COMMONWEALTH OF PENNSYLVANIA HOUSE OF REPRESENTATIVES
CONSUMER AFFAIRS COMMITTEE PUBLIC HEARING
STATE CAPITOL HARRISBURG, PA
MAIN CAPITOL BUILDING ROOM 14 0
MONDAY, APRIL 8, 2 019 11:00 A.M.
PRESENTATION ON HOUSE BILL 11, UPDATING THE PENNSYLVANIA ALTERNATIVE ENERGY PORTFOLIO STANDARDS (AEPS) ACT
BEFORE: HONORABLE BRAD ROAE, MAJORITY CHAIRMAN HONORABLE SHERYL DELOZIER HONORABLE JOE EMRICK HONORABLE FRANK FARRY HONORABLE RYAN MACKENZIE HONORABLE THOMAS MEHAFFIE HONORABLE CARL WALKER METZGAR HONORABLE ERIC NELSON HONORABLE TINA PICKETT HONORABLE THOMAS SANKEY HONORABLE MARTINA WHITE HONORABLE ROB MATZIE, DEMOCRATIC CHAIRMAN HONORABLE RYAN BIZZARRO HONORABLE DONNA BULLOCK HONORABLE AUSTIN DAVIS HONORABLE TINA DAVIS HONORABLE MARTY FLYNN HONORABLE ED NEILSON HONORABLE PETER SCHWEYER HONORABLE PAM SNYDER
* * * * * Pennsylvania House of Representatives Commonwealth of Pennsylvania 2
COMMITTEE STAFF PRESENT: PHIL KIRCHNER MAJORITY EXECUTIVE DIRECTOR HEATHER RODGERS MAJORITY LEGISLATIVE ADMINISTRATIVE ASSISTANT II JES BLAIR MAJORITY ADMINISTRATIVE ASSISTANT TRAINER
ELIZABETH ROSENTEL DEMOCRATIC EXECUTIVE DIRECTOR BRETT BIGGICA DEMOCRATIC RESEARCH ANALYST TIM SCOTT DEMOCRATIC RESEARCH ANALYST 3
I N D E X
TESTIFIERS
* * *
NAME PAGE
TOM RIDGE FORMER GOVERNOR AND FIRST SECRETARY OF HOMELAND SECURITY...... 6
MIKE PRIES COMMISSIONER, DAUPHIN COUNTY...... 15
STEVE BRAME VICE PRESIDENT OF PUBLIC AFFAIRS AND MEMBER SERVICES, PENNSYLVANIA RURAL ELECTRIC ASSOCIATION...... 21
DAVE GRIFFING VICE PRESIDENT OF GOVERNMENT AFFAIRS, FIRSTENERGY SOLUTIONS...... 25
KEVIN SUNDAY DIRECTOR OF GOVERNMENT AFFAIRS, PA CHAMBER OF BUSINESS AND INDUSTRY...... 49
GLEN THOMAS PRESIDENT, GT POWER GROUP...... 54
TODD SNITCHLER VICE PRESIDENT OF MARKET DEVELOPMENT, AMERICAN PETROLEUM INSTITUTE...... 61
DESIREE HUNG AARP PENNSYLVANIA...... 68
SUBMITTED WRITTEN TESTIMONY
* * *
(See submitted written testimony and handouts online.) 4
1 P R O C E E D I N G S
2 * * *
3 MAJORITY CHAIRMAN ROAE: Good morning, everyone.
4 It is now exactly 11 o'clock, so I'm calling this public
5 hearing of the House Consumer Affairs Committee to order.
6 The topic we have before us today is House Bill
7 11. There's going to be two panels today. The first panel
8 is going to be speaking in support of House Bill 11, and
9 the second panel is going to speak in opposition of House
10 Bill 11. Each panel is going to have 55 minutes to make
11 their presentations, and it's my understanding that both
12 panels plan on speaking for 20 or 30 minutes and leaving
13 the remainder of their time for questions from the Members.
14 So at noon we're going to switch to have the second panel,
15 and then we're going to close the meeting hopefully at
16 about 12:55 or 12:56 so Members can get to the Floor.
17 Of all the issues I've seen in the Legislature
18 since being elected 12 years ago, this is probably one of
19 the most complex and technical issues that we've faced.
20 There's a lot of moving parts with this, and I thought it
21 was important that Members have an opportunity to learn as
22 much as possible about this very complex and technical
23 issue. So we're going to hopefully learn a lot today.
24 And it is interesting. People supporting the
25 legislation say that if we don't do it, our electric bills 5
1 are going to go up. People opposing the legislation say if
2 we do do it, our electric bills are going to go up, so
3 hopefully that can get clarified a little bit today.
4 And I'm going to have the Democratic Chairman,
5 Representative Matzie, make an opening statement if he
6 would like.
7 DEMOCRATIC CHAIRMAN MATZIE: Thank you,
8 Mr. Chairman.
9 Just read briefly so we can get to the testimony
10 and the Q&A, I want to thank you for your leadership as the
11 Majority Chairman and ensuring that all sides are heard on
12 this issue. I think it was important to have hearings on
13 this bill and actually have a legislative process work. A
14 bill was drafted, a bill was introduced, and now, as the
15 Committee Chairman in which the bill was placed, you
16 decided to have hearings, multiple hearings, so I commend
17 you on that and look forward to the robust discussion, so
18 thank you.
19 MAJORITY CHAIRMAN ROAE: All right. With that,
20 the first panel -- I'm just going to introduce everybody
21 now. The first panel is going to be Tom Ridge, who's the
22 former Governor and first Secretary of Homeland Security;
23 Mike Pries, who's a Dauphine County Commissioner; Steve
24 Brame from the Pennsylvania Rural Electric Association; and
25 Dave Griffing from FirstEnergy Solutions. 6
1 And so, as I Stated before, the panel will have
2 55 minutes, so go ahead, Governor, when you're ready, and
3 start your testimony. Thank you.
4 MR. RIDGE: Thank you, Mr. Chairman. Chairman
5 Roae, Chairman Matzie, Members of the Committee, I want to
6 thank you for the invitation to join you this morning.
7 Today, I would like to address certain aspects of House
8 Bill 11 that touch on issues that I was engaged in both as
9 Governor of the Commonwealth, especially the restructuring
10 of the electric power industry, and issues that I dealt
11 with as the Nation's first Homeland Security Secretary,
12 including the implications for national security and the
13 safety and security of the Commonwealth.
14 It's no secret I support the passage of House
15 Bill 11, and I appreciate the opportunity to share my point
16 of view with you and your fellow Committee Members. For
17 me, it's all about maintaining Pennsylvania's energy
18 leadership, our national security, and, as equally
19 important, the State's ongoing need for a clean as well as
20 business-friendly environment.
21 Pennsylvania and the Nation need diverse energy
22 resources to ensure our national security and global
23 competitiveness and to maintain our leadership role around
24 the world. As former Governor and Secretary of Homeland
25 Security, I've come to appreciate that only an electric 7
1 grid built on diverse and stable sources of energy can
2 withstand evolving threats and frankly keep the lights on.
3 As a critical source of energy that runs 24 hours
4 a day, seven days a week for 18 to 24 months at a time
5 without refueling, nuclear energy is a critical component
6 of a resilient electric grid. In my opinion, grid
7 resilience cannot be met without nuclear power, and grid
8 resilience is a key component of our national security. If
9 you think about it, we've got three -- the Secretary of
10 Homeland Security had to deal with multiple economic
11 sectors, but the three that are most prominent in my mind
12 in the area of critical infrastructure, telecommunications,
13 finance, and energy. Think about where we go without
14 redundancy and capability in those three.
15 Nuclear generation is most reliable and lowest-
16 cost source of zero-carbon electricity. You don't have to
17 take my word for it. There are recognized experts -
18 you're aware of them -- MIT, Penn Union of Concerned
19 Scientists, and others -- who testified to that effect
20 during the extensive hearings conducted by the Pennsylvania
21 Legislature's bipartisan, bicameral Nuclear Energy Caucus.
22 Nuclear power's combination of secure fuel and
23 zero-carbon attributes frankly I think make it uniquely
24 valuable. The Pennsylvania State Legislature already
25 recognized those values when it overwhelmingly adopted 8
1 resolutions in support of fuel-secure resources in October
2 of 2017. That concurrent resolution specifically
3 recognized that the current design of the wholesale
4 electric markets results in prices that undervalue,
5 undervalue fuel-secure generation sources.
6 As you well know in the leadership positions that
7 you hold, States have the responsibility to their citizens
8 and the authority to ensure fuel diversity and compliance
9 simultaneously with Federal and State environmental goals.
10 This is best accomplished in my view by defining goals and
11 using a balance of competitive market forces and
12 requirements for direct markets to accomplish outcomes that
13 benefit the health and welfare of our citizens.
14 As you recall, as Governor, I lead the effort in
15 the mid-1990s with bipartisan support I might add in this
16 Pennsylvania Legislature to restructure Pennsylvania's
17 energy market. This has led to millions of dollars in
18 savings for the citizens of the Commonwealth and a strong
19 foundation to accomplish other results. The restructuring
20 did not change the State's authority and responsibility.
21 However, it met Federal laws, including goals for clean
22 energy.
23 One tool that Governors and State legislators
24 have utilized in over 30 States are portfolio standards.
25 As you again are well aware, such standards determine key 9
1 attributes needed to support the State's efforts to meet
2 clean energy goals and compliance with Federal pollution
3 rules. After I left office, the Pennsylvania Legislature
4 took action and established the Alternative Portfolio
5 Standards to ensure clean energy and attract investment.
6 This was done under a competitive structure that
7 complements the energy market restructuring we had
8 previously established in the Commonwealth.
