to market. And then the competitive renewable energy zones in Texas was doing a similar thing with a slightly different scale, 18,000 megawatts of wind to market. Some of which were already in the ground, but others that have developed since then. Started through legislation in, I believe, 2005. But really commenced in 2008 after the state regulator did a full cost benefit and well, I won't use the word full, but did a cost benefit analysis of the options for transmission investment and approved a five billion plan, which actually turned into a seven billion, almost a seven billion investment strategy that is nearly complete as we talk here today. I was also going to spend a little bit of time talking about distributed generation. Because, again, a misnomer, perhaps a bit of an oversight in the industry, is that if we have distributed generation, we don't need transmission. We can all survive on the generation that we put on our homes and businesses. And I think a great, again, real world case study of this is Germany. Germany has had phenomenal growth in solar distributed generation through incentive schemes that they implemented through legislation in the early 2000s. Literally, I think within the last five years, they've grown from a system that had zero megawatts of solar DG installed to over 30 gigawatts of capacity. They've had to not cap it at 52 gigawatts, but that's a significant number. When you think about the overall size of their system, which is only 190 gigawatts. So we're talking about a significant transformative change in that country. But solar DG isn't going to fuel the entire economy. And there's realization because of technical economic reasons that they need other types of investment. And those other types of investments are really pairing the solar DG that individual households can deliver with new transmission investment. Based on the ten year network plan that the European transmission owning entities do through a two year cycle, they've identified over $30 billion in euro terms of expected new transmission investment for Germany alone. And a lot of that is being triggered by the need to distribute the distributed generation to different areas of the country. And also to tap into offshore wind, which is a significant balancing source for the solar DG that Germany is planning to use now that nuclear is being phased out in that country. So a little bit on smart grid, but I won't stay very long here. I think very similar to DG, smart grid as we've heard it's the ability to control, to monitor, to have access to information and digitally to integrate the information better between the consumer. All the appliances we use that consume electricity and ultimately the network grid and the wholesale markets. We're still struggling, but I think we have an image for what the future is going to hold. There's beautiful drawings and renditions that graphics artists and forward thinkers have thought about how our homes would look with smart grid technology being deployed in the coming decades. But smart grid technology doesn't mean that we're all going to disconnect from the grid. And in fact, the purpose of smart grid technology is to better integrate our consumption patterns of the system as a whole and provide more efficient wholesale and retail market kind of a convergence of those two with time. So now, finally, getting to a couple of slides on the market resource alternatives. What I've done here, and this is actually a figure that we had in that September 2014 report. I've laid out some of the technologies, market resource alternatives that we think of today. Energy efficiency, demand response, utility scale generation, distributed generation, energy storage and smart grid technologies deployed at the distribution level. And one of the challenges that Jim had posed for our firm when we started looking at market resource alternatives is to consider a way that you can actually evaluate those types of technologies on a level playing field with transmission. And for us, the first task really was to identify what we're talking about. What are the characteristics of market resource alternatives? And how do they line up with the characteristics of transmission? And as we went through and populated this grid with our understanding of the various technologies, I think one of the very important observations that we had is that each technology has its own services that it delivers to consumers. And those services may mean different types of actual products in the market and so are services, renewable attributes, energy capacity. It may also mean that different technologies actually focus on a different geographical dimension. Some technologies like energy efficiency, demand response, distributed generation are really tailored to focusing on very narrow or small geographical areas, whereas utility scale generation transmission is looking at much broader geographical areas. And so it goes with the questions of how and when and other characteristics of these technologies. The bottom line what we see is that in order to be able to evaluate MRAs on equal footing with transmission, the planning analysis needs to be able to recognize these unique characteristics for different technologies and evaluate them, monetize them, because I think dollars is a common denominator that speaks to many of these characteristics. So we also through our analysis wanted to introduce some guidelines, precepts as we call them, to thinking about that evaluation or planning process that we would be recommending in order to have a comprehensive and robust consideration of the type of investments we would like to see in the future, both transmission and MRAs. And I think the first precept really speaks to my prior slide, which we would want to make sure that there is a similar objective set of criteria for looking at the economic benefits and technical reliability benefits of transmission and MRAs. And that would allow us then to have an effective framework for looking at investment opportunities, one that's efficient, so we're making the best choices possible, one that's practical too, so that we can actually implement it in nondiscriminatory, which as we've heard today is a mainstay of the requirements that FERC has imposed on planning for some time. Other precepts in my six precept lists, which you can find in the report, talk to the actual analytics of thinking through how to go about and do this investment analysis, and they speak to comparability and ensuring also technical feasibility, because in some cases I think we get carried away, we see a new technology, we really want to have it, almost like we see a new iPhone and want to have that. And sometimes consideration of the technical reliability concerns that presented themselves initially are overlooked just for the sake of trying out something new. And with the transmission system, reliability is almost like the first order constraint on this investment decision making process. We need to meet the reliability technical needs of the planning process first and foremost. And once we've decided how we meet that, that's when we then look at least cost and maximum benefit type of solutions to investment. Finally, if we go down my list of the precepts, just wanted to kind of rattle off a few more, I think number four is fairly important. And as we showed in that Moon diagram, there are many different benefits and services that different MRAs and transmission can deliver to consumers. They're very situationally specific. We've done a very generic view. And I think those types of benefits, market services and non-market services need to be evaluated thoroughly. And in some cases, I think for the sake of expediency, for the sake of simplicity and analysis, we overlook that type of comprehensiveness in looking at benefits and costs. Finally, precept number five or almost finally, precept number five, this is going back to that misconception or misnomer I talked about earlier between transmission and MRAs being perfect substitutes. You know, that's really an artifact of us having moved away from integrated resource planning into the restructured environment where we have different entities participating and making investment decisions in parallel. But that's not to say that we can't have regional coordination. We can't have a vertically integrated utility anymore, but we could still have regional coordination. And I think it's important when you build up the planning environment and the economic analysis that flows from it that as part of the regional coordination, you're looking at rational patterns of investment, not just for the regulated entity, the transmission entity that's planning investment, but also from a variety of other stakeholders. You're looking at how generators would respond to transmission investment, whether they would actually build more generation. You're looking at consumers and understanding the trends in distributed generation and energy efficiency and understanding how those link back to transmission investments that are made or not made. And I think with that rational, endogenous thinking, that's where we will actually get to a place where we can look at complementarity between investments. I like to always say is that when we're setting up an analytical framework, we get what we look for. So if we're looking for just substitutes and choosing A versus B, that's the investment analysis will basically get us to that common denominator. But if our investment analysis is more comprehensive, more open-minded to the dynamic investment decisions we would expect in the longer term from the industry, that's an opportunity to really get to the, to a higher order solution for investment planning where we're building out a number of different technologies, transmission, generation, smart grid technologies. And in looking at complementarities, we're basically taking into account what you may have heard in economic classes, things like positive externalities and incremental benefits that we wouldn't otherwise identify. And I think lastly, and just as a sideway to explain precept number six, Johannes pointed out today that planning is not about making, in my words, it all work under normal conditions. Planning is really making the best decisions with information we have on hand. And in the way I think about it, those risks and uncertainties are really about the information we don't have on hand. And what we want to do is plan for that as well. And so it's very important to underscore that those uncertainties, our risks are represented within our planning methodology, not considered as an afterthought. So with that, thank you for your time today. Our two keynote speakers are here. And, but I think we have time for a couple of questions. Johannes and Julia be happy to talk to you, of course, offline after this panel, but I think we'll just move on to the main event here. So thank you very much. That was terrific. Thank you. Thank you. Ladies and gentlemen, ladies and gentlemen, I'd like to introduce our keynote speakers at lunch today. As you know, our time is fairly compressed. And so if you do need to get up and get some further lunch, please do so. But it's a great honor and highly unusual that you get two distinguished legislators, both of whom have both a background and a desire to work in the electricity or energy areas. Our first speaker is Senator Martin Heinrich, who is a senator from New Mexico. He's a junior senator from New Mexico. I just learned something very interesting from him and that is his father was a lineman. And he kind of grew up in the utility environment. He is on the Energy and Natural Resources Committee quite appropriately, as well as the Intelligence Committee and Joint Economic Committee. I think that he's spoken recently at other conferences with our friends at the Americans for Clean Energy Grid. And he understands the issues that we are all grappling with in this period of great change. He is also a committed advocate for New Mexico's middle-class families, a champion for the burgeoning clean energy economy. And New Mexico has some wonderful resources in that regard and a protector of our public lands. He's the only engineer in the Senate. And so he brings a unique perspective to creating good, sustainable jobs and protecting vital missions of our national laboratories, particularly Sandia, which our other speaker happened to work at at one time. So this is a great harmonic convergence we've got going here. I'm delighted and honored to introduce you, Senator Martin Heinrich from New Mexico. Thank you, Jim. It's certainly an honor to be here today and to join you to talk about how we build a robust 21st century transmission infrastructure that reflects all the changes that Jim just alluded to from cleaner sources, dealing with intermentancy, managing that storage that's coming on rapidly from the horizon and power controls that are just simply a light year away from what my father experienced as a lineman back in the 1980s when he would oftentimes walk lines for miles looking to manually inspect switches and other controls. So things are really changing rapidly right now. And I should correct one thing for the record because my bio is a little out of date. There are now two engineers in the Senate. So Steve Daines from Montana is a chemical engineer. So we're making progress, but it is slow. But customers are now generators. I mean, myself included for the last 10 years, I've been putting electrons into the grid and taking electrons out of the grid. And the industry certainly has new responsibilities with respect to cybersecurity in particular to provide not only advanced control technologies but improved security as well. So I wanna commend Wires for hosting this event to bring folks together to seek pragmatic solutions and innovative opportunities and to gain a better understanding of why transmission infrastructure is so critical to our economy. And I wanna start out by pointing out Dr. Dan Alpert from my offices in the back corner. If you haven't gotten to know him and you're working on these issues in any way that touches us nationally or with New Mexico in particular in the Southwest, please get to know him. He has forgotten more things about this field than I know. So we try to put him to work on these issues on a regular basis. And I wanna thank Jim for just inviting me today and to everyone who made this event possible, thank you. Many of the important developments in regional transmission over the past 20 years are really a direct result of the things that Jim got started as first chairman. And I also wanna recognize my colleague who I'm gonna try to not do the faux pas. Ike Skelton used to introduce me sometimes as a gentleman from Colkamp, Missouri because when I was a little kid I lived in his district in Missouri. So I'm not gonna quite do that with Jerry but there was a time when Jerry worked at Sandia National Laboratories in New Mexico. And we still count him as one of our own not just as a New Mexican but as somebody who really understands these technical issues and we need a lot more folks like that in the House of Representatives and in the Senate and it's always a pleasure not just to share a stage with Jerry but to work with him. So you've got a great lineup of speakers who are really at the forefront of this innovation and who are focused like myself on unlocking America's clean power potential. And certainly energy is really at the heart of almost every issue across the country. And it's a cornerstone in my home state of New Mexico. We are certainly an energy exporter on many fronts. And as a member of the Senate Committee on Energy and Natural Resources I'm supporting a number of proposals right now to help expand both traditional and renewable domestic energy production. However it's gonna take a lot more than any one policy or one initiative or any one law to transition our nation and the planet from the energy of yesterday to the energy of tomorrow. And certainly given the current polarization which knock on wood we're seeing a few cracks in in Congress I don't have to tell you that it's not going to be easy but it is gonna be absolutely critical for our future. The transition of our nation's power generation portfolio to more efficient and cleaner technologies is already well underway and will surely accelerate as new regulations like the Clean Power Plan are implemented. But there's a big disconnect right now between transmission access and the best geographic renewable energy sources. And there should be no doubt that full utilization of our renewable potential will only be possible when we have the transmission capacity in place to deliver that power to market. Our system of power transmission and federal regulation were really designed for an era that no longer exists. When I was growing up I didn't often times didn't even realize how much of a utility brat I was at a yellow t-shirt that said I turn on after seven. That was the campaign to try to deal with peak generation challenges in the 1970s and used to draw a little ready kilowatts when I'd hang out at my dad's office. But in those days electrons sort of flow from your central generation out through the transmission lines to the distribution lines and then out to businesses and homes. And it was a one way street. The development of an interconnected transmission network regional transmission operators, independent power producers, distributed generation. Soon I think distributed energy storage using the grid in a way that no one foresaw just a couple of decades ago is the new reality. And at the same time the federal power act is now 80 years old and is increasingly limiting in the full development of robust markets for energy power in interstate commerce. And certainly limiting in terms of the kind of time management that we need to have in place today. So we need to work together to ensure that the regulatory structure is in place so that priority transmission projects can be cited and built. And I don't need to tell any of you what a challenge that has been. In New Mexico building new transmission and modernizing our existing electrical grid is central to becoming a state where our potential for new generation projects and our reality actually