9 While the AEPS casts a widely inclusive net over
10 existing clean energy resources, it missed one clean energy
11 resource: nuclear. Nuclear is the Nation's and the
12 Commonwealth's largest clean energy resource. The energy
13 market structures we have in Pennsylvania, they are robust,
14 and they will accommodate changes to AEPS to put nuclear
15 energy on a level playing field. Including nuclear energy
16 in the AEPS will not hinder competition and the ability of
17 customers to buy electricity.
18 The PJM, they auction energy every five minutes.
19 They've got to be competitive every five minutes. AEPS has
20 and will continue to coexist with competitive markets
21 energy. It will still be procured in a competitive market
22 at the lowest cost. Every five minutes, the lowest cost
23 gets the bid.
24 The AEPS provides a way to recognize other
25 attributes which I think we value as citizens and should 10
1 value as representatives of these citizens and procure
2 mixed results that benefit the health and welfare of our
3 citizens. It is not prudent to wait for action from other
4 court orders such as the Federal Government or PJM.
5 Today, the Commonwealth and Nation face numerous
6 both manmade and natural threats -- and remember, directed
7 toward these three critical pieces of infrastructure of
8 which I think energy may be the most important -- from the
9 polar vortexes, the terrorist attacks, to cyber attacks
10 that wholesale markets were not designed to handle. There
11 is a misalignment of market incentives and resilience in
12 the face of such threats. These market gaps have resulted
13 in inadequate revenue to maintain and operate the most
14 important resources needed to provide reliability and price
15 stability during extreme periods such as during an extended
16 deep-freeze or, heaven forbid, a failure of a major
17 pipeline.
18 Now, nationally, and I think this can't be
19 underscored enough, nuclear energy accounts for barely 20
20 percent of our power according to the Energy Information
21 Administration, and that share is declining, ladies and
22 gentlemen, as more plants come off-line. Interestingly
23 enough, China has embarked on a high-profile campaign to
24 build 60 nuclear power plants over the next decade. The
25 U.S. has closed or retired 13 since 2012 with an additional 11
1 20 at risk, 20 at risk of shutting down in the coming years
2 according to industry experts. If current trends continue,
3 nuclear could fall to just 10 to 15 percent of our energy
4 supply. In my judgment, that's a dangerously low
5 percentage from a national security standpoint.
6 This retreat risks another element of our
7 national security, leverage over how other nations use
8 nuclear power. When other nations buy Russian and Chinese
9 nuclear exports, as they increasingly do, Moscow and
10 Beijing and not Washington set the standards. That is why
11 last year over 70 former U.S. Statesmen and military
12 leaders and national security officials sent a letter to
13 the Secretary of Energy making a strong endorsement of
14 nuclear energy's national security importance. I'm merely
15 here to second their endorsement and that point of view.
16 Pennsylvania's historical leadership in nuclear
17 energy is at risk. The premature retirements of Beaver
18 Valley, Three Mile Island, and potentially other nuclear
19 plants within the Commonwealth will put Pennsylvania in the
20 category of other States that watched why they lost these
21 valuable resources. They're assets, and they ought to be
22 viewed as assets such as the resource lost in Vermont. And
23 if you take a look at what happened to that community after
24 they closed the Yankee plant, it's very revealing in terms
25 of the economic impact. 12
1 Securing Pennsylvania's leadership in nuclear
2 energy by including within the AEPS -- frankly, we're all
3 in the business of saving and promoting jobs -- this will
4 save jobs, keep America secure, and retain a critical asset
5 to our energy infrastructure. Two-thirds of Pennsylvania
6 voters believe the State needs to be more active in
7 addressing climate change according to a recent Franklin &
8 Marshall Poll. A majority of them believe nuclear power
9 should be part of the State's strategy. Similar polling
10 results are being seen across the country. It's only a
11 matter of time before the Federal or State legislation will
12 require more carbon-free electricity.
13 Nuclear power generation is also vital to local
14 growth and opportunities. When I was Governor, we spent a
15 lot of time making sure to keep the jobs we had right here
16 in Pennsylvania. You know, it's always been exciting when
17 you can attract jobs into PA, but before you attract them,
18 you don't want to replace ones you lost; you want to build
19 on the jobs you already have. That's a good philosophy to
20 take, and I think it's a philosophy we ought to apply in
21 House Bill 11 as well. I know that's your priority,
22 preserving jobs and creating new ones, so I think I'm
23 speaking to the choir in that regard.
24 Pennsylvania's status as a net exporter of energy
25 -- think about that -- is an extremely important economic 13
1 engine for the State. Retirements of nuclear power plants
2 are permanent. They're permanent and irreversible, and
3 once gone, the plants, the facilities, and the jobs are not
4 coming back. And, by the way, the nuclear engineers that
5 retire from Penn State may end up working over in China as
6 they build 60 power plants and we're closing ours.
7 Let me, if you will, share a personal
8 recollection in the weeks and months following 9/11 after I
9 was asked by the President to leave a job I loved to join
10 him at the White House and assume the responsibilities of
11 Homeland Security Advisor before we built the Department.
12 One of my early priorities was to better understand our
13 national defense and the industries that support it to help
14 keep our country safe. It was during this time that I was
15 able to personally experience the professionalism, the
16 dedication, and the expertise of the men and women who
17 operate our nuclear plants here in Pennsylvania and, by the
18 way, across the Nation. All Pennsylvania should be proud
19 of the professionals who operate these incredibly complex,
20 complicated, highly regulated, valuable assets and proud of
21 the role our Commonwealth has played for more than a half a
22 century as a national leader in nuclear energy.
23 Now the famous part of anybody's testimony at
24 least from your point of view, let me close. Let me close
25 with this. Pennsylvania has control over its energy 14
1 future, and over the years, I've been privileged to talk to
2 a lot of people about government and politics. It's
3 something that you and I feel are very important, or else
4 you wouldn't be where you are, I wouldn't be where I have
5 been and here today. Politics is always about tomorrow.
6 And when I talk to younger people, I say you ought to be
7 more interested in politics than I am because you have more
8 tomorrows than I do. They have more tomorrows. The
9 calendar guarantees they have more tomorrows. And so this
10 is a policy decision about the kind of Pennsylvania we want
11 for tomorrow and frankly the kind of country we want for
12 tomorrow.
13 This Committee has before it a bill I believe it
14 furthers the objectives of our State and frankly of our
15 country, a future of clean, reliable energy, continued
16 status as a net exporter of energy, and preservations of
17 thousands and -- I like this notion -- of family-sustaining
18 jobs. You know when they closed the Vermont facility, the
19 average -- I don't know what the average salary up there
20 was, but in Vermont the average salary was over $100,000.
21 Those are family-sustaining jobs. They were lost. Adding
22 nuclear power to the AEPS, it's compatible with competitive
23 markets. The market will continue to be competitive. It's
24 competitive every five minutes, and it will strengthen and
25 preserve one of the Commonwealth's most resilient resources 15
1 of electricity. The goal of good resilience, reducing our
2 vulnerability and enhancing our safety and security, cannot
3 be met without nuclear power.
4 As a former legislator, I appreciate the work you
5 and your Committee are doing, Mr. Chairman, and I
6 appreciate the kind invitation to express my points of view
7 this morning. Thank you very much.
8 May I invite my other colleagues to join me?
9 MAJORITY CHAIRMAN ROAE: Yes, the other members
10 of the panel can come to the table at their convenience.
11 And whenever you're ready, just introduce yourself and
12 start your testimony, whoever's going to go next.
13 MR. PRIES: Good morning, everyone. My name is
14 Mark Pries, and I'm a Dauphin County Commissioner, and I
15 just want to say, Governor, I get to tell my children that
16 I got to follow-up not only Governor Ridge but the first
17 Homeland Security Director in this great Nation.
18 MR. RIDGE: Be careful who you share that with.
19 MR. PRIES: It's truly an honor, truly an honor.
20 And I want to thank each and every one of you for the
21 wonderful job you do representing your constituents in your
22 legislative districts across the Commonwealth of
23 Pennsylvania.
24 As I said, my name is Mike Pries, and I'm a
25 Dauphin County Commissioner. I'm also proud to serve as a 16
1 Co-Chair of the Clean Jobs for Pennsylvania Coalition.
2 When this broad-based community coalition was formed almost
3 two years ago, we sounded the alarm for the need for a
4 State solution to place nuclear power on equal footing with
5 other zero-emission energy sources throughout Pennsylvania.
6 Without action, Three Mile Island will shut down
7 prematurely this fall, and the two-unit Beaver Valley plant
8 will do so in 2021. I fear our State's three other nuclear
9 plants will not be far behind, so I applaud this Committee
10 for holding this hearing today as the clock is ticking on a
11 solution to this extremely important issue.
12 This morning, I would like to address the
13 significant positive local impact we see from having Three
14 Mile Island operate in our community. I know from talking
15 to my colleagues that these same impacts are felt in the
16 other Pennsylvania communities near nuclear plants as well.
17 TMI is an asset to our community in so many ways. It's a
18 major employer for our local residents, providing close to
19 700 well-paying, steady, family-sustaining jobs. These
20 people buy homes in our neighborhoods, have kids in our
21 schools, and volunteer in our local fire companies. They
22 are part of us.
23 Beyond the permanent jobs, there are tangential
24 services and companies that rely on Three Mile Island and
25 its employees, local restaurants, stores, contractors, et 17
1 cetera. That's not to mention the influx of workers who
2 come in during regularly scheduled outages. During these
3 maintenance outages, which will occur this September, TMI
4 employs about 1,200 to 1,600 supplemental workers for a
5 period of four to six weeks. These folks stay in our local
6 hotels, eat in our restaurants, and shop in our stores. If
7 the State Legislature takes action, TMI will perform
8 another refueling outage this fall, creating these
9 additional jobs. And I might add that, of those employees
10 that come in, that's literally 36 to 48,000 room nights in
11 Central Pennsylvania at our local hotels.
12 Many of these men and women live in the area and
13 are members of the Central Pennsylvania building and
14 construction trades. If action is not taken, all of these
15 jobs will be lost forever. As a County Commissioner, I
16 know job retention is as important as job creation. With
17 these workers comes a tax base that our community depends
18 upon as well. TMI itself contributes more than $1 million
19 in property taxes each year, and this is in addition to the
20 taxes that TMI employees pay. The total TMI payroll comes
21 in around $60 million annually. This loss would impact our
22 police force, our fire departments, and especially our
23 schools. The closure of Three Mile Island would result in
24 $700,000 in tax revenue in the Lower Dauphin School
25 District alone. Our local taxing authorities will have to 18
1 cut services or increase taxes, and that is a reality.
2 From a community-giving perspective, TMI and its
3 employees are extremely generous and contribute more than
4 $300,000 a year in charitable giving to area nonprofits.
5 They are a top giver to the United Way agency, a prime
6 sponsor of a mobile bookmobile that provides books and
7 computer access to underserved areas within our
8 communities. TMI has contributed close to $700,000 to the
9 Londonderry Fire Company, allowing them to purchase much-
10 needed safety equipment without raising taxes on the
11 residents who benefit.
12 Speaking of first responders, TMI paid $425,000
13 in fees to the Pennsylvania Emergency Management Agency in
14 2018 alone. PEMA redistributes most of these funds to
15 counties and municipalities around TMI for all hazard
16 emergency planning. Those fees will dry up in about a year
17 or two if the plant closes. It's likely that full-time
18 emergency management positions will be lost as a result,
19 and so will much-needed training and drills. It's because
20 TMI funds that position here in Dauphin County. TMI also
21 currently provides all hazard emergency management training
22 to our local fire companies. That service will also be
23 discontinued if the plant closes.
24 Beyond its significant positive socioeconomic
25 impact, TMI generates enough zero-emission energy for 19
1 800,000 homes without polluting our air. In fact, TMI
2 generates more zero-emission energy than all other
3 renewable energy sources in Pennsylvania combined. Why in
4 the world would we not want to include nuclear in our State
5 zero-emission program into the future?
6 Pennsylvania should learn from the cautionary
7 example of Vermont and Wisconsin, which recently allowed
8 nuclear plants to close prematurely. Studies and
9 experiences in other States show that when nuclear plants
10 shut down, the cost of electricity increases. Among the
11 hardest hit by electricity price increases are our senior
12 citizens on fixed incomes. Further, since the single unit
13 Vermont Yankee plant closed in 2014, the local municipality
14 cut its budget by 20 percent and eliminated its police
15 force, this after residents saw a 20 percent property tax
16 increase.
17 In Wisconsin, electricity prices increased by 5
18 percent after the early closing of the single unit Kewaunee
19 Power Station, and Kewaunee County lost 30 percent of its
20 tax revenue. In both States, greenhouse gas emissions
21 increased right after the plants closed. This is what
22 awaits us here in Pennsylvania without action.
23 But this issue is not unique to Pennsylvania.
24 When faced with similar challenges, New York, Illinois, New
25 Jersey, and Connecticut have all adopted zero-emissions 20
1 certificate programs and have been able to keep nuclear
2 plants operating and their air cleaner. I believe it's
3 time for Pennsylvania to do the same.
4 And you know what, Pennsylvanians think it's time
5 to do the same, too. Our coalition just last week asked
6 the experts at Harper Polling here in Harrisburg to conduct
7 a Statewide poll of 500 likely voters. The survey found
8 that not only do 63 percent have a favorable opinion of
9 nuclear power, 72 percent said they would be more likely to
10 vote for a State legislator who fights in Harrisburg to
11 keep nuclear power plants open. Only 9 percent said they'd
12 be less likely. And more to the point of House Bill 11,
13 when asked if they would favor a proposal being considered
14 which would add nuclear energy to Pennsylvania's AEPS
15 giving nuclear energy many of the same incentives as wind,
16 solar, and hydroelectric and would help keep electricity
17 prices in check, a whopping 75 percent said they're in
18 favor. That's three out of four likely voters who said
19 just last week they would support House Bill 11.
20 In closing, the clock is ticking. We've sounded
21 the alarm. My constituents, your constituents are counting
22 on you to get this done. Let's not look back five years
23 from now and ask ourselves why did we allow these jobs,
24 these economic engine drivers, to get away? I urge you to
25 take prompt action to pass House Bill 11 to ensure our 21
1 State continues to enjoy the economic, environmental, and
2 reliability of our zero-emission nuclear power plants.
3 Thank you.
4 MR. BRAME: Thank you, Chairman Roae, Chairman
5 Matzie, Members of the House Consumer Affairs Committee.
6 My name is Steve Brame. I am Vice President of Public
7 Affairs and Member Services for the Pennsylvania Rural
8 Electric Association, or most of you probably know us as
9 PREA. I've submitted written testimony today, so instead
10 of reading my testimony, I'm going to maybe go through a
11 few highlights of what I said and why we at PREA are so
12 involved in this critical issue.
13 PREA is the Statewide service organization
14 representing the interest of 13 rural electric cooperatives
15 in Pennsylvania, but more than that, we are advocates for
16 over 600,000 rural residents who rely on our cooperatives
17 for low-cost, reliable, and safe electricity. We believe
18 that supporting nuclear energy is critical for a diverse
19 and competitive energy marketplace. It's also of
20 particular importance to Pennsylvania's rural residents and
21 the energy future of all Pennsylvanians.
22 Who are electric cooperatives? Cooperatives were
23 formed decades ago when electric energy was not made
24 available in our rural communities. In fact, our history
25 begins with dairy farmers in rural Pennsylvania coming 22
1 together to take control of their future and form not-for-
2 profit electric cooperatives. Today, we serve rural
3 residents, family farms, retirees, our young in school, and
4 job creators in rural communities. Rural electric
5 cooperatives in Pennsylvania have a proud 80-year history
6 of delivering life-changing electric power to the rural
7 countryside.
8 But they didn't do it alone. They relied on
9 policymakers such as yourselves to step in and correct the
10 market that would not provide power to rural areas. It
11 took legislative action and forward-thinking policy to
12 bring about this change. Today, electrical cooperatives
13 are key economic drivers in their communities thanks to the
14 action of policymakers 80 years ago.
15 Electric cooperatives are governed by those who
16 use their power. In other words, our consumers are our
17 owners, just as they were the day they were created. Our
18 cooperatives operate as not-for-profit organizations driven
19 to provide the very best, least cost, and most reliable
20 service they can to our rural heartland.
21 We are pleased to be a part of the nuclear energy
22 discussion, and I want to be very, very clear that
23 Pennsylvania's electric cooperatives stand in support of
24 House Bill 11. Cooperatives have believed in nuclear power
25 for decades, having invested in the Susquehanna Steam 23
1 Electric Station in rural Berwick, Pennsylvania, since
2 1977. As a result of this investment, Pennsylvania's
3 cooperatives own 10 percent of the Susquehanna plant. We
4 believe our experience as nuclear owners can offer some
5 perspective on this important issue.
6 While an ownership share of one-tenth of one
7 nuclear plant may not sound like much, that small share
8 provides 60 percent of all the power needs for more than
9 600,000 Pennsylvania rural residents. For decades, that 10
10 percent share has been the stabilizing force that has
11 powered hundreds of rural cooperative communities across
12 the Commonwealth.
13 Today, these communities enjoy one of the lowest
14 and most stable electric rates in the entire PJM
15 interconnection thanks to the investment in nuclear power.
16 Just that 10 percent of one plant goes an incredibly long
17 way towards serving the needs of more than 600,000 rural
18 residents.
19 As a major part of the cooperative's diverse
20 energy portfolio, nuclear energy has allowed cooperatives
21 to maintain extremely reliable electric rates for decades
22 helping to protect rural communities from significant
23 volatility during times of economic turbulence. To fill
24 out our portfolio, cooperatives also depend on a
25 competitive energy market, one made stronger by the 24
1 presence of nuclear power. Its reliability has allowed our
2 cooperatives to interconnect more than 500 consumer-owned
3 renewable energy systems to the cooperative grid, thus, in
4 more ways than one, cooperative investment in nuclear power
5 has helped significantly further the production of carbon-
6 free energy in the Commonwealth for the benefit of all
7 Pennsylvanians.
8 Cooperatives believe that recognizing nuclear
9 power as a carbon-free workforce is vital to the diverse
10 energy community we strive to have in this State. Without
11 nuclear power, we believe the energy market will
12 necessarily be dependent on one major commodity: natural
13 gas. This is not an attack on natural gas. This is a
14 virtual certainty. Should nuclear power cease to be vital
15 in Pennsylvania, we believe it will significantly increase
16 costs to our rural cooperative consumers. That's seniors,
17 that's families, that's family farms.
18 Diversity is critical to the robust energy
19 marketplace that policymakers have envisioned in
20 Pennsylvania for decades. Nuclear must play a role in that
21 diversity. By leveling the playing field, by compensating
22 nuclear for its zero-carbon attributes, you can play the
23 key role in guaranteeing energy diversity.
24 On behalf of the 600,000 rural residents in the
25 13 electric cooperatives who are privileged to serve them 25
1 power, we thank you for the opportunity to join you today
2 and look forward to working with the Committee and the
3 General Assembly on this critical issue.
4 MR. GRIFFING: Thank you, Steve.
5 Chairman Roae, Chairman Matzie, distinguished
6 Members of the Committee, thank you for inviting me to
7 speak before you today. My name is Dave Griffing. I'm the
8 Vice President of Governmental Affairs for FirstEnergy
9 Solutions. And today, I'm here to represent the nuclear
10 generation facilities in the Commonwealth of Pennsylvania.