meet. And according to the US Solar Insight 2014 year in review New Mexico was 10th in the nation last year for added solar capacity about 88 megawatts of new solar bringing our total to about 325 megawatts. Not bad for a state of two million people. I mean that's 75,000 new homes but nowhere near our total capacity. And when you add in the potential we have for wind on the east side of the state that is currently stranded it is a substantial wasted resource. We should be a major exporter of electrical power even beyond what we're doing now. And we can spur substantial additional renewable energy development by adding that transmission capacity that will allow us to export clean energy to markets in Arizona and in Congressman McNerney state. And while we're at it, the benefits are many fold. For one we have had a real dip in construction jobs in recent years since the Great Recession of 2008, 2009. The number of construction jobs would be substantial and many new permanent jobs associated not just with the construction of new generation but the operations and maintenance of new generation. But the reality is that regional planning for a transmission just has not developed in the west the way it has in the east and the Midwest United States. And other than California, most of the west does not have competitive markets for electric power generation. Though the regional transmission organizations are developing in much of the rest of the country the large distances and the low population densities in the west have been a real challenge. The western interconnection can count dozens of individual balancing authorities that manage the operation of the local transmission grid. The development of the new short-term energy and balance market in the west is one positive step forward that will help to better integrate intermittent resources like solar and wind into the marketplace. But we have a long way to go before we're managing intermittent sources at the level of say Germany which has really shown what is possible to do in terms of managing very high penetration levels of renewables even in the midst of a solar eclipse. So we need to improve the overall transmission, siding, permitting and review process if we're gonna get there. Ensuring that transmission projects get timely regulatory approvals, especially when there are multiple jurisdictions involved which seems like always, is just critical to realizing our true potential. So FERC has played a strong leadership role already with its order 1,000. Setting the rules of the road on regional transmission planning and cost allocation. And I'll also add that we're lucky to have Norman Bay as the new chair of FERC. He is, in my view, an outstanding public servant with extensive experience to address the challenges that we face in our country right now. He gets extra points in my book, not only because he's from New Mexico but because he's an ardent flyfisher, men. But I'm also confident that Chairman Bay will continue to judiciously implement the law focused on FERC's statutory responsibilities of energy infrastructure, competitive markets and reliability. And I would hazard to guess that Chairman Bay's tenure will see changes in the adoption of both central and distributed storage on a scale analogous to the recent changes that we've seen in the last few years with solar generation. With his leadership, I know that FERC will be well positioned to navigate, implement and manage that change. Additionally, the administration has established a clearinghouse to try and streamline approvals on federal land. And in those few cases when the responsible state regulatory bodies cannot come to agreement on a priority project that has been selected as part of FERC's 1,000 order 1,000 process, Congress, Congress should establish an option for developers to seek approval directly from FERC. This idea has been talked about for a long time. Congress took a crack at it back in 2005 in the last energy bill. There was litigation, things didn't quite work out as planned. But today I am pleased to announce that I've introduced legislation that will provide transmission siting authority at FERC as a backstop in the rare case where states have been unable to act on priority projects. The bill amends the 1935 Federal Power Act to provide FERC narrow authority to approve and cite new electrical transmission lines. The siting authority would only apply to regional transmission projects that serve multiple entities and where the costs are to be shared among the entities. Under FERC's order 1,000, each public utility transmission provider must participate in a regional transmission planning process and produce a regional transmission plan. Order 1,000 also requires transmission providers to develop methods for allocating those costs of new transmission facilities among those who will either use or benefit from them. Currently developers of new priority regional transmission projects must seek approval from local or state authorities to cite and construct their projects. My bill would allow FERC to step in and provide backstop authority but only after local or state approval has been, is not provided within one year. And in cases where a state simply does not have the legal authority to consider or approve a project under existing state law. FERC would also have to first determine that the proposal proposed project is in the public interest and advances public policy goals including supporting the development of new cleaner power generation, reducing emissions like carbon pollution or enhancing competition and reliability. FERC would be required to conduct a full public process to review the project and perform all required federal authorizations such as those under NEPA and the use, those under NEPA and for the use of any federal lands, including tribal land. This citing authority wouldn't apply to Alaska and Hawaii which at least currently don't connect to any other states but it's my hope that the energy committee will consider this bill this year. And additionally, today, as we know, the administration is releasing the first quadrennial energy review. Someday I'm gonna learn how to say quadrennial easily but which will include recommendations on energy infrastructure including transmission and while I've just started to dig into that I am hopeful that that will be another tool for advancing the rapid change that we're all struggling with right now. I understand that you're gonna have a session today as well on cybersecurity which is also one of those issues that Congress should be acting on soon. One area I believe Congress should consider is providing the Secretary of Energy Emergency Authority to protect the nation's electric transmission grid from an imminent cyber security threat. Currently no individual is clearly designated to take immediate actions to protect the United States from a possible national security threat to the electrical grid or to respond in the case of that kind of an emergency. Now modernizing our nation's electrical grid isn't just about new jobs or harnessing clean energy potential or for that matter reducing the risk of energy disruptions due to cyber attack. It's also at its root about dealing with the challenges that we currently face with regard to climate change. I am of the opinion that it is our moral obligation to lead the world and not be a follower with regard to the climate crisis. Certainly the world is looking to us for leadership and if you come from a state like I do you wrestle with the fact that these things are no longer theoretical. The stubbornness of the challenges that we have faced in the last few years are very, very difficult to ignore in my home state. We are seeing dramatically different fire behavior. We're seeing very different seasons or humidity levels are lower or temperatures are higher and we're dealing with changes that we've just never experienced in the past. Over the past four years in fact we have seen the two single largest fires in New Mexico's history and with elevated temperatures studies at Los Alamos National Labs predict that three quarters, literally three quarters of our evergreen forest in New Mexico could be gone by as early as 2050. A radically different place than the one I live in today. At the same time in the past several years we've experienced some of the driest periods on record since records were started in the state. And at the heart of this it's simply irresponsible for us not to take concrete steps to begin to address these challenges. We cannot pass on 100% of the burden for this to our kids. But we have the technology and we have the resources. We have the human capital. And I know that through American ingenuity we will unleash the full potential of clean homegrown energy and put a lot of Americans to work while we do it. I'm a strong believer that innovation is what America is literally best at. And in fact I think the very character of our nation has been shaped by hard work and innovation over and over again. That's the American story. We're going to have to embrace the challenge of addressing climate change. We're going to lead the world in clean energy and make modernization of our electrical transmission infrastructure a priority in this country again. And I hope that all of you will see me as a partner as we face those very challenging challenges in front of us. So thank you again for having me today. Tim? Do you have time for any questions? Do you have three questions? Thank you. So Senator, I'll take a question or two. Yes, sir? So I want to ask you, given the proposal, how would you convince Texas to actually get into work and get energy from you guys? Are you open to it? Right now we have ready markets to the West. And so the short term play is to be able to move generation to Arizona and California. The long term play is to see and interconnect with Texas. And the timing of all of that is relative too, because there are competitive issues between the two states as well in terms of cost and when some of that generation comes into play. So I think what we're staring at right now, the most immediate opportunities, are to be able to create new generation that will flow to the West. In the long term, I think we'll be producing generation that will be able to wheel back and forth between the Texas grid and New Mexico. Other questions? Let me ask what your timetable is for this legislation, because we'd love to help in any way we can. Well, I think that the first thing I would simply ask is that if you have an opportunity to speak to other folks on the committee, the chair and others, please encourage them to take a look at the bill. We're going to be asking them to schedule a hearing, and that's always a critical first step, and be in contact with us if you have suggestions for who we might have as, who could testify at that hearing. Ask me. Sure. Sure. Well, I think NEPA does a good job of accounting for that, and there are a number of other rules in place, and we've actually been able to, in the state of New Mexico, if you look at a number of the transmission projects that are on the table, the portions that have gone through my state, I'm very proud of the sighting that's gone on there. I can't speak to whether, that's always been the case in other places. They aren't straight lines. Obviously, the developers would love them to be straight lines, but we've been able to navigate around wilderness areas, wilderness study areas, national wildlife refuges, other natural features that are really critical to my home state, and I think it's worth looking at those. It's just like wind energy. I'm all for wind energy, but you don't cite a wind generation facility in the middle of a flyway. So we have to be thoughtful about where we put these things. That's not trivial, but it's certainly also not impossible. Thank you very much. We really appreciate it. Oh, absolutely. Thank you, Senator. We have a double header here. The honorable Jerry McNerney is with us. He is a five-term congressman from California, and one reason we are delighted he's here is he is a co-founder of the House of Representatives caucus on grid innovation, the grid innovation caucus, and he has a background also in New Mexico, which we didn't plan that, but he has an extraordinarily appropriate personal history for this kind of industry, this kind of conversation that we're having. He has a doctorate in biophysics from UC Davis. He is an extraordinary mathematician and engineer. I should read part of this. Because it is quite amazing, before and immediately after graduating from the University of New Mexico, he spent several years working on renewable energy and national security programs as a contractor at Sandia, and after leaving Sandia, he spent two decades in a variety of positions as a developer of renewable energy projects. So a lot of what we're talking about today, he has a very personal knowledge of, and he is, of course, on the Energy and Commerce Committee of the House, where he has helped to put together a very bipartisan emphasis on the future of the grid. So it's indeed my pleasure again to introduce the Honorable Jerry McNerney of California. Well, good afternoon. It's really a pleasure to be here, and I want to thank the Senator for his kind words. Senator Heinrich and I were colleagues for a few years in the House, and we both have a very strong engineering background. I have a lot of passion about this area, and I hope that that comes through today. I also want to acknowledge my former colleague, Mike Ross, who's part of the organization here today. He was also a member of the Energy and Commerce Committee, and someone that was very bipartisan and willing to work together. So it's a pleasure to see you here today, Mike. Well, you guys are the nuts and bolts of the transmission industry, and that is a big part of the grid. It's a big part of what anybody that wants to do something with electric power has to deal with and manage in one way or another. My background, as mentioned, I spent about 20 years in the industry creating new wind energy technology, new solar, new residential metering technology at EPRI and so on. So I'm fairly familiar with the industry from an employment perspective, and I just want to tell you a little story about my first days in the business. I went to Massachusetts to work for a company that created wind turbines, and we got some investment money in order to design a wind turbine on a blank sheet of paper. So we started from scratch. We designed a beautiful wind turbine. We had it manufactured. We had the components manufactured and put them together in our shop, and it was just something of real pride for all of us. We got to plant that thing in the hills of New Hampshire, where it was nice and windy and nice and cold most of the time. We went out there, invited investors out there to see the maiden voyage. We turned it on and then, man, the blades just started flying and everyone was running for cover. So that's a good way to impress your investors, but they got them emotionally involved as well. So, but you know, the thing is that, and it's like the transmission of business. We looked at the problems. We looked at the blade routes. How do we make those secure? How do we make the bearings last long? How do we make the generators cost effective? What do you do to make the foundation secure without spending a ton of concrete? All these things year after year, incremental improvements, and they tell Wind Industry is now very successful. It's very cost effective and it's leading the world in generation in some parts of the world. So it's just a matter of sticking with it, having confidence in your engineering ability and making it happen. So I think you all can relate to that story in one way or another. And in the wind industry, where I spent most of my career, you really rely on transmission. As Martin pointed out with his comment on stranded assets in Eastern New Mexico, there's some really good wind energy resource in this country and the Dakotas in that whole line from the country, from the Dakotas all the way down through New Mexico and Texas. And yet we don't have the transmission capacity to install that wind energy. So there's a lot of opportunities still in the business if you think you've run up against the wall. No, there's plenty of opportunity out there. And that's why I wanted to start the bipartisan grid innovation caucus. My co-chair is Renee Elmers. She's a Republican from North Carolina. And I can tell you if you watch the news, it looks like Washington is a place where people are always fighting. And the newsworthy items are there newsworthy because we're fighting on those items. But there's plenty of other issues that we're able to work on. And this is one of them. Our caucus has 20 to 25 members now, very bipartisan. We're working with utilities across the country to get ideas out there in terms of engaging my colleagues. I think that's the biggest challenge is to see that my colleagues in the house and maybe in the Senate understand the challenges and the excitement in this industry and the opportunity. So we're working together. PG&E was out here and made me get up in one of those man cups over there. It was all electric, it wasn't the gas power. So that was a lot of fun. Ms. Elmers had a skirt on, so she didn't want to get up there. But it was quite an experience and we do those kind of things all the time. So we're gonna focus on transmission and distribution, cyber and physical security, which is very important as we've seen. And how can Congress, how can we in Congress be effective in developing policy that will help this industry move forward? And when we do that, there's several things we need to take into consideration. Martin mentioned the siting issue. Well, siting is very important and I appreciate his legislative proposal. We'll have to take a look at that in the house and see if that's something we can move forward. Having a supply of skilled labor also very, very important. That depends on some of our educational policies. The integration of renewables, how are we gonna integrate renewables? Martin, when Senator Hydrank sat down, the first thing he asked me was, are you as excited about storage as I am? Well, yes, I'm very excited about storage. It's