11 Nuclear power forms the backbone of
12 Pennsylvania's electric generation fleet and its energy
13 economy. Pennsylvania is the second-largest nuclear
14 capacity State in the country, home to nine nuclear
15 reactors at five stations across the State. Over 16,000
16 Pennsylvanians are employed in this industry, which
17 contributes $2 billion annually to the gross domestic
18 product and nearly $70 million in annual State taxes.
19 In addition to being an economic engine for the
20 State, nuclear power is safe, reliable, and clean. Nuclear
21 facilities operate at close to 100 percent capacity 24
22 hours a day with planned refueling outages only occurring
23 every 18 to 24 months. They avoid the fuel supply issues
24 faced by most other generating facilities such as
25 disruptions in natural gas pipeline networks, frozen coal 26
1 stockpiles, and other weather conditions that prevent
2 renewable energy production, all of which may threaten the
3 reliability of the power grid. And, importantly, the
4 production of electricity using nuclear fission produces no
5 air pollution and releases no carbon dioxide emissions.
6 Two of Pennsylvania's five nuclear plants have
7 announced plans to shut down. We've already heard that
8 today. Three Mile Island is scheduled to shut down in
9 September of 2019 and Beaver Valley, one of our plants, is
10 scheduled to shut down in 2021. Both plants are being
11 retired well before their current operating licenses are
12 set to expire, and once these plants are shut down, they
13 will not be brought back into operation. These two plants
14 are likely foreshadowing future premature retirements as
15 the other plants in Pennsylvania are on a similar
16 trajectory.
17 Others will try to convince you that these plants
18 are failing to complete and that you should let the market
19 decide what happens to them, so let's talk for a second
20 about that market. Pennsylvania participates in a
21 wholesale market call PJM, which is regulated by FERC.
22 That market decides what power is used in Pennsylvania
23 using rules they decide for us what power our customers
24 receive and what price they pay for it. The market does
25 not consider whether the power plant negatively impacts the 27
1 seven counties in the State that are already exceeding
2 their air pollution limits. It doesn't account for whether
3 the power plant adds harmful carbon pollution to the air.
4 It doesn't account whether the plan has a reliable source
5 of fuel on-site, and it doesn't consider what is best for
6 the customers in Pennsylvania over the long-term. All it
7 does is pick the power that is cheapest for the next five-
8 minute increment.
9 Many States, including Pennsylvania, have stepped
10 in to promote a cleaner, more diverse generation fleet. In
11 2004, Pennsylvania enacted the Alternative Energy Portfolio
12 Standard Act, or AEPS, which provides financial support for
13 16 forms of clean energy, including wind, solar, and
14 hydroelectric power. But nuclear resources, despite being
15 the State's largest source of clean energy, are not
16 eligible for the program. Because of that, it is not
17 credible to say that the plants aren't able to compete, and
18 it's unfair to the 16,000 Pennsylvanians who safely support
19 and operate those plants 24/7, 365. On one hand, emitting
20 plants get to pollute for free not bearing any of the cost
21 of the pollution they put into the air or the water. And
22 on the other hand 16 other forms of technology get a
23 payment, some as high as $55 from the Federal and State
24 government through tax credits and AEPS credits. The
25 result is not shocking. Nuclear facilities here and 28
1 elsewhere in the country have both hands tied behind their
2 backs and are facing the prospect of premature retirement.
3 The impact of losing the State's nuclear
4 facilities cannot be overstated. Nuclear power represents
5 93 percent of the Commonwealth zero-carbon electricity.
6 These facilities allow the State to avoid 37 million tons
7 of CO2 annually and prevent significant emissions of
8 criteria pollutants like sulfur dioxide, nitrogen oxide,
9 and other particulate matter. Independent experts value
10 these contributions at $1.6 billion and $260 million
11 annually per year. If these facilities are lost, they will
12 be replaced primarily by natural gas-fired generators, not
13 wind and not solar. Carbon emissions will increase, grid
14 resilience will deteriorate, and cost to consumers will go
15 up by $788 million per year according to the Brattle Group.
16 The proposed legislation will temporarily prevent
17 this outcome and give the Federal Government and PJM time
18 to work together on a permanent solution. This legislation
19 would amend the Pennsylvania AEPS to create a new tier 3
20 credit program open to nuclear power along with existing
21 tier 1 and tier 2 credit programs. This new tier will put
22 nuclear power on equal footing with other clean energy
23 resources in the State.
24 One tier 3 credit would be earned for each
25 megawatt hour of electricity produced by a qualifying 29
1 resource, and Pennsylvania's electric utilities would be
2 required to purchase these credits from qualifying
3 facilities as they currently do for wind, solar, waste
4 energy, hydro, and other environmentally beneficial
5 technologies. The tier 3 credit price would be tied to the
6 tier 1 credit price but would contain both a floor and a
7 ceiling to provide pricing stability and protect consumers.
8 In other words, nuclear would get the same credit as tier 1
9 renewables, but unlike tier 1 renewables, the tier 3 credit
10 price will never go above $8.
11 The tier 3 program would be open not just to
12 nuclear, however. Solar, wind, low-impact hydro, and
13 geothermal energy could all be compensated under tier 3 or
14 one of the other tiers, just not both. Applicants will
15 have to demonstrate that Pennsylvania's environment would
16 be negatively impacted if the resource were to cease
17 operation or, in the case of a new resource, if that
18 resource failed to come into service.
19 The Pennsylvania Public Utilities Commission
20 would rank all of the qualifying resources on this basis
21 and will select applicants up to the point at which the
22 combined sum of the megawatt hours equals approximately 50
23 percent of the electricity distributed by the electric
24 distribution utilities in the State. Participating
25 resources would have to commit to operating for at least 30
1 six years and would be prohibited from participating in any
2 similar program in another State.
3 In closing, as Pennsylvania and the country
4 transition to a cleaner energy future, we overlook the
5 importance of nuclear at our peril. Many scientists now
6 agree no other energy source can provide around-the-clock
7 carbon-free power on the scale necessary to meet the
8 climate challenges that we face. Closure of these
9 facilities will increase your constituents' electric bill,
10 create a generation portfolio dominated by single fuel
11 source, eliminate any possibility of achieving the
12 Commonwealth's Stated environmental goals, eliminate 16,000
13 highly skilled jobs, and represent a loss of economic
14 vitality for many of our communities. This body is the
15 only entity that can prevent this outcome, and we urge you
16 to do so.
17 Thank you for your time and for your attention.
18 MAJORITY CHAIRMAN ROAE: All right. Thank you
19 for your testimony. There's a couple other people at the
20 table if you'd like to introduce yourselves, please.
21 MS. RAGGIO: Certainly. Debra Raggio, Senior
22 Vice President of Talen Energy over Regulatory and External
23 Affairs.
24 MS. BARRON: Good morning, Kathleen Barron,
25 Senior Vice President for Government Affairs with Exelon. 31
1 MAJORITY CHAIRMAN ROAE: Okay. And I just want
2 to remind the audience and people on TV copies of the
3 testimony -- there might be some more copies on the table
4 up here to my left, but then also you can go to the PA
5 House GOP.com website, and after the hearing there'll be an
6 electronic version of the copies of the testimonies there.
7 We're going to start with questions now, and I
8 ask the Members to please be very brief with questions.
9 We're here to hear the testifiers, not ourselves. So we're
10 going to start with the Democratic Chairman, Representative
11 Matzie.
12 DEMOCRATIC CHAIRMAN MATZIE: Thank you, Mr.
13 Chairman, and thank you, panel, for participating here
14 today. I think it's important for us to hear this.
15 Before I ask my first question, let me just say I
16 don't think that's anybody is taking this issue lightly,
17 including myself. When I agreed to be a Co-Chair of the
18 Nuclear Caucus two and a half years ago, showed my
19 commitment to get educated, to learn, and to hopefully come
20 up with a solution that makes sense for the Commonwealth of
21 Pennsylvania. As this process has gone on, obviously more
22 questions have come up, and as we have tried to address
23 what could work from a legislative perspective and to get,
24 as I like to say, 102, 26, and a signature, and that still
25 remains to be seen as far as the difficult process as 32
1 policymakers that we will be faced with.
2 The question that continually comes up to me from
3 detractors of this as stakeholders have been in the
4 revolving door that is 121 Irvis Office Building has been
5 the projections are this bill would raise about $500
6 million a year. What we don't know yet is how much each
7 plant needs. And that question was asked again to me this
8 morning and again over the weekend and how much everybody
9 needs.
10 Obviously, Beaver Valley is close to my heart
11 because it's directly at the border of my district, and the
12 vast majority of the people that work there live in my
13 district. Do we have a number yet? Do we know -- because
14 we're going to rely on the PUC to come up with a formula or
15 ranking, et cetera, to determine what plants need because
16 some media reports are saying TMI needs 500 million
17 themselves. So if this is only going to raise $500
18 million, that raises a tough question for us as
19 policymakers to answer. Is it enough? Are we doing
20 enough? So I don't know who wants to jump in and address
21 that and see if they can answer that.
22 MS. RAGGIO: Well, I can't really answer what
23 each company needs. I'm speaking from Talen's perspective.
24 MAJORITY CHAIRMAN ROAE: Sure.
25 MS. RAGGIO: But this legislation was never 33
1 needs-based legislation. It was legislation based on
2 paying for an attribute that was produced. I can say from
3 Talen's viewpoint right now, today, Susquehanna, our
4 station, which is owned 10 percent by Allegheny, it is
5 making money. It is not in need base. We have not
6 announced a shutdown. But if you look at projections, it's
7 on that trend. And if you even look at the Market Monitor,
8 State of the Market Report March 15th, it shows a drastic
9 reduction even through 2021 in Susquehanna's revenues.