expensive, but there's innovations coming along and I think we're gonna see some breakthroughs that'll make storage cost effective within the next decade or so. We ought to start planning how to integrate that and to use that technology to meet the goals that Senator Hydrank was referring to in terms of climate change, which we're all facing. We wanna make sure that investors get a return. You don't wanna have a system out there where people can invest their dollars and not have some sort of confidence that they're gonna get that return, or else it won't happen, as you know. We need regional planning, another issue that Martin touched on heavily, and we also need to look at the wheeling rules. How are we gonna wheel, are we gonna wanna put in a 721 overlay, or are we gonna wanna depend on distributed generation? I mean, those are very difficult questions. The overlay issue I think is complicated because it seems like it's good. You can generate power at one part of the country, ship it to another, but then if you do that, people in New England are gonna say, well, we can produce wind energy, but we can't compete with coal from Wyoming, so we have these regional issues to consider when we talk about large-scale, high-voltage overlays for our transmission system in this country. Of course, the goal of all this is reliable, cost-effective, resilient, and regionally effective electrical transmission. We need to know, we need to get some idea, and I hope we can continue to discuss this in the grid innovation caucus. Where is our electrical grid heading? How are we gonna start planning for the challenges, and can we plan for the challenges? Do we need economic models? Do we need better load flow models? I mean, how are we gonna understand all that? How are we gonna get the resources out there for you all to actually take those challenges on superconductors? Does anybody feel strongly about superconductors? I mean, there is technology out there, the superconductor temperatures are as high as minus 100 degrees or something, I don't know exactly, but if we can get superconductors out there, you know the story about losses, you know the story about heat. If we can get superconductor transmission out there, that would be an incredible boom for our country. We create a lot of employment, and as you know, the footprint for a superconductor transmission is really only gonna be about six feet laterally, as opposed to about 50 feet for transmission lines. So we have a lot of opportunity out there in terms of technology, switching gear, that's something that we developed in our wind industry, we had these generators that tend to be induction generators, utilities like synchronous generation, we need to be able to control the power factor because we had transmission, we had generation that was way out in the boonies, nobody wants to live near those, well, not nobody, but not many people wanna live in extremely windy sites, so we had to transmit power pretty good distances, which means we're having power factor changes, so we could either lead or lag, and we developed the switching technology to follow the sinusoidal current distribution we needed on that, so that sort of technology is gonna have to extend even more to the transmission facilities because we wanna make sure that our transmission lines can cut off quickly to avoid system-wide disruptions, we wanna be able to use the electrical energy we have efficiently and so on, so there's an opportunity for that sort of technology, and I guess as Martin pointed out, we're gonna work closely with FERC and NERC, he mentioned their orders 1,000, but we also have the 764 and the 890, so there's plenty of involvement, there's plenty of opportunity for involvement between the Congress and the regulatory agencies that are managing the business. And as Martin mentioned, as I got a question earlier, the quadrennial energy review just came out, I haven't had a time to really dig into it either, but I think it's gonna give us an opportunity to sort of point us in the right direction of how to address some of these big problems. The Energy and Commerce Committee now is working on a bipartisan way to develop a new comprehensive energy package that will address some of these issues like return on investment and so on that'll help you all move forward in this industry. And I hope to get some feedback from you all in this process. Is this new legislative package is introduced? There's gonna be a lot of questions, there's gonna be a lot of opportunity for you all to chime in and tell us what is gonna work and what isn't gonna work and how we can make this the most effective legislation possible in this environment. And again, I wanna thank you all for allowing me to address you this morning. I just wanna say, I live in California, normally I come back early flight on the day of votes. Today is the day of votes, first day of votes this week, but because I had an opportunity to come here and meet some of you fine folks, I decided to come back a day early. So I just tell you how, who's yes, kind of about this, but thank you very much. I can take a couple of questions. Questions for the conversation? Well, I guess the question that's certainly on my mind is what is the agenda of the grid innovation caucus and you see some natural issues coming out of your bipartisan efforts anytime soon? Well, I mean, the real goal in my mind is to establish a forum so that we can discuss what legislation will be useful, but also to get people excited about it because we're gonna be doing these demonstrations. We want some of my colleagues to get out there and see what's going on to meet some of the players in the industry. So it's as much of an opportunity to get people excited, sort of a PR way as it is a policy forum. So I think the two objectives will be what I have in mind. I think my colleague and co-founder, co-chairs also feels the same way. Well, I would make the same offer that I made to the senator. We'd be delighted if you'd call on us for our input and expertise. We have quite an array of technologically astute people here. Thank you. We're glad to. Other questions? Yes, ma'am. Well, cybersecurity is one of those really hard to get your hands on issues. I mean, there's three or four aspects. There's the data breach notification part of it. There's data sharing. I think there's a data sharing bill gonna be marked up and voted on relatively soon. We had a data breach notification markup in the house last week. It was relatively bipartisan. And I think the members of the majority listened to the members of the minority. They didn't accept our proposals exactly, but they certainly have promised to work with us in finding a compromise solution, which is important because if it doesn't have a compromise solution coming out of the house, it's not really gonna go anywhere in the Senate or the White House. So that's important. The other part of that is data security. How do we make sure that our data is secure? And then if you look at your part in that question, data security for transmission companies, for utility companies is a bit of a different question than it would be for healthcare companies, health insurance companies, or for banks or for credit card companies. So every sector, every part of the economic, every sector of our economy is gonna have to look at what it's gonna take to make their data secure and make their customers have confidence that their data is secure. And then once we understand what that is, what those requirements are gonna be, I think we're gonna be able to be in a position to legislate what's needed and get the Federal Communication Commission and Federal Trade Commission to enforce those rules. So we have still a big challenge, but it's a necessary and it's an urgent challenge. We see that there's an opportunity with some specific sorts of cyber attacks to destroy perhaps some of our transformers and so on. So we need to act urgently and legislation is moving forward, at least on data breach and data sharing and we need to get something more solid on data security as soon as we can. One more. What are the research needs on new transmission technology at the federal data laboratory to address these issues for the use of the role of the federal government to have these issues. Okay, well, there's changes in the technology with the students and everything else. Are there, is there basic research in the federal government piece to deal with that area or is it something that you've foretold my client? Well, I think the current mood in Congress would be to provide a situation where there's a return on the research investment in the private sector through tax breaks or other means rather than trying to fund. Although I'm certainly in favor of providing the Department of Energy money, grant money to do research. I think the mood of the Congress is more in terms of letting the private sector do it. So the vehicle would be to make sure that there's tax return on investment on that. Thank you. Well, thank you very much. We are not gonna waste any time. I believe our next panelists are here. I see Joe and Assistant Secretary Dirkovich, I believe is, okay, is our web person here. We can go back to our, oh, is it, oh, okay, okay. I thought we had a different thumb drive. All right, great, great. That's not a mistake I would make. All right, we're gonna, that's the perfect segue. The Congressman was talking about cyber security and legislation and Assistant Secretary for Infrastructure Protection at Homeland Security is going to talk a little bit about what the government's responsibilities and activities are in that area. Caitlin Dirkovich is Assistant Secretary for Infrastructure Protection, the National Protection and Programs Director at the U.S. Department of Homeland Security. That, I suspect, is an enormously complicated and responsible job. She leads the department in strengthening public-private partnerships and coordinating programs to protect the nation's critical infrastructure, assess and mitigate risk, build resilience, which is very important for the power grid, of course, and strengthen incident response and recovery. She has many years of experience at Homeland Security and in related positions. Start out at Booz Allen. She's, ironically, was born and raised in New Mexico. This is, I don't know what's going on here, but a graduate of Duke University and has an incredibly great background for the job she holds. She and Joe Dezel are gonna talk about cyber security and we frankly haven't given them nearly enough time on this subject, on this program today. So you know who they are and we'll give you their home phone numbers, but we wanna make sure that this subject matter gets a lot of attention. Joe, and I'll go ahead and introduce him now, has more than 20 years of IT and cyber security experience, he's the Chief Information Security Officer and Head of Cyber Security at ABB Enterprise Software. This is so far above my pay grade, I can't talk, but Joe is working on a lot of security issues relative to public utilities and has spent a lot of time working in the electric utility industry, including on NERC's SIP standards and rather than belabor this subject, let me turn it over to the Assistant Secretary and we look forward to hearing your remarks. Great, thank you very much and good afternoon everyone. It's wonderful to be here. It is a glorious day outside and so if you have a chance to go outside and just enjoy the sun and the flowers and if you have allergies, I'm sure that hampers it, but it's certainly pretty nice out there. I am delighted to be here today and what I would like to do is talk to you about our relationship with the electric sector and frankly the other critical infrastructure sectors, why my office does what it does and to provide you with kind of a broad look at the range of threats and hazards that can impact the electric sector and frankly other sectors and then I'll let Joe really do the deep dive into the cyber part of it. So my office at the Department of Homeland Security, Office of Infrastructure Protection is an office that is organic to the Department of Homeland Security. It is not one of the 22 different departments and agencies that transferred out of other departments and agencies to form DHS but it was established with the recognition that at the end of the day on 9-11, terrorists weaponized critical infrastructure and flew it into iconic buildings which are also considered critical infrastructure and that at the end of the day, the majority of our nation's critical infrastructure is not owned or operated by the federal government but is in fact owned and operated by the private sector and other unique ownership arrangements, some of them municipal but complex but again, not necessarily owned by the federal government and then it was incumbent on us as the federal government to work with those owners and operators to help them understand and at that time at post 9-11 really the threats that could disrupt their infrastructure and their operations and thereby impact both national security but economic security and prosperity as well to help them understand those threats and hazards and then to work with them to develop tools and programs to mitigate that risk. And so really over the course of the last dozen years that's a good part of what my office has been doing is working to develop those trusted relationship with the owners and operators of critical infrastructure and again to help them understand this evolving risk environment and I think that's an interesting thing as I kind of set up the, what are the things that we're worried about today is that it has the world since post 9-11 has evolved and we remain very concerned about the threats from our adversaries. We've certainly, Al Qaeda remains one of our main concerns but the terrorism front is changing and with the rise of ISIL we are increasingly concerned about domestic terrorism, violent extremism here on US soil and the impact that can have on our critical infrastructure but we're equally concerned about increasingly extreme weather. We're concerned about cyber threats and so really the range of risks and threats and hazards that a utility and a critical infrastructure owner and operator has to worry about is growing and increasing and so we spend a lot of time again looking at these threats and hazards, helping them understand what is the probability, what is the likelihood and how do you craft a security posture, a resilience posture that accounts for these range of threats and hazards. We divide the world into 16 sectors. The energy sector is one of them and under energy you have oil and natural gas and you have electric power as well as pipelines. There's water, there's transportation, there's commercial facilities, such as the chemical sector. I don't wanna go through all 16 sectors other than to state that in the last few years we have begun to recognize that of those 16 sectors there are a few of what we call lifeline sectors that we recognize that without these key critical infrastructure functions it would be hard to do what you do on a daily basis. And so in particular those are electricity, water, telecommunications and transportation and think about what you do in your daily life and if you took one of those, if one of those stopped functioning, if you couldn't access the internet, if you couldn't make a phone call, if there was no power, right? If there was no water, how hard it would be to do what you do on a daily basis. Well the reality is all of those critical functions underpin our economy and the functioning of our American way of life. So we work very closely with those functions in particular again to help them understand what are the range of things that can disrupt their operations and how can we mitigate that risk. So what I wanna focus on is two things. One is what are the specific threats and hazards that again could disrupt the electric industry but equally important the recognition that that particular critical infrastructure function is dependent on other, these other lifeline functions and then as we work with owners and operators it's not only helping them understand what is going to disrupt their own operations but there are dependencies and interdependencies both in their supply chain but across the critical infrastructure landscape where disruption in for example the water sector can actually impact how an electric utility operates and so as much as we're focused on terrorism and on natural hazards we're also very focused on the ecosystem of critical infrastructure itself and how disruption can have cascading impacts. So when you look specifically at the range of threats and hazards that can disrupt the electric industry they are far reaching and it is everything from vandalism and theft there is a lot of copper that you'll find on substations and you have junkies who have made it a habit no pun intended to go out and they try and mine that copper that you find in a substation and they can go sell it and they can make some money and they can go buy drugs that is as we see as many of those incidents as anything else but you have stupid people who are doing these things and sometimes when they're going and stealing copper they cause disruptions so it ranges from something as unsophisticated as copper theft to the very sophisticated and what we see on the cyber side from attacks on control systems to an adversary that is increasingly attuned to the fact that you can disrupt communications and you can cut fiber lines and that can impact how the transmission and the distribution system works as well and I'm gonna talk a little bit more about that but it's also natural hazards and I would say we're all very aware of how a storm like Hurricane Sandy or Hurricane Katrina can disrupt power but we're in and the industry itself I think has become it's very resilient and it learns from these lessons and that overall it is well suited to handle what I would call kind of high frequency but increasingly low impact storms we've gotten used to hurricanes in this country and most of the utilities know how to deal with it and you see this in particular in this region and particularly in the Southeast but when we have an approaching storm you'll see the linemen and the trucks staged outside the storm area because they know that coming in they're gonna have to come in they're gonna have to get debris removed and they're gonna have to get the transmission and the distribution most often and the distribution lines back up so that's a hazard that we've gotten used to but increasingly we're seeing severe storms we're also worried about believe it or not something called space weather and you have sun flares that can disrupt not only the electric sector but the telecommunications sector we had a storm here a few weeks ago that did cause some havoc but solar weather is a concern we're worried about electric magnetic pulses again a range of threats and hazards that can impact the system itself on the cyber side and again we're gonna hear more about this from the next speaker but I would say that overall the likelihood that the next cyber Pearl Harbor is a day away is not the case and I'll say that for a couple of different reasons one is that again the electric industry is incredibly resilient and at the end of the day they learn and they adapt but equally important both the way the system works and I think you've heard about that this morning but also the recognition that while they are increasingly dependent on industrial control systems at the end of the day they're still an operator sitting in an operation center that can go turn, that can go flick a switch that can go turn a crank and that can mitigate the impact of some sort of cyber intrusion it is certainly something that as we think strategically about where we're going and as we work to modernize our nation's infrastructure and we become more dependent on the digital infrastructure it's something that we work with owners and operators across the board to think about that you still need that human interface and that that ability to go and mitigate a potential cyber destruction that that back channel, that back fail safe isn't important from a human asset but at the end of the day and as much as we're seeing on the industrial control system front and the number of different malwares and intrusions that can impact the operations again they're still a human at the end of the day that can go and mitigate that potential threat we don't have that type of fail safe when it comes to physical damage and it is why we are increasingly concerned about our adversaries doing damages our damaging substations and transformers and or a space weather or an EMP event where you would see multiple transformers damaged this is the biggest challenge that we have at the end of the day these are the component parts of the electric system that are take a long time to manufacture many of them are not manufactured here in the United States, in fact most of them they're manufactured overseas and in China and some of our other foreign partners that we've got tenuous relationships with at times and so both getting, ensuring that there is an adequate supply of these transformers but equally important if there were to be major disruptions to transformers across the United States how you actually physically move them is what the biggest challenge is and they are large they often, they require being moved on rail and there's a lot of kind of interstate regulations that make it difficult to move these things easily so we are working very closely with the electric sector and with the transportation sector again to address this potential threat what is encouraging to me is again I find that the electric industry is very forward thinking and very resilient they understand the dependency on these transformers and the impact that damage to multiple transformers can have and so they have developed a transformer sharing program depending on the class of transformers that at least we know that there is a sufficient number of backup transformers that if there were multiple incidents we, they are here on American soil the challenge is again is how do you move them across interstate lines and so we are working to mitigate that potential impact what is interesting about some of the recent events that we've seen and some of you may be aware of this but there was an incident in California two years ago this month outside of San Jose at a PG&E substation called Metcalf and ironically this was in the hours following the events at the Boston Marathon and it went, it kind of flew under the incident flew under the radar for a bit in part because of the nature of the attack and obviously there was a lot going on in those 24 hours following the Boston Marathon but you had an adversary who lifted the manhole cover and went underground in this subterranean and cut the fiber lines that connected this substation both to the downstream PG&E substations but also cut the fiber line that controlled the 911 system which meant that all 911 service in the San Jose area was disrupted. The adversary then proceeded and they knew what they were doing by the way that where they cut the fiber lines was up against the wall and made it difficult to do a quick repair. They then proceeded to fire 120 rounds of an AK-47 into the radiators of this particular substation draining the oil and what they were intending to do was to cause the substation to fail and really to make San Jose in the Silicon Valley area dark but because there were some redundant capabilities in place PG&E was able to rebalance the load it was also night, the weather was cool enough that there was not a large load at the time and there weren't a lot of customers using power because it was night so PG&E was able to rebalance the load and there was no disruption to the San Jose area but this adversary knew what they were doing one in that they cut the line that connected the SCADA systems that would have in theory prevented PG&E from rebalancing the load but it also made it difficult for local law enforcement to communicate with PG&E and so we have since gone around the country to raise awareness again of our adversaries recognizing that they can both perpetrate a cyber attack and a physical attack and potentially cause significant damage but this leads to my final point which is the interconnected nature of how we work and that is a lot of what we spend our time doing is helping owners and operators understand that as much as they need to think about securing their own assets and their own systems and ensuring they are resilient to a range of threats and hazards that they are also dependent on other functions they're dependent on telecommunications they're dependent on water the electric industry is dependent on downstream natural gas and as they think about security and resilience that plan has to include the continuity of these other critical functions and so to use an example as we went out around the country raising awareness about what happened at Metcalf it was as much about having the utility owners and operators or the electric utility owners and operators in the room as it was about having the telecommunications provider and having the state and local law enforcement so as they start to see anomalies and incidents that they are communicating with each other so that PG&E operation center the next time knows that in addition to and they had some intrusion systems on their fences that at the end of the day could have pointed to the fact that something was happening they accounted for the high winds at the time but had they known that there had been a 911 line cut and had the sheriff's department been able to contact them because they had also gotten a call about shots fired in the area they may have approached that particular incident a little bit differently and actually sent folks out to see what was going on. I will end with just a note about how we work with owners and operators so in addition to working directly with chief security officers and chief information security officers to talk to them about the threats we have a range of tools and assessments that we do we push threat information out to them we do training around everything from cyber threats to improvised explosive devices to space whether we try and exercise where we bring again owners and operators together we have a scenario and talk about how folks would respond to and also prepare for these types of events but we are increasingly finding that engaging the senior executives of these companies of trade associations is really important these are the folks who are managing brand risk operational risk, regulatory risk and I would posit that they need to have security and resilience on their radar too because a disruption caused by a security event can have an impact on operations can certainly impact the brand look at what happened with Target and the cyber intrusion that happened there and it causes all sorts of regulatory levers to be initiated as well and so we have been working very closely especially in this sector with the CEOs of the investor owns the rural firms and the public power companies we brought them to the table we've given them a kind of much deeper dive of the environment that I've given you and now on a quarterly basis meet with them we've got a work plan in terms of the things that we're trying to address we're working on a plan for how we would handle something like what happened in Japan where you had an earthquake, a tsunami and then the event at Fukushima what are the roles and responsibilities of industry what are the roles and responsibilities of government where do we know we have some challenges let's go back to the transformer issue and how we would move those transformers and how can we ensure that we're working in coordinated action but increasingly these CEOs also recognize the importance that they need to be working with and meeting with their counterparts in the financial services area in the water sector, in the transportation sector in the downstream natural gas and in the communication sector because again without those key functions it would be hard for the electric sector to do what it is doing so to end it is a very complex and dynamic environment as you learned earlier the electric industry works very closely with its public utility commissions to as they make investments in upgrading the electric infrastructure and putting in security and resilience measures they actually have to go to the utility commissions to get to do rate recovery they can't pass those costs on to customers without getting approval from the public utility commissions and so in a day and age when they're looking at everything from vandalism to cyber threats to how are you resilient to space weather and EMP it's asking a lot in terms of what are all the things that you put in place to mitigate them so part of what we do is help them understand what are the protective measures that can mitigate a number of these different threats but also working with them to help make the case to the public utility commissions about why they should be able to do rate recovery for these particular investments I find it and I will end with this again that it is a very resilient sector they are very cognizant about the range of things that can impact them to include cyber security and they are again working to ensure that they can remain resilient through a range of different threats and hazards so with that I will turn up Joe and then we'll take questions afterwards one thing if you have not read this or seen this this is the E-PRO handbook this is a great primer just into the range of threats and hazards faced by the electric industry how it works, how they're dealing with it it's an easy read and in fact I've got folks all over the country I have given a copy to all of my folks out in the field so they can get a better sense of how the electric sector works Jim, did those pictures make it or no? Would they? Yeah, they should be in there All right, fantastic so I'm gonna keep this simple this is, we started this morning with a great overview of how complicated this machine is and it's an extraordinarily complicated machine I'm convinced that the electric system at least in North America is probably the most complicated man-made machine in existence and the fact that it works in real time every day is a testament to how great our electrical engineers are in this country I mean that we have a product that has produced the instant that it's consumed and we don't know where it's coming from or where it's going, but it all works so I'm gonna ask the engineers to forgive me as I oversimplify the system because I know it's against their nature but they're gonna wanna correct every imperfection in my talk, so please but here we've got an example of these things are massive and this is just one generator in a typical generating station like this we have dozens of subsystems from fuel handling, water purification, turbine monitoring, emissions monitoring that are all controlled by industrial control systems which is a fancy way of saying computers so they all have a cyber threat element so we're controlling them in real time with computers, we're no longer staff to control these things manually we no longer have the skilled personnel to operate the electric sector like we did 50 years ago it's we depend on automation or it wouldn't work here's another example of a generating station and remember we've learned today these are typically large I mean it's changing a little bit but still today we typically have large generators that are geographically isolated we talked about the siting challenges we have with transmission lines well believe me no one wants one of these in their backyard either these are tremendously difficult facilities to build, to engineer and to site and for those of you that I see some colleagues that I've worked with over the years who have gone through this process of getting the permitting getting the rate cases approved so that you can get recovery from your constituents and your customers in terms of paying for these assets and then they have a lifespan of 30 to 40 to 50 years and when we look at the electric infrastructure in North America today we've got a huge percentage of it that's more than 30 years old so that's one of our challenges from a cybersecurity perspective so additional background we gotta get it from where it's made to where it's going so this is a substation again massive facilities and there are thousands of substations in the United States and North America again all of this there's a control room someone you can't see it in this picture but there's a control room that's again full of computers and all of this information that's coming back to these operators in real time we call it telemetry and it works over SCADA systems all of this is coming over computers computer networks, older protocols telephone networks, et cetera back to an operator to make informed decisions so all of that we had a talk earlier this morning where they mentioned situational awareness and that situational awareness is all of that data coming back to an operator so they can make informed decisions so one of the things that I want you to think about in terms of the cyber threat is what if the information the operator is given is incorrect what if it's the exact opposite of what's really happening in the field what if this breaker is open but the operator's console shows it is closed very, very severe consequences this equipment that is extraordinarily expensive difficult to procure and difficult to manufacture and install long lead times can be damaged and loss of life I mean, when we have technicians working on this equipment we expect the state of the equipment to be safe and that decision is helped by the situational awareness and by the operator so we got another transmission substation this just shows the scale of these facilities it's just remarkable if you've ever get an opportunity to tour one or if you do so I mean they are fantastically immense and the fact that they work is amazing so how do we pull it all together well this is an older picture of a control center this is probably a mid 90s vintage maybe early 2000 vintage control center that is a map board that is digitized so they used to have them with push bins and magnets even but all of this information is showing the system operators who would typically sit down here in real time what the transmission system is doing so these are probably substations and generators and then you've got transmission lines in between and the color coding tells the operators how much electricity is going across each line what actions they need to be and this is where they make those decisions that the load the customer usage is now balanced with what is coming out of my generators and at every phase of this operation we have an opportunity for cyber events to take advantage of it and that's what we're trying to protect and we're challenged by this aging infrastructure the aging workforce we don't have human operators every place anymore we certainly have them in our control centers I mean that's but we do not have operators in a typical substation anymore how many people have a meter man that comes to their home to read their meter you know those folks are no longer all of our meters are almost all of our meters are read in an automated fashion and we have old protocols protocols that were designed decades ago where these new cyber threats were not envisioned it's not that the people that designed this equipment were stupid they just had had not occurred to them that someone would maliciously want to take this over and cause the equipment to misoperate was not even in the realm of possibility in their thinking at that time so these protocols were not necessarily designed with security features the equipment gets a message and it executes it so we have a lot of security questions that need to go into that like how do I know that the message that is is coming from a legitimate system operator and that the action that I'm going to take will not be destructive and we have newer protocols now that can allow us to authenticate those messages encrypt the messages etc so that we can help mitigate some of those cyber threats but we're in the same risk management problem that everyone else is upgrading the equipment is capital intensive it costs money it costs people need to go install it and maintain it and we have