10 But we would not have supported this legislation
11 if it was needs-based or a bailout. It is putting us on a
12 level playing field with what other zero-carbon producers
13 are getting of electricity. And for 16 years now or 15
14 years we have not been paid that, yet we're providing the
15 same electricity and the same, you know, attribute to the
16 State of Pennsylvania.
17 So with respect to need, I don't think we would
18 be in a position to say right now there's a need. It's
19 more of a payment for what you're providing. If you pay
20 for one or two that are going to shut down, I think you're
21 going to see it exacerbated, and then people will be coming
22 in on a one-off asking to be paid off to keep from shutting
23 down, and I don't think that's good policy.
24 MR. RIDGE: Okay. And Chairman, if I might
25 respond, I think you've hit on a very critical question. 34
1 And I say that those who would be opposed to this would
2 point to a plant or two or today's profitability, but this
3 is really a policy question for the Legislature and the
4 Governor. This is about the future of electric generation,
5 electricity generation in the Commonwealth of Pennsylvania.
6 It's about reducing and ultimately relying on one or two
7 sources. Is it about saying that we were just going to
8 dismiss 93 percent of the carbon-free electricity
9 generation? So it's not about TMI, it's not about any
10 individual plant. And I would just say to you that under
11 any and all circumstances when we deregulated back in the
12 mid-'90s, we weren't interested in creating a monopoly for
13 anybody. And all of a sudden we keep chipping away at
14 nuclear and who knows where coal is going to be.
15 And I'm an all-in advocate for energy. I want
16 solar, I want wind, I want hydroelectric. But you keep
17 chipping away, and then the margin of vulnerability expands
18 while the number of producers is reduced, and so I think
19 you really need to take a look at this. My perspective,
20 one, in the future; two, beyond individual plants or
21 individual companies like Exelon or FirstEnergy; and three,
22 what kind of resiliency, reduction of vulnerability,
23 safety, security, and national security infrastructure do
24 we want to have in Pennsylvania? It's a great question.
25 DEMOCRATIC CHAIRMAN MATZIE: Thank you. You 35
1 know, and I'll let other Members ask more questions if we
2 have more time at the conclusion. I'll help fill in the
3 time.
4 MAJORITY CHAIRMAN ROAE: All right.
5 Representative Mackenzie.
6 REPRESENTATIVE MACKENZIE: Great. Well, thank
7 you, Mr. Chairman. And thank you to all of our panelists
8 who are joining us here today. I appreciate the different
9 perspectives you bring from all of your different fields of
10 expertise. So I again want to thank you, and I share in
11 your belief that nuclear energy is an important issue for
12 Pennsylvania from energy and environmental issues to
13 economic issues, national security issues. We heard about
14 all of these things, so I share that.
15 I want to build on the question that Chairman
16 Matzie brought up about the implications of the legislation
17 and the potential $500 million shift from ratepayers to
18 other interested stakeholders. So it would be helpful for
19 those that are advocating for support of this legislation
20 to understand what your financial interests are or what the
21 benefits would be.
22 So I'd like to go right on the line, start with
23 Commissioner Pries. I appreciate you talked about some of
24 the implications for Dauphin County, what that would be.
25 Now, it's my understanding that TMI has announced that they 36
1 are starting the decommissioning process. They announced
2 that on Friday. So with that in mind, what does that mean
3 for Dauphin County in terms of do they continue to pay
4 property taxes even if they do ultimately decommission -
5 they announced -- or least I saw in news reports some
6 scale-down of jobs. So can you specifically talk about
7 those impacts of that decommissioning decision and what
8 that would mean?
9 MR. PRIES: Well, at this point it was a press
10 release and an early announcement, so we're taking this day
11 by day, week by week and having meetings to discuss the
12 formal implications of what you just said.
13 REPRESENTATIVE MACKENZIE: Okay. So, I mean,
14 again, I was hoping you might have an answer, but maybe you
15 can get back to the Committee so that we can gain an
16 understanding because, again, I understand it's early in
17 the process, but they have announced that. So what does
18 that mean in terms of property taxes, et cetera, for the
19 county, school districts, other interested local government
20 stakeholders would be helpful.
21 MR. PRIES: Thank you, sir.
22 REPRESENTATIVE MACKENZIE: Thank you. Governor
23 Ridge or Secretary Ridge, I appreciate you being here as
24 well. You're listed as former Governor and first Secretary
25 of Homeland Security on our agenda. Do you have any 37
1 financial implications? Are you being compensated or is
2 Ridge Policy Group being compensated by anybody who has a
3 stake in this to benefit?
4 MR. RIDGE: No. First of all, I think that's a
5 legitimate question, and I want to make sure you ask it of
6 everyone, okay?
7 REPRESENTATIVE MACKENZIE: Yes.
8 MR. RIDGE: Secondly, you should know, if you
9 know my background, I happened to be on the board of Exelon
10 many, many years ago. But more importantly, you should
11 know that I had this interest in nuclear energy,
12 diversified energy infrastructure, reliability long before
13 I left either the Department of Homeland Security or during
14 my time as Governor. It's reflected in the deregulation we
15 did in the mid-'90s. I've always been a strong believer of
16 a diversified portfolio, of energy generation. I've always
17 believed in the PJM giving the opportunity for those to
18 purchase on a competitive basis.
19 I've also always believed in fairness, and you've
20 got 16 sources of carbon-free energy that are getting some
21 support. There's a 17th source that's nuclear. It's not
22 getting recognized because of that.
23 I also think you would know if you look back at
24 my background that I appreciate the diversity of energy and
25 the need to keep family-sustaining jobs in a business- 38
1 friendly network. You also know that if you look at the
2 deregulation, we never wanted to create an environment
3 where it would shrink the number of sources of energy. We
4 want competitive markets and competitive markets need
5 multiple sources of generation, so it's a fair question. I
6 just hope you ask it of everybody.
7 REPRESENTATIVE MACKENZIE: Absolutely. I mean, I
8 think the other individuals, they are listed with their
9 current professional occupations, so I just didn't know
10 what, again, your -
11 MR. RIDGE: It's fair.
12 MAJORITY CHAIRMAN ROAE: Representative
13 Mackenzie -
14 MR. RIDGE: Absolutely.
15 MAJORITY CHAIRMAN ROAE: -- we still have several
16 Members that want to ask questions, so we'll come back if
17 we have more time, but we're -
18 REPRESENTATIVE MACKENZIE: Sure.
19 MAJORITY CHAIRMAN ROAE: We're going to have to
20 move on. Just for the interest of the audience, we're
21 alternating between Republicans and Democrats asking
22 questions, so we want to be fair. Representative Neilson.
23 REPRESENTATIVE NEILSON: Thank you, Mr. Chairman.
24 Thank you, ladies and gentlemen, for coming here before the
25 Committee today. 39
1 As a quick disclaimer, since we're putting
2 disclaimers out, I am a card-carrying member of the
3 International Brotherhood of Electrical Workers, and so I
4 want to make certain that labor comes to the forefront in
5 all of these conversations and these good jobs that we
6 provide.
7 Couple questions, Mr. Pries. I hope those 500
8 people you called lived in my district because I am a
9 cosponsor on this bill, and I have no issues. If I do,
10 I'll be seeing you next year looking for employment. I try
11 and lighten it up a little bit. This is a serious issue
12 that we have to consider, and I want to tap -- we're
13 talking about perspectives here, and I have questions for a
14 few of you.
15 Governor, thank you for coming. Thanks for your
16 service to the country. You've done great things in your
17 career. And you went through the deregulation. You worked
18 both in Federal and State Governments for your entire
19 career and life.
20 The FirstEnergy experience, the Exelon
21 experience, and you've talked about in your testimony about
22 this is happening all over the country. It is the job of
23 the U.S. Department of Energy to oversee a lot of the stuff
24 we do with nuclear energy, and in Mr. Griffing's testimony,
25 he even said, he said this is just going to buy us time for 40
1 the Feds to do their job. Should our taxpayers have to
2 foot the bill for the Feds to do their job, I mean, because
3 that's what we're asking them to do? And I just want your
4 perspective on it because this is something that the
5 Federal Government should be handling and they're not -
6 MR. RIDGE: Well, listen -
7 REPRESENTATIVE NEILSON: -- is my perspective of
8 it. I'd just like to get yours.
9 MR. RIDGE: I think it's an excellent
10 perspective. I certainly share that point of view. It
11 would be nice if the Federal Government would do its job.
12 We leave that and the editorial comments aside in response
13 to your question.
14 As I've seen the economic studies of House Bill
15 11, there are two potential cost increases associated with
16 the elimination of nuclear generation in Pennsylvania, the
17 highest cost increases associated with its elimination.
18 And there will be -- I think I saw it's $1.71 a month for
19 the average ratepayer as opposed to much higher, maybe even
20 double if there's another. Again, it depends on the
21 studies you see. But I would even ask you this. Is it
22 worth it to the Commonwealth and individual citizens to
23 have a diverse energy resource to continue to build on the
24 assets that sustain these great jobs to provide both
25 employment opportunities and growth opportunities in 41
1 Pennsylvania, continue to support.
2 And again, I think sometimes we focus in on one
3 company or two. There's a synergy between the nuclear
4 industry, the Department of Energy, the Department of
5 Defense, the academic community, and the list goes on and
6 on. And preserving the nuclear energy, I agree with you.
7 I wish the Department of Energy would do something
8 significant. But I think one of the reasons you're seeing
9 -- Ohio is working on it, New York did, Illinois did, other
10 States are doing it is because you can't wait for the
11 Federal Government to work. And if it's five or six years
12 from now and who knows when it'll be, we may not have these
13 facilities in Pennsylvania.
14 So in response to an excellent question, I say
15 let's preserve the assets that we have, build on them. In
16 the same time I think there's a growing momentum within the
17 Federal Government to do what it should have done a long
18 time ago. I'm just a big strong proponent of nuclear
19 energy, and I think for safety and security reasons and
20 sustainability reasons and avoiding future monopolies or
21 oligopolies within energy, I think you've got to keep
22 nuclear at the forefront.
23 REPRESENTATIVE NEILSON: A quick follow-up -
24 MAJORITY CHAIRMAN ROAE: I'm sorry -
25 REPRESENTATIVE NEILSON: -- Mr. Governor, this 42
1 is -
2 MAJORITY CHAIRMAN ROAE: We don't have time for
3 follow-ups. We will have several -
4 REPRESENTATIVE NEILSON: I -
5 MAJORITY CHAIRMAN ROAE: -- people. I apologize,
6 but please try to keep your questions brief, Members.
7 Next is Representative Mehaffie, and then this
8 panel has five minutes and 14 seconds left.
9 REPRESENTATIVE MEHAFFIE: Thank you, Mr.
10 Chairman. And I will make this quick. I promise that.
11 I'm glad everybody came here to hear about my bill. I
12 think this is really great.
13 So, anyway, Kathleen, you testified before in
14 front of the Nuclear Energy Caucus, and I just wanted to
15 hit on this real quick. Can you explain why those that
16 profit from the flawed wholesale power design are opposing
17 this legislation? I mean, I know we touched on it briefly,
18 and I know we talked about before and you were I think the
19 one that talked about it when I first got on the Nuclear
20 Energy Caucus, but I think it's really important that we
21 talk about this. Thank you.
22 MS. BARRON: Thank you, and I appreciate the
23 question because I think it goes to Chairman Roae's
24 comments at the beginning of this hearing. You're hearing
25 from both sides that prices are going to go up no matter 43
1 what you do, so what would you do with that? And I think
2 it's important to look at what happened when this happened
3 in other States. We've heard about New York, Illinois, New
4 Jersey. I was involved in all of those cases, and I had
5 the opportunity to appear before Legislatures and Members
6 like yourselves who were trying to figure this out.
7 But I want to tell you what happened when this
8 type of policy was enacted in New York. There it wasn't
9 legislated. It was a regulatory decision, and the
10 Commission was convinced that it would be better for
11 consumers if the plants stayed in operation from a cost
12 perspective, environmental, GDP impact. Every way they
13 looked at it, the numbers added up that customers were
14 better off. But the fossil generators didn't like that
15 outcome and they went to court, and that's where the rub is
16 because in order to appear before a court, you have to have
17 standing. You have to say how you're harmed. So they told
18 the court in New York that if the State had not acted to
19 include nuclear within the clean energy standard, that
20 prices would have gone up by $15 billion over the 12-year
21 period of that law. There were losing money because prices
22 would go up if the States had let the plants shut.
23 And that is the difference here is that they're
24 here because they do not want to see prices stay low, and
25 they stand to benefit in terms of price and market share if 44
1 you don't act.
2 MAJORITY CHAIRMAN ROAE: All right. Our next
3 question is from Representative Flynn.
4 REPRESENTATIVE FLYNN: Thank you, Mr. Chairman.
5 My question is for Pennsylvania Rural Electric
6 Association. Lackawanna Energy Center and Venergy's gas-
7 fired combined-cycle plant is right outside my district,
8 and that has the capacity to power over one million homes
9 with local sourced energy. It was constructed at the hands
10 of almost 800 skilled laborers from all across, making
11 energy costs much cheaper for my constituents. Now you're
12 telling me that my constituents need to pay more to
13 subsidize a corporate machine that in 2018 made $640
14 million.
15 While you tell this Committee how important
16 industry is and how we need to support it, House Bill 11
17 explicitly exempts your rural co-op members from this
18 mandate that will drive up costs for my constituents. How
19 do you expect Members like me to support legislation that
20 costs our constituents more?
21 MR. BRAME: No, I appreciate the question,
22 Representative Flynn, and I'll just go back to my testimony
23 on that specific subject. Our electric cooperatives are
24 not public utilities. They are not-for-profit electric
25 cooperatives. We are in fact exempt from the Alternative 45
1 Energy Portfolio Standard and explicitly will not be
2 subject to the non-bypassable charge that's contemplated in
3 House Bill 11. And I might suggest that that makes perfect
4 sense when you consider we are the Pennsylvania residents
5 who are paying for the nuclear energy already. We are the
6 Pennsylvania owners of nuclear energy. Our consumer
7 members, 600,000 consumer members in rural Pennsylvania,
8 have been investing in nuclear power and in carbon-free
9 energy for 3 0-plus years. So no, we would not be subject
10 to the non-bypassable charge very simply because we are
11 already paying for it.
12 MAJORITY CHAIRMAN ROAE: All right. With one
13 minute left for this panel, Representative Nelson will ask
14 a very brief question.
15 REPRESENTATIVE NELSON: Thank you, Mr. Chairman.
16 Thank you. And I appreciate the testimony.
17 MALE SPEAKER: Hopefully, you'll get a very brief
18 answer.
19 REPRESENTATIVE NELSON: Yes. In the world of
20 disclosure, I too work and have worked, our company, on
21 nuclear facility outages, and I would say that, you know,
22 our time on those outages exceeds that four to six weeks,
23 you know? But I also am very concerned with the two plants
24 at about three million manhours apiece that have projects
25 for natural gas that have been put on hold. 46
1 You know, I appreciate the disclosure for the
2 other bodies, and it's my understanding, you know, I am
3 very respectful of your service to the Nation, sir, but the
4 Ridge Policy Group may have additional interests in -
5 MR. RIDGE: Oh, yes, they're doing work with
6 FirstEnergy.
7 REPRESENTATIVE NELSON: Yes. So as a former
8 member of the Exelon board and, you know, currently -
9 MR. RIDGE: Sure.
10 REPRESENTATIVE NELSON: -- a client -- but when
11 you had mentioned the national -
12 MR. RIDGE: I would tell you that -
13 REPRESENTATIVE NELSON: -- sir, when you had
14 mentioned the national security complications -
15 MR. RIDGE: Yes.
16 REPRESENTATIVE NELSON: -- if the United States
17 -- and I do agree that's a Federal issue. But if we
18 receive 93 percent of our uranium from Russia and Exelon, a
19 company of which you sat on the board, has petitioned the
20 Federal Government to be able to get their nuclear fuel
21 from Russia, is it really in our best interest to take and
22 limit the opportunity to use Pennsylvania fuel for that?
23 And the second part of the concern for the
24 FirstEnergy side is Exelon has disclosed that their
25 intention is to store their nuclear waste on-site and their 47
1 spent fuel in an independent spent-fuel storage facility
2 which will be held on-site until 2073. Is it FirstEnergy's
3 intention -
4 MAJORITY CHAIRMAN ROAE: Representative -
5 REPRESENTATIVE NELSON: -- to store that energy
6 onsite as well?
7 MAJORITY CHAIRMAN ROAE: Representative Nelson,
8 Representative Nelson, the time's expired for this panel.
9 We're going to let the panel answer the question -
10 MR. RIDGE: If I could.
11 MAJORITY CHAIRMAN ROAE: Yes, go ahead.
12 MR. RIDGE: First of all, I appreciate the fact
13 that you are sensitive to those who testify at any time
14 before any Committee on any issue may have interests, so
15 let's be very clear. I was proud to serve on the board of
16 Exelon, but my views with regard to nuclear energy and its
17 importance to Pennsylvania and the country were formed long
18 before I joined the board, else I wouldn't have accepted
19 the invitation.
20 FirstEnergy is clearly a client of the Ridge
21 Policy Group. We don't apologize for it. We believe in
22 its possibility -
23 REPRESENTATIVE NELSON: They're a great company,
24 absolutely.
25 MR. RIDGE: -- and so I just want to make that 48
1 very clear. I don't back away from that, and I think it's
2 a very appropriate question, by the way.
3 Secondly, you know, we don't have uranium
4 deposits in Pennsylvania, so we're not going to be mining
5 for them here. I think we might get 7 0 percent -- your
6 information is pretty correct. I think we get 70 percent
7 of uranium from domestic sources, but I think a large
8 measure of it comes from our friends in Canada, not Russia.
9 Now, admittedly, Russia has quite a bit of uranium, but
10 notice how they've used natural gas as a weapon as they try
11 to deal with a monopoly as they tried to deal with Western
12 Europe, Ukraine, and Eastern Europe.
13 So I have the interest that I have, the legacy
14 that I have. There is no uranium in Pennsylvania to be
15 mined, and I think we get the majority of it from our
16 friends in Canada, and that's a great relationship. And
17 that's a border that I think is -- and a relationship that
18 I think is worth keeping because it's a great value to us
19 as a country, and nuclear energy is a great asset for this
20 country, and we can't let it go.
21 And the question was earlier asked. I wish the
22 Federal Government would get its act together on this and
23 other issues. They haven't, and until they do, the States
24 have to act. That's why it's such an important policy
25 question and that's why I thank you, Chairman Roae, for 49
1 taking it on in such an ambitious way. Thank you very
2 much.
3 MAJORITY CHAIRMAN ROAE: All right. Well, thank
4 you, panel, for your testimony.
5 At this time, the first panel is going to, you
6 know, vacate the table as the second panel prepares to be
7 seated. And during this little transition I want to remind
8 people again if you go to the website, PAHouseGOP.com
9 shortly after the meeting there will be an electronic copy
10 of the testimony. Also on the table up front there might
11 be leftover copies of the testimony.
12 So if the other panel could please work their way
13 to the table.
14 And I would like to remind the Members to please
15 try to summarize your question in about a 30-second
16 question so we can get through and allow all the Members
17 that want to ask questions, ask questions. Try to keep it
18 a very, very brief question. We're here to hear the people
19 testifying.
20 All right. This panel is going to be Kevin
21 Sunday from the PA Chamber of Business and Industry, Glen
22 Thomas from GT Power Group, Todd Snitchler from American
23 Petroleum Institute, and Desiree Hung of AARP. If you're
24 ready, you may begin your testimony.