to balance these risks along with all of the other risks that affect the grid but i will say the threat actors are extraordinarily sophisticated and i've worked to uh... in the utility industry for for many years and have had the opportunity to work in a security operations center where we're monitoring security events across our system uh... both physical you know alarms and and uh... cyber security events i've worked with a number of utilities that that have similar facilities and the number of events that we see is that the challenge is not getting the events it's filtering out all of them and getting to the one in one hundred thousand that's actionable because when we look at our systems we find out that they're being probed constantly and the number of events that we see resulting from probes is the capacity of our equipment to log and get them to us so you know fifty to one hundred events per second uh... on a traditional medium-sized utility that are monitoring their assets so i mean it's just looking constantly for an opening so that i can exploit that system and we there are just fantastic statistics you know if you put an unpacked system on on the internet which you would never do with the control system by the way uh... unfortunately there are people who have uh... there's a search engine out there called show dan which will find them for you uh... i certainly hope they're not our customers i know it certainly would not be our recommended installation but check those systems have a a life span of seconds before they're taken over by an adversary so we have to be diligent we have to engineer our systems uh... to protect the office authenticity of those control messages uh... but it's extraordinarily challenging uh... i will i will leave it with that it's a complex machine uh... we are faced with the aging infrastructure uh... reduction in the skills needed to maintain it and the sophistication of our threat actors is continues to increase so we approaching it in a systematic method uh... the electric sector uh... isack and and nirk do a fantastic job the financial sector does an excellent job as well and and the electric sector sector has been working together for a very long time to address these issues and we're doing so in a in a balanced way and modernizing the uh... the equipment allowing the equipment to use the newer protocols that will authenticate the messages encrypted to keep adversaries out and act in real time to around around issues or problems of any kind uh... will help improve the overall resiliency of the grid so with that i'll open it up for questions for for katelyn or myself thank you very much we uh... we'd be delighted to take a couple of questions uh... if there are some uh... and we are of course over time already yes sir yeah absolutely uh... we're concerned about that as a threat and uh... particularly in the smart grid distribution management systems remote disconnect is the is the threat that we're most concerned about uh... we're most concerned about someone being able to get upstream into a control center environment and with the push of a button uh... disconnect hundreds of megawatts of load immediately and cause uh... imbalances in the system that could cascade and cause widespread outages not that hundreds of megawatts wouldn't be a widespread outage but we're talking now across the the greater part of one of those interconnects so though the systems have been engineered to prevent that while it is certainly theoretically possible uh... that you have uh... from a meter connectivity back to a control center there are numerous safeguards in place to prevent that from happening all the way to the operator control and having uh... you know more than one person pushing the button before we do remote disconnect remove you know uh... controlling the numbers of meters that can be disconnected at a single time those types of things that's a that's a great question well we're going to end with that great question and i'm going to ask uh... katelyn and joes indulgence and and uh... uh... say thank you very very much for your presentations uh... and uh... uh... we obviously need to have a much longer conversation about this but thank you we have one very brief panel and one long panel and uh... i'm going to ask uh... uh... messers fine and and one row to come up and we're going to talk a little bit about uh... the clean power plan that e p a has proposed and what its implications are for transmission and you'll have to forgive us forgive me in particular for not allowing enough time to really explore this in detail uh... but again we're going to be hearing a lot more about this as e p a finalizes its rule this summer so uh... please remember what it is who it is we're talking to uh... steve fine is uh... is vice president of i c f international uh... uh... the energy advisory and solutions practice he's been around the business a long time and and uh... i'm uh... i've seen some of i c f work in this area already is really quite impressive and and uh... and helps convey uh... you know kind of tangible tangible evidence of what the implications of this change in the generation mix that e p a is proposing uh... augurs for the for the future carlman roll course uh... is uh... executive vice president chief operating officer of s p p uh... somebody's known very well certainly our membership carl and s p p are members of of wires and uh... as is i c f actually but uh... carl uh... carl is uh... going to explore uh... a little bit about uh... uh... how an r t o would look at this issue and the kinds of dilemmas uh... that you're facing in terms of a planning for the uncertainties involved in in the clean power plant so uh... i'm going to ask you to try and keep it brief so we don't run out of time unfortunately they're gonna they're going to send in a general looks sort of like that to run us out of here three o'clock so uh... i want to make sure we have enough time for our last group so i'll turn it over we just get the slides i think you're there we go okay all right well good afternoon uh... pleasure to be here thank you jim for the invitation uh... as jim mentioned i c f is uh we're an energy and environmental consulting firm we've been doing this kind of work for a long time uh... and are in addition to that a member of the the wires consortium so i've been asked to be brief i will definitely try to do that i'm gonna talk about the clean power plan one eleven d new source performance standards comes under sort of a a bunch of different names as it's the talk if you're in this part of the in the environmental regulatory part and looking at what environmental regulations are on the on the power sector and we've been looking at these for a long time uh... it's clear that once you look at this that this is just not another air regulation right this is essentially is in many ways rewrites the resource plan uh... of the u s um and really rearranges the u s power map the reduction requirements very significantly uh... and and this came about as a result of not getting federal legislation to uh to control greenhouse gas emissions so what we have is e p a regulating greenhouse gas emissions under the clean uh... air act and everybody said don't do it don't do it you really you need to go down the you should go down the federal legislative route because if you do it through the clean air act which isn't really meant to regulate uh greenhouse gases then it's going to be a mess well here we are um but what e p a is done is given tremendous flexibility to the states i'll talk about this all a little bit more briefly but so state policy design really matters but we don't know what that looks like at all just yet um the the it will result in significant retirements uh in the system coal retirements it's what it's meant to do is to drive down coal generation increase gas generation increase renewable generation and increase the use of energy efficiency so it really is going to sort of rewrite the resource map uh and how the all those things come into balance depends on the standards of e p a sets and we're yet to see a final rule that's coming this summer uh and it depends on the programmatic way in which each individual state will implement those standards will implement obtaining the program to obtain those standards to obtain those standards um and it's clear that given how it's going to rearrange the resource map the transmission has a tremendously large role to play in all this so that's the setup a couple of sort of basics about the clean power plan it was proposed last june e p a is they received comments over two million comments received on new source performance standards and what i'm talking about right now is 111 d as opposed to 111 b 111 d even though it says it's called new source performance standards regulates existing sources the cutoff being january 8th 2014 so if you were under construction or in operation before as of january 8th 2014 you are regulated under 111 d if you are a new unit including new gas units that are being constructed currently or anytime after january 8th 2014 you fall under 111 b which for a gas unit is not difficult to meet it essentially rules out coal without carbon capture sequestration many have argued that you're not going to build a lot of new coal anyway given the economics and low natural gas prices and there's something to that but e p a based it on four building blocks you often hear a block one blocks one two and three one two three and four there's a there will be a lot of legal arguments e p a will be sued over this rule when it comes out a lot about whether there was regulatory overreach there i'm not going to go into all the details right now but safe to say that blocks two through four will be the ones that are going to be legally challenged and for transmission and resource planning purposes it's really blocks two and three that matter block two is the redispatch of coal to natural gas and block three is there's some preserved there's some nuclear in there but it's really about building new renewables and the amount of new renewables that will come on the system so lots to be discussed about the building blocks but in the interest of time i'm going to keep moving i'm going to show you some maps that are based on e p a analysis these bubble charts this third diagram down i'll go into that in a little more detail that show where e p a in their own analysis when that they came out with the proposal rule back in june is expecting to see additional coal retirements where they're expecting to see additional renewables what the shift in generation overall is going to look like and and the purpose of that is just to emphasize the fact that you can agree or disagree with the specific analyses that e p a has done but the fact of the matter is again that the map is going to move and resources as we've known them are going to change and how they have how those resources access load and how they balance the system is going to matter and is yet to be completely figured out and then of course the final rule will be coming out this summer as we said and then states are the ones to implement the programs they have between one and three years to actually write what is the equivalent of their state implementation plans they're not quite called that but they're effectively the state implementation plans where they're going to be coming up with the programmatic ways in which they are going to to meet those rules so you're going to see a parallel process going on here on the one hand there's going to be a lot of smoke and around the legal issues and a lot of i would suggest and you'll see a lot of there'll be a lot of discussion in congress and there'll be a lot of discussion in the courts as to where this rule is going to go and at the same time states are going to have to start moving down that the pathway of putting programs in place so short of a full-on stay by the dc district court the states are just going to have to keep moving so this is just a chart that goes across the 47 states in the lower u.s. vermont is the only state that doesn't have fossil generation but what it does is show the starting rates the fossil rates in 2012 which is what epa based this all on and you can see the states on the left hand chart side of the chart are sort of all those above 2000 and this is pounds per megawatt hour co2 emissions those on the left side of the chart are those that are sort of all coal all the time in their fossil mix those on the right hand side of the chart that are under a thousand pounds a megawatt hour are all basically natural gas all the time with no coal and those states in the middle or some blend between the two and this again is just fossil rate not blending in renewables and nuclear or other non-emitting sources and then the decrement so the 2012 is the starting point the height of the total bar and then those color bars represent the four building blocks that epa used to get them down to the final rate right which is called the best system of emissions reductions and those rates again these are what were in the proposed rule epa is rejiggering some things recalculating some things right now in response to the many comments that it received over two million as i mentioned on 111b by itself and and they're going to be coming out with those final rates come this summer and those rates matter because they have been essentially they differentiate between the states so some states have higher compliance targets some states have lower compliance targets and that sort of alters the playing field right there and certainly the traditional playing field it's already altered from the get go but this alters it considerably more with some states having a larger obligation some states having a smaller obligation i'm going quickly so so this is the first in a series of maps i just wanted to show epa by their own analysis is showing the coal retirements in the u.s is basically going to double by 2020 and that is relative to the base case that they analyzed that included the mercury and air toxic standards so the mat standards which already took out roughly 50 gigawatts that and low natural gas prices certainly have hurt coal economics but that is responsible for roughly 50 gigawatts of coal retirements add on the clean power plan as analyzed by epa and you see another an additional 50 gigawatts of coal retirements and so if you just to put it in context we started before match regulations with roughly the coal fleet of nationwide of roughly 300 gigawatts so and by the time we get to 2020 with the clean power plan we're going to basically weed out 100 gigawatts right so a third of the coal fleet rough numbers is going to be gone by 2020 so that's just a reorientation it's not to say many of those plants were older many of them were relatively inefficient many of them were not controlled hence they didn't make it past the maps bar which controls for mercury and air toxics so there are multiple reasons but the fact of the matter is that the gen the traditional generation mix in this country and that's 300 gigawatts of coal out of roughly a thousand gigawatts were a little bit higher than that now total but you take that and we're wiping out basically a third of the coal fleet so just it's going to rearrange the map again at the same time you're going to have an almost doubling of renewables and this is where you've got wind this is just referring to wind you have some other renewable solar pv in particular solar and some solar thermal coming in looking at EPA's analysis but this just shows you the the green dots are where you're going to see increased amount of wind builds whereas the the white bubbles are where you're going to see decreased amounts of wind build and sort of in the decreases are in the midwest it has to do with a certain way the dpa is sort of set up the interstate transfer of renewable credits versus how rps has actually worked today I'm not going to again go into details but the fact of the matter is that to access these renewables there's going to need to be and we heard that this we heard that this morning that there's going to need to be transmission right because getting accessing good renewable resources and bringing that into the load centers is going to require some transmission and then lastly just looking at generation across the board and this is just gigawatt hour so all generation all resources that are putting power onto the grid some regions are net positive some regions are net negative again this is not arguing good or bad this is arguing that there's factually going to be a big shift in the generation mix of the country and the transmission system is going to have to adapt to that now when you look at power system reliability and there's been a lot of discussion about reliability and how FERC should weigh in and how NERC should weigh in around the clean power plan and how the the individual rto's should be should weigh in on these and we'll hear about that in a minute there are a few things to look at when you look at power system reliability the first is resource adequacy and that is do you just maintain reserve margins right reserve margins are because electricity is a real-time product without the advent of significant storage which is just starting to sort of make its way into the market you need to balance that system on a real-time basis because of that you need to hold the reserve in place typically that reserve is 15 it varies a little bit but that's not a bad sort of back of the envelope number and so when EPA looked at this and looked at the clean power plan they looked at it in terms of resource adequacy and indeed given the changes in the mix so you're retiring coal in one place you're building gas in another place you're building renewables in another place you've got some energy efficiency going on so on balance they looked at the resource adequacy issue and they deemed that it was sufficient that there is and indeed the lights stay on in their analysis what they didn't look at and what they say they're not charged to look at which is true they are the transmission security and the transmission adequacy issues and so i'm sort of teeing it up for Carl because that's really the role of the rto's right to look at that and and and i won't steal any any of Carl's thunder but he can tell you about spp and how they're looking at at this issue so but just keep in mind there are multiple aspects to power system reliability resource adequacy is certainly important but not the only component and again just another segue into Carl's piece various system operators including ERCOT, SPP, WEC, PJM and others my so have sort of weighed in and have looked at this and have come out with their own regional reports. NERC is going to be coming out with a report and so there are a lot of there are a lot of folks that are very concerned particularly with not so much the 2030 date which is where EPA goes with those final targets that i showed you that bar chart but with the interim targets with the 2020 target and there's a lot of concern about how given enough time there's no doubt that the system can adapt it's a question of timing and whether you can get we've all heard about the lead times associated with new transmission projects but can the system adapt quickly enough so last slide very quick just to recap transmission is going to be part of the compliance for the Clean Power Plan the states as we said are going to play a key role and those state programs are going to start to be developed once the final rule is issued this coming summer lots of uncertainty around the impacts will no more once we see the final rule and especially the thing to look for are those interim targets and what happens in in that 2020 time frame the 2030 is less again because of the time to adapt it is less of concern and transmission is an integral piece all of that so with that flyby i'll turn it over to Carl well thanks for inviting me i'm am going to talk about some of the things that actually have been talked about this morning but also steve's done a great job of introducing the subject of transmission and what reliability means from it and as you can see up there that's our mission statement helping our members work together to keep the lights on in the future so you can see that our main mission is reliability itself this is actually a chart that shows both the capacity that we have to create electricity and the consumption on a particular year itself this was in 2013 itself and you can see that at least from sbp's perspective we're pretty much mixed between gas and and coal itself although as coal is actually cheaper to produce electricity we use a lot more of the coal but you can see that we have renewables that are starting to get in there both the we've had traditional hydro but then the wind itself is at least producing in 2013 was about 11 percent in 2014 it was about 13 percent we've had days where 36 percent of the energy or an hour where 36 percent of the energy from sbp was produced by wind itself and we've been constructing transmission these are transmission projects that have been constructed over a nine-year period itself a lot of that construction has taken place in the last three or four years that's about a third of what we intend to build with over the next six to eight years too so we have a lot of transmission projects that are already in process and that transmission was being built both to deliver some of these renewables and to actually provide reliability for that and provide reliable service to our members but also to get the economic benefits of using this mix of generation that we have in and of itself this gives you a chart and this was probably one that was mentioned before that people have seen before is this is a chart of actually the average wind speeds annual wind speeds and then you can see where the sbp footprint is and this includes some members that are joining as of october 1st of this year in north and south dakota and you can see that it's a pretty significant wind development area in sbp and you can see that it is on the west side for the most part it's on the west side of sbp and on the east sides where all the load is even within sbp another interesting thing is from the panhandle of texas to san francisco is actually closer than to go from the panhandle of texas to chicago so in that sense you know we're kind of sitting in the middle of the country with all these natural resources both this and as you can see with solar provision too so there's a lot of potential there to be used in the cpp to to respond to the the intense of that this is just the same thing steve show but this shows the the ones for the sbp region itself a significant number of our states have a lot of work to do to comply this is the the waterfall chart this is what steve was also talking about about the interim goals and the final goal you can see that for the most part we have to meet the interim goals is significantly the final goals anyway and as you can see that's in 2020 and here we are in 2015 rule comes out in summer they got a year to put the the states have a year to put the plan together maybe two years maybe three years and so you only have two three years to respond to that and in some regards building new gas plants may even be restrictive in that point you may be able to build more renewables in that time frame but at the same time we got to talk about transmission too so we did a we did an analysis actually back last year to look at the reliability impacts of the clean power plan and we did that on two things and steve's already introduced both of those resource adequacy or reserve margins is what we call it or transmission impacts themselves so what we did was we just took the expected retirements that steve's already talked about in the rule and retired those generators and saw what the problems were just in retiring that generation itself and we saw that from both the transmission impact and from us a capacity margin or reserve margin impact itself but then we also say well what would be a natural way to respond to the capacity issue with additional generation what would that cause on the transmission system so those are the two parts and the best way to say that is what happens if we comply by just retiring the generators and we don't build any new infrastructure or what happens if we retire all the generators that are expected and add new generation but we still can't build the transmission in the time frame and in both those cases we have to we'd have to make a choice between violating a NERC standard one law in order to meet the other law or the other regulation if you want to look at it that way so we're in a quandary here on 2020 of which law or which regulation do we actually violate this is all those retirements that Steve saw but this shows the specific particular ones at least in SPP and then this was when we did the part two this is where we added generation and the types of generation and you can look at this when you get it to see where we would have expected to add generation again this was based on just the best guess we had about where we would add generation it's not up to us to add generation it's up to the members to add the generation and here's where all the violations occurred from a reliability assessment of the transmission system and this is a reserve margin you can see we have a minimum of 13.6 as reserve margin but by 2020 it'd be only 4.7 which we'd not be meeting that requirement and that would put loaded risk of being able to serve it this gives you an idea of what it takes us to build transmission and that's from the time that we start to study for what we need to transmission takes us anywhere from 12 to 18 months to to get the study done because you want to make sure you're making a wise decision it's 40 year asset you're talking billions of dollars here you want to make a wise decision in doing that and then you actually have to now under order 1000 you have to go out and actually bid this stuff out so that means you spend another year bidding the projects out to get them built in and of itself and then it takes anywhere from two to six years to actually construct it so you're talking somewhere between eight and a half to to ten years to get transmission built from the time that you envisioned just starting the study itself and that's the long lead time that's a long pole in the tent now for for planning is transmission itself and that's why it's important that we understand what the impacts are going to be and have the time to do it so that we can build the correct transmission infrastructure to actually make this work so anyway this just sums up what we talked about what we actually asked the EPA in there is that we needed more time we needed more time to meet the interim goals there's it's it's almost impossible to meet the the interim goals without putting the the load and the transmission system significantly at risk risk but if we have the time we should be able to to meet those requirements and particularly given enough time so that parties can make wise decisions not only the states and how they're going to do the implementation plan but the parties who have to respond with their generation and plans itself and then the transmission that actually lags all of that at the same time we ask for a reliability safety valve so that if you know we're going to cause a reliability problem give us you know don't give us this this choice of violating one rule or the other give us the choice of making sure that we protect reliability of the transmission system we also started another study the end of last year and just completed it it's out on our website if you want to go look at it but this the members came and asked us to also look at what the how we could actually comply with this you know using those building blocks at least what was reasonably to expect that you could do in each of the building blocks how could we comply and what it would cost and then I only want to look at it that way as what would take SPP but we want to look at it on a regional basis and a state by state basis to see if there's a difference between trying to have the states work together to come up with a regional solution and see whether that makes a difference in cost we just completed the regional part of that we've just started the state by state everyone else has done this before has found that a state by state is more expensive than a regional we expect probably that'll be the same case here because you don't get that overall efficiency of the use of the planning and the general and the actual operation of the system on a regional basis that's one reason that we are here because our SPPs here because we get more efficient fishing operation and planning out of a region than we do out of trying to do it state by state so but anyway it will take significant amount even within the regional which is the one that we've published it'll take significant amount of changes in the generation mix which then says there's going to be a significant amount of changes in the transmission system itself so that's kind of where we're at with SPP again we're waiting as Steve has talked about we're waiting for the final rule to see if there's been adjustments in the hopefully an interim goal hopefully they'll give us a a reliability safety valve hopefully they'll make it easier to do a regional approach than it was in the in the draft rule itself so that's what we're really looking at from SPP's perspective again our mission is to protect the members in their delivery and make it where they can keep their lights on so I appreciate your interest thank you Carl and Steve and we when this rule hits the streets in June something like that June whenever we'll probably have another wires university just a delve more deeply into this and because it will raise a whole new set of questions I'm sure but thank you very much we're going to go on to our to our next and final panel I'm delighted to invite up four executives and experts in this area I'm glad you all stuck with us today because this is the pièce de résistance and I looked out the window and don't worry about it it's snowing out there so just stay put let me let me let me let me briefly introduce our last panel and thank you all for coming I also want to recognize that I didn't do it earlier the honorable Mike Ross a former congressman from Arkansas and who now works with the southwest power pool and I'm delighted Mike that you're able to be here this is great support for us Commissioner Phil Moeller joined the FERC the the Federal Energy Regulatory Commission the first the first chairman of the of the FERC hated it being called the FERC because he he was on the hill at the time the legislation that created FERC was drafted and it almost got called the Federal Utility Commission and I I think he never he never quite got over that but but we call it FERC we beloved agency of ours and Phil has been here since 2006 he has been a great friend of transmission of competitive markets he is in his the end of your second term I believe and has approached previously a energy policy advisor to Senator Slate Gorton from Washington and has had jobs in the utility sector I consider Phil be a great friend and a great friend to wires and and I hope he has a third term fourth term anyway thank you commissioner for being here our next panelist is vice president of transmission operations for Pacific gas and electric Greg Lemler Lemler excuse me has been in that job for a while now but he's had almost every other job in the in the MPG&E had various positions in engineering planning maintenance construction project management and his his storied career at at PG&E is is not over and we're we're especially pleased that that Greg chose to last year to have PG&E join our organization his his most recent role with senior director of electric transmission system operations and you know PG&E system is 18,000 miles of electric transmission a lot of it are very high voltages and 960 transmission and distribution substations so he really knows whereof he speaks but the the interesting thing is that that his company is so involved in the evolving western bulk power markets and he may want to say some things about that he's a registered engineer he's an alum of my of my school University of Wisconsin and and he also has MBA so you know a lot of engineers with MBAs I think we we see a a definite trend here but our our next a a panelist is is Mike Skelly who's president founder of clean line energy if you follow the development of big electricity pipelines that has high voltage direct current lines that are interregional in nature and designed to bring renewable energy uh from parts of the country where we have very high quality wind to other parts of of the economy the other parts of the country that is that is clean lines mission Mike Mike was one of the founders of Horizon Wind and was there for a long time he has experience in thermal hydroelectric biomass and energy projects but naturally he he would come home to good old transmission so we're we're delighted that he's that he's here he's he's a noted aim grad and he has an MBA too from Harvard Business School well uh it's my pleasure to introduce Wade Smith I just met today Wade is president and chief operating officer of AEP Texas and the the the this represents a branching out and of of essentially a midwestern big midwestern utility into into new markets he oversees a distribution of electricity for 900 000 customers in central and north texas and as as in that role he he sees all parts of of the grid he was formerly vice president transmission engineering and project services at AEP he's a mechanical engineer uh and uh oh my god he's got an MBA from Abilene Christian University you know I'm feeling sort of inadequate so I'm just going to I'm just going to let this let this go this is an open discussion uh one you can all raise your hands and ask questions but I had the temerity to sort of come up with some with some questions for them to to answer it all seems a little silly right now because um they probably want to talk about what they want to talk about but um let's let's just put this on the table uh how has the role of the grid changed in recent years and and uh do you see new demands on the electric transmission system that are going to fundamentally change your jobs or change the way we think about the high voltage transmission system and um I think that would be an especially interesting question for a regulator too because um well mr chairman would you like me to start well thank you for holding this forum thank you for all attending I'll go just about anywhere to talk about transmission because I've tried to make it the top priority during my terms at the commission because as you probably heard in themes throughout the day depending on how deep you are into this issue it's the ultimate enabler that we have as our fuel mix changes either because of economics or because of regulations transmission allows us to go through that change uh with uh flexibility it's also of course essential to the reliability of the grid something we take for granted but which uh thousands of people work very hard to assure uh little anecdotally 1.2 to 1.4 billion people in the world have no electricity another 1 billion have intermittent electricity so reliability uh is something that they would obviously like something we pretty much have but it's increasingly important uh from health and safety and economic perspective as well transmission can cut customers rates when a congestion on the grid similar to congestion on freeways cost people money because power can't flow to where it's demanded without the cost of a congested grid so it has a variety of benefits the technology is changing some of the people behind those changes are here at the table it's an exciting time but it's still uh it still has its challenges in terms of us expanding the grid which again based on the panel you just heard is perhaps going to be increasingly important particularly in terms of building block three under the clean power plant thank you so I guess I would add to that or perhaps reinforce a couple of the points there and uh this is something that FERC has focused a lot on is the facilitation of market so over the last decade or two we have gone from regulatory construct to where we said okay we got an incumbent utility they have assets they put them in rate base everybody pays