25 MR. SUNDAY: Well, thank you, Chairman Roae, 50
1 Chairman Matzie, Members of the Committee. My name is
2 Kevin Sunday, Director of Government Affairs for the
3 Pennsylvania Chamber of Business and Industry. The PA
4 Chamber is the largest broad-based business advocacy
5 organization in the Commonwealth, and we have been
6 consistent in our support for competitive markets and
7 consumer choice. We have also taken strides over the years
8 to support both energy users and energy producers,
9 including coal, oil, gas, renewables, and nuclear.
10 Specifically as it relates to nuclear, these
11 strides include supporting relicensing of Peach Bottom,
12 securing changes to DEP storage tank regulations at nuclear
13 facilities, advocating military bases overseas look to
14 nuclear as an alternative to Russian-sourced natural gas,
15 arguing in front of Congress the Obama Administration's
16 draft Clean Power Plan did not appropriately recognize
17 nuclear for its role in securing emissions reductions, and
18 supporting a change to PJM's pricing roles, which will have
19 the effect of increasing energy prices paid to generators.
20 In addition, the PA Chamber was a cosponsor of an
21 economic report which estimated the economic and
22 environmental value of Pennsylvania's five nuclear power
23 plants. However, it's important to note that that report
24 was premised on a situation if all five plants were to
25 shutter at the same time. 51
1 With this being said, the PA Chamber cannot
2 support House Bill 11. This legislation is in clear
3 conflict with our organization's energy policies, which are
4 developed and approved by a Board of Directors whose
5 membership comprises executives from companies of all sizes
6 and industrial categories, including the energy industry.
7 In part, our energy policy directs us to support
8 legislation that encourages competition in electric
9 markets, allows individual companies to select the most
10 appropriate energy source that meets their needs and goals,
11 and avoids government actions that select, force, or
12 subsidize particular energy resources. Government policy,
13 as it relates to energy and the environment, should be
14 technology-neutral.
15 The PA Chamber opposed the creation of the
16 original Alternative Energy Portfolio Standards Act in
17 2004, which it must be noticed did not assign credits to
18 particular resources for their greenhouse gas avoidance but
19 because they were government-decided technologies. We
20 opposed that legislation out of concern for the cost it
21 would impose on ratepayers and that it would distort the
22 market, as it very clearly has. And we therefore cannot
23 support a massive expansion of costly energy mandates.
24 House Bill 11 will impose significantly higher
25 costs on ratepayers, stifle innovation, erode competitive 52
1 markets, and diminish Pennsylvania's ability to attract new
2 investment. This bill adds a 50 percent mandate to the
3 existing alternative energy mandates for total of nearly 70
4 percent of the markets subject to government mandates. The
5 total cost will depend upon implementation but can be
6 estimated to be between $500-600 million, and the brunt of
7 those costs will fall on commercial and industrial users
8 whose annual energy bills would increase between 5 and 15
9 percent.
10 In real dollars, this means a large hospital
11 would see annual increases of over $500,000. An energy
12 intensive manufacturer would see costs increase by nearly
13 $5 million. Schools, colleges, and universities would see
14 higher costs as well, meaning likely higher tuition costs
15 and property taxes.
16 Given Pennsylvania's already burdensome tax
17 regulatory, legal, and labor policy climate, the
18 legislation should seriously question whether it wants to
19 give manufacturers and businesses another reason to export
20 their investment to another State, particularly given the
21 regional grid operator has analyzed outcomes in a variety
22 of scenarios and found we are not facing a reliability
23 threat.
24 As it relates to environmental attributes,
25 competition has driven improvements in conjunction with 53
1 regulation in the efficiencies of all power plants. House
2 Bill 11 erodes competitive markets to our detriment and
3 precludes the entrance of new technology into the market
4 and the continuing operation of existing fuels. New
5 technologies such as carbon capture, hydrogen, fuel cells,
6 other fossil generation, small modular reactors, batteries,
7 and other resources not yet even contemplated would face a
8 difficult market to enter in Pennsylvania should this bill
9 be passed. House Bill 11, by virtue of raising costs,
10 would preclude investment into existing industrial and
11 manufacturing facilities in the State and encourage
12 relocation or disinvestment.
13 We have been advocating as part of the Forge the
14 Future initiative that, by leveraging our energy assets, we
15 can secure 100,000 new jobs, a $60 billion increase in
16 State GDP, and a $2-3 billion increase in State tax
17 revenues.
18 Our energy assets, paired with Federal and State
19 tax and regulatory reform, should be putting us in a
20 position to be a leader in 21st century innovation and
21 manufacturing, but instead, as too often has been the case
22 over the past many years, we are focusing on the upstream
23 producers, whether they're being taxed or subsidized enough
24 and not focusing on the needs of the consumers and energy
25 users downstream. This is a policy that raises costs for 54
1 businesses and consumers, and we encourage this Committee
2 and the Legislature to instead turn their focus to enacting
3 pro-growth legislation and policy.
4 And I look forward to answering any questions you
5 may have after my co-panelists speak. Thank you.
6 MR. THOMAS: Good morning. Good morning,
7 Chairman Roae, Chairman Matzie, pleasure to be here. My
8 name is Glen Thomas. I am President of GT Power Group.
9 Just to start with a disclaimer in anticipation
10 of Representative Mackenzie's question, I am here on my own
11 behalf today and not on behalf of any GT Power clients. I
12 have clients that are in all segments of the industry. I
13 have clients that own nuclear power plants. I have clients
14 that own coal, gas, wind, solar. I have clients that serve
15 retail load. I have clients that provide demand response.
16 We're on all sides of the market as a firm, but I am here
17 today on my own behalf. My turnpike tolls that I incurred
18 this morning to come up here will not appear on any expense
19 report.
20 And I'm here today because I care about
21 Pennsylvania energy policy. I was proud to serve as
22 Governor Tom Ridge's Energy and Environmental Policy
23 Advisor for six and a half years. I was part of the team
24 that helped restructure our industry and write that
25 legislation. I spent many long hours in this room working 55
1 on that bill. I then was honored to serve on the
2 Pennsylvania Public Utility Commission for four years both
3 as Chairman and as a Commissioner. And throughout that
4 time I remained steadfast in my belief that competitive
5 markets were in the best interest of Pennsylvania.
6 In the bulk of my time since I left the
7 Commission in 2005, I've spent time traveling around other
8 States mostly arguing why those States should be more like
9 Pennsylvania and their energy policy. I have fought bad
10 ideas all the way to the Supreme Court from other States.
11 I have testified in Annapolis, Albany, Trenton, Columbus.
12 I've traveled around the world. People want to know why
13 Pennsylvania is so successful. And a big part of the
14 reason that Pennsylvania has had so much success in the
15 energy space is because of the Competition Act that was
16 passed in 1996.
17 I want to make it clear I support nuclear power.
18 There was a lot of testimony that was presented this
19 morning on the benefits of nuclear power, much of which was
20 a dead accurate. However, I do not support House Bill 11.
21 There's a huge disconnect between some of the testimony you
22 heard this morning and the actual language in House Bill
23 11. House Bill 11 is a big deal. It's a very complicated
24 piece of legislation. I've been doing nothing but energy
25 policy for the last 25 years. I've probably read this bill 56
1 a dozen times, and each time I read it, I pick up something
2 new. There's a lot of nuance to it, a lot of details. It
3 was written by some very, very seasoned folks in the energy
4 space. I urge you to go slowly on it because there's
5 enormous implications buried throughout the bill.
6 This is not a simple bill that just simply
7 expands the State's AEPS program to include a resource that
8 should have been included in 2004 or whenever the AEPS was
9 passed. This is a major change, a major shift in
10 Pennsylvania's energy policy from basically a policy that
11 puts consumers in the driver's seat to one that puts the
12 policymakers of Pennsylvania in the driver seat by
13 dictating where Pennsylvanians are getting their energy
14 from.
15 If passed, 68 percent of the resources consumed
16 in Pennsylvania would come from specified resources. And,
17 by the way, not all of them are carbon-free. If you
18 actually look at the AEPS Act and read the reports that the
19 Pennsylvania Commission produces, over half, over half of
20 the subsidized resources in today's existing AEPS program
21 produce carbon. I would venture to say over half of those
22 resources are also out-of-state.
23 There are issues associated with today's AEPS
24 program that deserve examination by the Committee. I would
25 love to come back and talk more about the existing AEPS 57
1 program that's on the books before we even think about
2 expanding it.
3 I urge this Committee to go slowly. There is a
4 lot to consider in this bill, and it really undoes a lot of
5 the hard work that it took to get here, 20 years of
6 bipartisan support for competitive markets landed
7 Pennsylvania in an enviable position where our rates are
8 about 30 to 50 percent below our neighboring States' rates.
9 Our State that was once 15 to 20 percent above the national
10 average are below the national average.
11 I have to correct Governor Ridge on a couple
12 points, but he said that the electricity restructuring act
13 has saved millions. It has saved billions, folks. Our
14 consumers, our ratepayers have saved billions of dollars as
15 a result of this act, and guess what, we've seen billions
16 of dollars in investment. The reference was made to the
17 facility in Lackawanna County. We've seen 13 new
18 facilities that have been built throughout this State in
19 the last 10 years alone, many of them employing IEBW
20 workers as part of the process. So this has been a jobs
21 producer. It's been a very solid piece of legislation, and
22 it's produced terrific results.
23 When I look at, you know, Pennsylvania and where
24 we stand now compared to where we were in 1986, our rates
25 are lower, our reliability is better, our grid is more 58
1 diverse today than it was in 1996, and air emissions are
2 down whether it's NOx, SOx, particulate matter, even
3 carbon. All those pollutants are lower today than they
4 were in 1996, so we've seen tremendous progress under this
5 act that I would not want to throw away for sure.