for them everybody pays for the transmission and if it's a if the utility makes a great investment then that works out well for the rate payers and if the utility makes a dumb investment that doesn't work out so well for the rate payers and so uh we've gone we're slowly evolving toward a and it's spotting in different parts of the country but we rely more and more on markets and we rely on the markets to allocate capital and to make decisions around resources to a large extent so without a grid that can facilitate the movement of power around these markets don't work very well this is why we have uh I live in Texas we have farm to market roads and uh in similarly in electricity if you want markets to work well you have to they have to come with infrastructure to move power around now many would argue that given the absence of of uh electric infrastructure at a national level one of the reasons we have big differences in value of electricity around different parts of the country is because we don't have markets that are inter-regional and part of the reason for that is we don't have the transmission infrastructure that you need to support some markets but we are slowly moving in this direction more reliance on markets and uh a a recognition I think by everybody in the transmission space that one of the really important things that that wires can do is is facilitate markets and then the other point that that I would reinforce a little bit is as we have built out the grid over the we sort of got a pass on the grid for for some number of years while we moved toward natural gas and the way basically natural gas works is you build a pipe and the pipe goes underground we've got well-established authority to get lots of pipes built and those pipes go to cities you build a gas-fired power plant relatively close to load and off you go so we had a great infrastructure to move energy in the form of natural gas as we look for new options on the energy side renewables are and this is sort of this weird term of art that we use in the wind industry we call it a locationally constrained resource okay which is and we do that with anyhow it seems like a funny term that is only designed for us to understand but what it basically means is it winds out there in the middle of nowhere and you need wires to get it to market so as you as we move toward more slower and more wind we need the wires to get it there and what we've seen over the last decade or so there's been and you saw this in the SPP presentation big actually a fair amount of transmission has gotten built over the last decade a lot of it driven by uh increasing demand for renewable energy so when uh when Carl talked about SPP hitting 13 percent and on days 30 35 percent of their electricity coming from wind that's because SPP and its members have gone about the task of building the transmission system to support those new resources without the grid that would not happen and we see the same thing in Texas where we just underwent a big transmission build out that that i'm sure we'll hear more about um and that is facilitating the integration uh interestingly first of all of new wind but then as uh as new uh oil resources opened up there was actually grid required to get to the to drilling rigs and so on so it supported that now with uh the cost of solar dropping uh almost by the day uh these wires are supporting uh new new uh new solar projects which i think reinforces the point that that commissioner is making about uh the role that the grid can provide in terms of optionality so again the market facilitation and new and new low-cost energy resources are some of the really big trends that we've seen over the last decade and that we think at least in our business that are going to be even more powerful uh over the next 20 years or so so if i could add on to that i think i think the grid is not only enabling everything else that's going on i think it also enables the policies that are coming out from uh either at the federal or state level so for example in california we have a 33 percent renewable goal um that that in essence uh and pgne we're probably 28 29 percent there of our of our sources is renewable which is very very important but what we're finding is is that it not only enables the market and the ability to transport power back and forth but we're finding that it's it's also brought a lot of new innovation i would say to to the to the markets and abilities to provide different resources and we talk about storage we talk about a lot of different things but we're seeing at it at the not only the transmission level but we're seeing it at the distribution level rooftop solars we have for example we have over 150 000 rooftop solar customers at pgne uh three years ago we were connecting about a thousand a month today we're at about four thousand a month and we expect that to grow to about 10 000 a month but what we're seeing though at the distribution level is that there's only a certain amount of rooftops uh that can take solar right the take solar panels and that that capacity is going to run out what we're really seeing at the the policy level again to meet that 33 percent and there and and many of you know there's a discussion at the uh at the california legislator rate legislation to raise that up to 50 percent um but we're seeing really to meet that demand it really requires uh wind it requires utility scale type uh renewables to make that happen and we're seeing a lot of our changes and investments in the in the transmission system required to meet and to deliver that whether it's in it's in the rocky mountains in the east or it's uh down in southern california for us with uh where the most the solar opportunity is but it's really uh utility scale that's uh that's that's really going to make that happen and meet those policies but again it's an enabler so the way we look at it at PG&E is the grid is really and we've we've heard it a lot today is really changing from just a you know deliver deliver power from one end of the other integration uh we are really looking at it as a network uh that that enables um all kinds of technology all kinds of uh interconnections there's there's all kinds of different things that we haven't thought about today that are going to be introduced and want to be interconnected to the grid to buy or sell power or whatever it is and we're seeing a lot of that we're getting a lot of requests for different technologies that aren't necessarily uh making it in the mainstream today and i think that as we move forward to me that's the that's the real vision or where our 21st century grid or whatever you want to call it is going is um it to me it's almost analogous analogous to the uh the internet to a certain extent it's it's really a grid that people want to connect to and do different things um whether it's buy or sell power or connect in their their electric vehicle into one area and charge it and then drive to work and and sell their energy from the electric vehicle at a different location it's just giving that enabling that customers choice customers ability to do whatever they want with that system is where we see it going uh and we at PG&E we've actually coined it as you know you've heard of the internet of things we've coined it as the grid of things it's kind of uh you know whatever you want to call it but um it's that's what that's what we really see the 21st century uh a transmission system as well as a distribution system because for us it's all interconnected it's wires and uh that's that's what we see the the vision of the future from that all right so there's always a risk of going last I would like to start by saying I worked one summer for a few weeks in Albuquerque so I have my new mexico connection for those of you that've been here all day I want to go back though to the stuff that's not changing you were asking what's changing I think one of the things that that's really important for us to keep in mind is and and I think we heard it earlier today um the grid really is the underpinning of our american way of life we have to continue to invest in the grid we have to have a robust grid a resilient grid one that can adapt and that is flexible because if you look at at all that it supports for us today it supports our commerce it keeps our food cold it keeps us well lit at night it provides comfort to us it allows our medical devices to function so it's just critical for us and that's something that's not changing and and having a robust resilient underlying grid is just imperative for us so what is changing as you said earlier today we're asking the grid which was built largely in the 60s and 70s in some cases it was built long before that we're asking it to do things today that it wasn't designed to do and it really wasn't intended to do it was originally intended to connect you know neighboring generation stations to improve reliability well we have to continue to focus on improving reliability enhancing that but I think you're right on target the challenge today is integrating and connecting everything else the grid doesn't pick generation we don't care what the voltage source is whether it's a battery or wind generation you're right we're seeing grid utility scale solar connecting to the grid in texas today on lines that were originally built to connect wind and I think that's just the importance the other thing is just integrating the new technologies that we're developing you think of our industry as being a hundred year old industry you know how innovative our poles and wires at AAP we've come up with a new design for overhead transmission lines that will allow us to increase throughput on where we in the past may have had a single 345 kb line we've got a new line that's developed now that'll let us use the same right away shorter towers and and move one and a half or if we want to make it be a a double circuit line three times the power that we could move down that same existing right ways today so to me the challenge is embedding the new technologies and allowing folks to connect to what you call it the the grid of everything the grid of things yeah grid of things it's a new it's a new mantra I think that's a good approach well if you were to uh to look ahead say 10 or 15 or even 20 years we we may see well it's hard to tell what we're going to say the the the things that are being hung on the grid could be quite different some of the uncertainties that are being created by by law or policy could be resolved maybe not maybe they just create more uncertainties but do you have any this is an immensely unfair question of course you know you look at your crystal ball what what what do you see uh uh uh what's the role for the grid is it is it going to change in fundamental ways in terms of resolving some of these uncertainties can we uh plan a transmission system without knowing what all the gadgets are that are going to be out there that people are going to want to use uh i i think kind of suggests that there is a way to get at that issue but it requires a different kind of planning regimen than we have today or maybe even a different kind of regulation i don't know but uh if if you were to uh time travel a little bit what do you think where do you think we need to be in 2000 pick a day at 30 well i i think uh the main thing to take away is that the grid is going to continue to be very essential and i think of it in terms of after superstorm sandy there was a lot of talk of micro grids and you know i hope i'm not offending anybody here but micro grids are great uh but you know it's going to take a long long time for them to be widely dispersed and the ones we have now are for very specialized purposes like princeton that wants to keep tissue samples that are 70 years old cold so they don't lose them you know they are willing to pay a lot more for that in the meantime we're seeing market expansions throughout the country more and more entities are joining organized markets uh and it's been really quite remarkable just in the last couple years and in my home with the pacific northwest which has generally been hostile to it the effort is growing it's not a full-blown rto but it's essentially taking advantage of the efficiencies that are allowed through a larger transmission footprint where the most efficient uh low-cost power dispersed over a wider footprint adds reliability helps consumers it allows those location constrained resources to access the grid because they're the wind is usually blowing where there isn't a lot of people consuming power somewhat similar to solar so in 15 years we're going to have a grid i believe that will take advantage of of uh additional technology that allows us to see into it more frequently 30 times a second as opposed to once every four seconds for example but it will be as important as ever even if we have developing distributed generation and micro grids because those are still going to need to be interconnected great yeah um whatever we do we need to start now because i've you know we talked about yes takes five to ten years to build a transmission i i would argue that uh it takes five years just to get the permits sometimes ten years to get permits so um it we whatever we need to do we need to do it now because it it takes a lot of time to do that i think i think it really gets back to there i mean it's a multifaceted question there's a lot of variables to play here right and i think though when you get back to uh the policy and the planning component is that's where it really starts and i think it would be incumbent upon all of us uh no matter who it is that's involved in this industry or has influence in the industry to think about how do we how do we expand the grid such that it's modernized it's more resilient whether it's cyber security or physical security tax i mean it's all of those kind of things as well as interconnecting all of the zones that we know their renewables are whether it's wind or solar we know we know where those areas are and i think we need to think about the regional planning or national planning of that and establish policies that enable that to happen i think it starts with that so i would uh i mean thinking about the grid in 2030 um i think it's pretty clear that we will have a less carbon intensive fuel mix and that means a lot more uh either zero carbon or low carbon energy if you think about it from a national perspective we we are actually extremely well endowed with low low-cost energy sources in terms of solar wind natural gas so we this this country is even from a sort of a global competition perspective we're in much better shape than most of the rest of the planet if it comes to reducing carbon footprint now we got a ways to go but we're from just a natural resource perspective we're in a pretty good spot um if we can figure out how to how to get all this done i think the other big thing that we'll see is more uh efficiency will clearly play a role but uh the most popular high-end car in the country these days is a tesla and so we will place new every time we come up with more efficient things we're going to come up with exciting new things to plug into the wall and that will uh and that's noteworthy because it's it's very very difficult to decarbonize the liquid fuel world and it's very hard to replicate a barrel of oil in terms of its energy intensity but with electricity you can make electricity a lot of different ways through naturally occurring phenomena it's really hard to do that uh to in if you're going to try to make fuel so that if if we're thinking about sort of a 20 30 time frame i just have to think that's going to be part of the equation i think some other things that we'll need to see uh i'm going to call it cooperative planning as opposed to interregional interregional seems to you know get people's hackles up but uh cooperative planning i think needs to take place to address some of the issues you were you were talking about um i think we're going to see a better coordination between the gas and electric sectors appreciate what's going on there that's very important if we're going to to be able to really address the the needs of the country as as there's a bigger shift toward natural gas as a fuel um in many cases it it could be a lot easier to move the electricity than to move the gas and i think we have to look at that and figure out the the right approach on that front you know one one trend that we're seeing uh so far is really the what i call the electrification of the transportation industry you know electric vehicles i think that's uh that's going to become much more of an influence and much more of an impact on our industry than than people realize you guys would be seeing it more than anybody what are you what are you seeing uh we're seeing a lot of it we're seeing um uh we're seeing certain pockets of demand picking up but it's again it's a multifaceted grid and planning you've got renewables you got a lot of different things that are going on from a planning perspective but we are seeing a big increase in in electric vehicles and and it's not only the increase from the load perspective but it's also going back to what i mentioned earlier is customers want the flexibility to do whatever they want with the grid just like you can do with your iphone today right you want all kinds of different things right and we're seeing customers that want to again they want to charge up in all kinds of different locations they want to discharge and sell their power back to us in all kinds of different locations not just one interconnection point so we're seeing a lot of that kind of demand where it's it's again not just a single point but multi-point type activity and so there's a lot i think that's going to be a big impact for us as an industry i think the other thing is going to be interesting to see exactly where it goes is uh you know four quarter one thousand it's really just kind of getting off the ground and and as we see what happens there it's going to be important to have a level playing field for everybody that's playing and make sure that you know we're all following the the same approach generally so that it is a level playing field across the country well let me put one more issue on the table and then i'm going to open it up for all you i know you're itching to ask this panel some questions but one one issue comes to mind we're talking about change is new business models at least three of you are involved in uh an industry i think one of you described it as you know building transmission to connect you know the the the local generation with load and and that was about it now we're looking at a transmission anyway as as more of an enterprise there are new entities out there perhaps a clean line as represented one representative example of a non utility transmission company uh those those business models are changing are changing with joint ventures and spin-offs and and new companies that we hadn't even thought of uh 15 years ago any any observations about where all that might be headed from a from a business perspective i are you guys with MBAs i mean we'll be able to have figure this out i'll start um you know it's interesting because we're seeing a lot of different players in the industry not so much owning the wires in the grid i mean there's a there there are there's utility players and they're coming there a lot of the same players are taking different forms um but what we are seeing is a lot of other people getting into the business for example i don't know if you know this but just the other day google announced uh that they're gonna build a utility grade solar facility and partnership with i think it's first for solar and things like that but they're doing why are they doing it i mean why would google be wanting to get into the generation business well they see a benefit from an environmental perspective they see a benefit from a energy perspective but they're doing it to meet their own needs so i think we're going to see a lot more larger more sophisticated customers starting to do their own kind of thing um and then that to me is another player in in our industry and and another customer that we have to uh we have to meet their their needs well and another one like that you know tesla's working on batteries not just for cars but for you know utility applications that that's another place that you're seeing um i think the other piece that you're going to keep seeing it's going to be technology companies like google but it's trying to get at the meter so that they can work to offer products to you know customers uh at a meter you know one of the things we've seen in texas so most of the utilities there have deployed smart meters that are there so that you know they get 15 minute read increments we don't actually sell to end-use customers they're retail electric providers in texas that do that but they're starting to offer all kinds of different products to you can buy prepaid electricity from any of the retail providers if you want you can have free nights and weekends if you want it's just the different products that they're starting to offer to customers to meet their requirements as well as to address the demand issues that the suppliers have so not to be too contrarian i don't think over the next few years we're going to see a ton of business model innovation on the wire side of things uh traditionally uh the the the new upstarts like us on the wire side of things are typically focusing on hvdc projects or seams projects that go between you know new york iso or um and pjm or uh manhattan to new jersey etc but they're not um we haven't seen a lot and i don't think we're going to see a lot of new companies springing up that are in sort of the competitive transmission realm uh other than existing utilities who sort of recast themselves and and largely in defensive mode because they're worried about some other utility coming in and trying to fish in their pond so they've armed themselves up to to go fish in somebody else's pond uh it's a um and it's it and i think fork went as far as they sort of felt they could in terms of creating uh trans uh competition in the transmission space but um you know you really need to go to brazil or certain provinces in canada if you want to find full-on competitive transmission where uh instead of saying hey you invest some money and uh we'll we'll largely put up with your cost overruns and we will guarantee you a certain rate of return that's kind of the world we're in today other folks who've tried to solve for the same riddle have said okay we've got point a to b here uh you tell us how much you need in terms of revenue requirements each year and whoever's revenue requirements are the lowest gets to build the project and so that particular developer and i'm referring here to brazil in particular gets has to optimize their design they have to build an efficient project they have to optimize their capital structure around that and lo and behold the people who pay for all this the rate payers generally get a dramatically better deal out of a competitive process like that and i know that there's folks at FERC who would like to go there but that we don't have the framework in place at at the state level and the federal level to make that happen but if we think about what a a truly competitive world might look like 15 years down the road i think you probably have to focus a little bit on less on the here and now and tweaking the model here and now in the us but and look at at what the how effective competition is and bringing down costs uh elsewhere elsewhere around the world so but absent this sort of fairly dramatic departure from our current regulatory paradigm it's hard to see like huge changes in the business model landscape on the wire side there are opportunities and we're firm believers in that but it's not a wide open competitive world here in the us i agree first credit and i think this started really when you were there jim the commission's been open and certainly i have been to a variety of business models and there is quite a variety out there in terms of some of the projects over 1000 trying to inject more competition but they're the merchant uh proposals that we have certain guidelines on in terms of how we approach them there are a lot of joint ventures i think of the sunrise project in sandy in the san diego area which was both a utility and and you know citizens energy building a power line we've we've seen again more interest in the concept of of an outside developer joining perhaps an incumbent utility there's a obviously there's ways to go particularly on the interregional which we really didn't tackle in order 1000 and it has a lot of potential but there's such order 1000 fatigue right now that we kind of have to get through this before we i think take on any any big major issues but there were issues i had with order 1000 i didn't think we made the right call overall i thought it had benefits and at least one example of that is when pjam put out their bid for the artificial island which was a area where there are nuclear plants a long time issue that had to be resolved and they got 27 bits in that ranged from i think 157 million to 2.1 billion and then there were three finalists and we haven't resolved it and there will probably be litigation to go but the point is you inject some competition you get the the creative new approaches that ultimately assuming you know ultimately benefit ratepayers and hopefully the reliability of the system as well that's that's very that's a very great answer right questions for this panel yes kurt hi kirk you're on with stan teck i have a question i guess follows on some of the dialogue and conversation that we've had today how do you anticipate the transmission grid being able to respond to consumers non-logical decisions in other words it's hard to make a cost-effective argument for an outie but yet people buy outies all the time and i think we're seeing that now where consumers are making decisions to to buy new technologies and implement new technologies that don't make good cost-effective sense and we need to anticipate where those decisions are going to go in the future so how do we do that and in particular how do we do that when we are looking at the logic model for new transmission in terms of a cost benefit analysis thank you i guess that's a tough question nobody wanted it i think it when you when it really bottom line if you get to the bottom line it's all around the price signals to that consumer or whoever and that customer that wants to interconnect to the grid and it really gets back to the markets if there's a if there's a robust market and there's a price signal or an opportunity to reduce that price i think that's really what the trigger is and i don't we don't we don't have that yet i don't believe in our industry especially even at the distribution level you know customers aren't seeing that level and i think it's really it really boils down to that if we can get to that point where if you want to buy an audio and you can afford it you can buy one i mean that's what we've got to get to yeah so i would question that the premise of the question i mean people buy outies because they like them and it's a i don't have one but it's a you know i've written in them they're nice cards and they perform well and there's a certain prestige associated with them and those are i don't know maybe in some people's view that's not a rational thing but it's i think we need to accommodate consumer preferences rational or not and i think that's what you're getting at so somebody says i want solar panels on my roof because that's cool then what we ought to do is say you can do that uh and you're going to get roughly the wholesale value of that electricity we're not going to subsidize it because you're typically you know you're probably driving an Audi or a Tesla as well with your solar panels so you're in a certain income bracket and we shouldn't subsidize that but if you want to show off to your friends that you've got cool solar panels on your roof then you know we should make that option available to you if i could add to that if i may i think it's all around i i think where we're going with the grid and the grid of things and that kind of uh enablement we the the rate structures associated with really have to match that and they don't today i mean you look at the internet right i don't know what you pay but between internet and cable tv i i think i'm paying about 200 bucks a month a fixed rate and i use it a lot i got unlimited access to it so uh whereas the electric system it's you know you pay on usage so i think we've got to somehow make sure that the rate structure matches uh the you know where we're going with it with the grid just explain that explain that the rate structure yeah no i can't very important i can't no say non-subtle point yeah we don't have enough time i don't think really well that's what i want to build on i'll twist the question a little bit in that uh it was alluded to by michael but we have this like it or not this complex tension between state and federal regulation our state colleagues regulate the distribution side we're at the wholesale level one trend to watch for is those are somewhat converging with distributed generation and there's probably a battle on the horizon related to jurisdiction over some of those power sales but setting that aside uh it's easy for me uh to talk about the retail rate making because i don't have to face the consequences but that doesn't stop me um and the fact is that consumers are not seeing accurate price signals now at the retail level and and i hope they do because i think it'll be transformational will be uh you know every other aspect of our lives we see some kind of dynamic or real-time pricing whether you're going to a sporting event or airline ticket gasoline that you're buying uh you know we're in a new world that's different than 10 years ago on electricity you're paying you know flat rates maybe seasonal rates but the reality is that that the value of that product is is is enormously expensive for 200 hours a year but you're you're paying the same rate you play in the middle of the night and uh if consumers got accurate real-time price signals and it's it's really not about uh the poor getting hurt because they're already paying it arguably they are subsidizing rich people right now uh when when energy is the most valuable so i think we've got great potential that will empower consumers to make decisions that are more rational based on the value of the product and and i think we'll have a much more efficient system however it's going to be controversial and and again that's why it's easy for me to expound on it because i don't have to face the heat great question yes sir let's wait for the mic here and i'm brent nelson i'm a triple a s policy fellow at doe my question is kind of related to your last comment which is i was wondering if you could comment on impacts and opportunities for peak shifting and the impacts that would have on transmission either through demand response or load scheduling or storage our other means some of the product that was mentioning in texas or that's exactly what they're doing the customers don't know that's exactly what they're doing you know but when you're offering free nights and weekends they're really trying to shift their peak you know off to get folks out of the on peak times and get into real-time pricing is really a challenge some places you know folks are really against even having a smart meter which is just an advanced technology installed at their home but i think ultimately it's kind of where you have to go so i can give you a real-time example we right now we have a lot of solar that's come into our service territory especially on the southern end and obviously the best time for solar is in the afternoon we get a lot of it and the load tends to come up our peak is just right around sunset or in the latter part of the day especially in the wintertime well what we find what we're finding is that there's almost too much solar during that time period to where we need load we're looking for load to offset the solar so we don't have to i know the ISO is looking so we don't have to to curtail solar i mean you don't want to get into that situation right so we are we have our helms pump storage about a 1200 megawatt a facility down in that area we now pump during the day which is just kind of those that have been around the industry i mean it was always to run at night and you know it offset the demands of the central power stations etc so the the whole load and the forecast and the and the demands and things of that are certainly changing big time and we're seeing it today and the solar is obviously being very disruptive in this sense and uh hawaii is really grappling with it right now it's the over generation issue that's kind of flipped the traditional peak shifting on its head still most of the country is going to have most of the population until we'll have the traditional peak shifting problem uh midwest east coast unless there's just massive solar penetration but um but it's an exciting time and i think people pay attention to what the hawaii commission is doing will be very informative and then california is not far behind all right so i'm gonna kind of rat out my wife so i'm glad she's not here i've been in this industry for 26 years she comes in one night we you know i'd mentioned that it's going to be a high peak so there's you know it's going to be kind of tight that afternoon so she says so should i not run the dishwasher and do the clothes okay so my wife who i talk about this stuff frequently at home you know there's no price signal at home but it's like well yeah you should she goes so will it be cheaper it's like well no but it's the right thing to do right so let's conserve right now and then we can we can do the dishes later this evening again it's the disconnect it's there and somehow we've got to be able to communicate that to really drive home those programs and methodologies you're talking about Michael no um well my only comment is is uh if i'm gonna ask waited to talk to my wife as well because my wife thinks i have the most boring job on earth and she won't even let me talk about this stuff at all Dan we've got time for one more question then why thank you and as much a comment as a question but there's you saying there's a disconnect at the residential level i want to say there's also i think a disconnect at the market level so if you're trying to run a pump storage plant you put individual bids and offers into the market they can take one but not the other so you're committed to to uh you're committed to pump but you may not have the they may not take your energy or they'll take your energy but but you won't get the energy to be able to pump because those are broken apart plus also the system is set up to give you an incremental uh tax essentially on a losses and which is a surcharge in order because of that but when you're really doing fuel storage and fuel delivery you're paying a tax to to to provide future value you're providing a tax to to return that and that money doesn't go to the generator it reduces it reduces the economic performance of the person who wants to do pump storage so there's uh there's not only disconnects once you get into storage there's a whole set of disconnects that also apply at the market level and i guess if it wanted to be a question what are we going to do about that so let me comment i i think it's not only storage but it's also markets so in california the iso started the energy and balance market to help deal with those those issues this over generation issue and it's actually working and it's working very well by just basically bringing in a broader portfolio of generators we're going into pacific corpse area they've joined nevada others that can help balance that out so markets is also not an option well before i adjourn this this panel i want to thank them for stimulating discussion all together too short i'm afraid but while we're filing out i want to make sure that everybody thinks about giving us giving wire some feedback on today's session you can find us at hushblackwell.com or find me there anyway or you can tweet us at at wires group or you can contact us through our website wiresgroup.com it's been a splendid day we had a great deal of fun we had some great great panelists and you guys were just terrific you capped it off so thank you very much