6 I submitted written testimony. In my written
7 testimony I outlined some of the steps it took to get here.
8 But let's face it, it has been a long, hard struggle. We
9 endured polar vortexes, we endured hurricanes, we endured
10 changes at the Federal level, all of which Pennsylvania
11 endured and, like I said, 20 years with the PUC
12 Commissioners and the terrific staff at the PUC has done
13 yeoman's job, yeoman's work implementing this act to put
14 Pennsylvania in this position. It took us 10 years to
15 transition to competitive markets. It cost our consumers
16 $12 billion in stranded costs. It should not be taken
17 lightly how hard it was to get where we are.
18 And then I look at House Bill 11, which is an
19 absolute competition killer. And while I hear what
20 Governor Ridge is saying, that the market clears every five
21 minutes and that we'll continue to be a competitive market
22 in that respect, let me put it in the simplest terms
23 possible. If Kevin is producing energy at 5 cents and Todd
24 here is producing energy at 4 cents, in a competitive
25 marketplace, Todd's energy is going to get used can't 59
1 Kevin's is not. However, if the State comes along and
2 subsidized Kevin's energy so that it reduces his cost to 3
3 cents, he is now going to get dispatched and Todd is not.
4 Yes, it's still a clearing auction, yes, it's still a
5 competitive market, but the State just put, you know, the
6 thumb on the scale for a specific resource. And House Bill
7 11 does that for 68 percent of the delivered megawatts in
8 the State if approved. And, oh, by the way, there's a
9 provision in House Bill 11 that could expand that to 100
10 percent if certain changes are made at the Federal level.
11 This is a very complicated bill, folks, that
12 deserves a lot of time to be better understood. And when I
13 listen to the reasons for doing this, when I listen to the
14 reasons -- you know, and I think there's a terrific
15 discussion to be had in Harrisburg about carbon. This
16 General Assembly, this State is ready for a carbon
17 discussion. And yes, there is more that can be done at
18 this level to reduce carbon.
19 And when I look at all the pollutants that have
20 emerged or been produced from the energy space, like I
21 said, whether it's sulfur, mercury, lead, particulate
22 matter, NOx, all these pollutants have been addressed in a
23 way that does not destroy the competitive marketplace.
24 It's been done so in market-neutral ways that have allowed
25 competition to flourish. We should have a similar 60
1 conversation about carbon. I guarantee you there are
2 better, cheaper, more efficient, more effective ways to
3 regulate carbon in this State than House Bill 11. I would
4 love to have that conversation. We don't have enough time
5 today, but I really would love to come back and have that
6 conversation.
7 I would like to add one thing, and it relates to
8 the remarks of the County Commissioner. I actually am very
9 sympathetic to the impacts at the community level from the
10 closure of any power plants, whether it's a coal facility,
11 a nuclear facility, or anything. And the communities that
12 have hosted these power plants have endured a certain
13 burden on behalf of their fellow Pennsylvanians that
14 deserves to be recognized, particularly as those plants
15 close. And other States have taken a look at this and
16 actually done things. I point you to New York that has
17 created a transition program for States transitioning away
18 from existing power plants. And I think similar things can
19 be done here.
20 But what I cannot support is opening up a $500
21 million program -- this is $500 million every year. I
22 mean, this is $5 billion over 10 years. This is a lot of
23 money. You know, I appreciate the fact that, you know, I
24 think you said it was $1 million that they pay in property
25 taxes, but there's better ways to address Dauphin County's 61
1 problem and Goldsboro's problem and Middletown's problem
2 and I think it's the Central Dauphin School District's
3 problem than creating a $500 million program that dictates
4 where 68 percent of the energy consumed in this State comes
5 from. And, like I said, there's provisions in there that
6 could expand that to 100 percent.
7 This is not an all-of-the-above energy policy.
8 This is a command-and-control energy policy that is being
9 put forth in House Bill 11. I urge the Committee to take a
10 good hard look at this bill, understand what it really
11 represents, and invite a thoughtful conversation so
12 Pennsylvania can continue to remain in the vanguard of
13 energy policy throughout the country and the world.
14 MR. SNITCHLER: Good morning, Chairman Roae,
15 Chairman Matzie, and Members of the House Consumer Affairs
16 Committee. My name is Todd Snitchler, and I am the Vice
17 President of Market Development at the American Petroleum
18 Institute. In the interest of disclosure, since we're
19 going to get the question anyway, prior to joining API, I
20 was elected two terms to the Ohio State House as a State
21 Representative in the Ohio General Assembly and was also
22 appointed Chair of the Ohio Public Utilities Commission
23 where I served from 2011 to 2014. Since returning to the
24 private sector, I've represented independent power
25 producers, competitive energy suppliers, and technology 62
1 companies working in the energy and utility space prior to
2 joining API.
3 A little background about API, we are the only
4 national trade association representing all facets of the
5 oil and natural gas industry, which supports 10.3 million
6 jobs and 8 percent of the United States' economy. API's
7 more than 625 members include large integrated companies,
8 as well as exploration, production, refining, marketing,
9 pipeline, and marine businesses, and supply and service
10 firms. As Vice President of Market Development, I am
11 responsible for natural gas issues, including those that
12 are related to the use of natural gas for power generation.
13 Also, it's important to note that API's
14 Pennsylvania affiliate is a member of the Citizens against
15 Nuclear Bailouts Coalition, a diverse coalition of over 20
16 members representing citizens group to power generators and
17 energy business and manufacturing associations. My
18 comments today, however, represent the views of API and do
19 not represent the views of any other organization.
20 I want to thank you for the opportunity to
21 provide testimony in House Bill 11, but before discussing
22 our concerns with the bill, I briefly want to highlight the
23 role that natural gas has played in the U.S. since the turn
24 of the century and the role that the U.S. has played in the
25 global oil and gas market. 63
1 We currently lead the world in production of
2 natural gas and oil, and at the same time we are the global
3 leader in the reduction of carbon dioxide emissions.
4 Additionally, carbon dioxide emissions from electricity
5 generation have declined 28 percent since 2005 and are at
6 their lowest level in nearly 30 years. About 50 percent of
7 the decrease in power generation related CO2 emissions
8 since 2005 was due to fuel switching to natural gas.
9 It's significant to note that the development of
10 new natural gas-fired resources in Pennsylvania has
11 resulted in Pennsylvania's carbon dioxide emissions falling
12 to levels that would now meet the repealed Clean Power Plan
13 without a government mandate.
14 My colleagues on the panel talked about the
15 success of restructuring and what has happened in other
16 States, but allow me to offer a couple of observations.
17 The intended benefit of restructuring was to shift the risk
18 of large investments in generation resources from utility
19 customers to utility shareholders. It's important to note
20 that, before restructuring, Pennsylvania's electricity
21 rates were 15 to 20 percent higher than the national
22 average, and now they are paying less than the national
23 average, as my colleague has noted.
24 In addition, in order to ensure that commitments
25 previously made by regulated utilities under the vertically 64
1 integrated model did not cause financial harm to those
2 owners, those utilities were allowed to request and receive
3 stranded cost recovery for assets that had not been fully
4 depreciated. According to a June 17 study by Daymark
5 Advisors, total stranded cost in Pennsylvania ended at
6 about $11.6 billion with $8.6 billion related to stranded
7 nuclear costs, meaning consumers have already paid over $8
8 billion to subsidize nuclear plants in Pennsylvania. Many
9 would argue that restructuring brought a new level of
10 discipline to the electricity market and forced suppliers
11 to compete for service with natural gas and renewables
12 leading the way in new builds.
13 At the same time, natural gas prices have sharply
14 decreased over the last decade. Prices that had been as
15 high as $15 per MMBtu have dropped to below $3 per MMBtu on
16 an average annual basis, and the price volatility of
17 natural gas from 2010 through 2018 fell by half relative to
18 those from the period 1997 to 2009.
19 So responding to this shift, along with consumer
20 demand for cleaner and more flexible power, power
21 generators have turned to natural gas. This dramatic
22 change in the price of natural gas turned the power
23 production market upside down and has provided consumers
24 with dramatic economic benefits. What it has also done is
25 attract billions of dollars in private capital to 65
1 Pennsylvania from power plant developers who see
2 opportunity.
3 With regard to House Bill 11, API supports a
4 level playing field where all types of generation resources
5 are able to compete for market share, the type of playing
6 field that has led to such drastic emission reductions in
7 our country since 2005. API also believes that awarding
8 subsidies and selecting winners and losers in the market
9 disrupts effective entry and exit of economic resources,
10 resulting in an inefficient market where consumers end up
11 paying more than they otherwise ought to pay. The
12 increased use of natural gas in power generation provided
13 dramatic economic and environmental benefits to the
14 families and businesses of the Commonwealth of Pennsylvania
15 and should not be abandoned to provide subsidies to
16 profitable generation owners.
17 House Bill 11 would effectively destroy a market
18 that has encouraged innovation and recognized those who
19 have risked private capital and provided beneficial
20 outcomes without burdening Pennsylvania ratepayers. Put
21 simply, it would punish those who played by the rules.
22 Were House Bill 11 to pass, 50 percent of the market would
23 be required to buy credits from nuclear generation, making
24 nearly 70 percent of the market uncompetitive when combined
25 with the current AEPS requirement of 18 percent. This 66
1 outcome would not just distort a playing field which is
2 already suffering from subsidy distortion, it would make
3 the game unplayable.
4 The supporters of House Bill 11 have previously
5 benefited from restructuring, and they now want to mandate
6 that Pennsylvania families and businesses pay at least $500
7 million more annually to ensure that they continue to
8 receive profit margins that they deem acceptable. That
9 outcome is the worst of all worlds in creating a heads-we-
10 win, tails-you-lose scenario where profits are retained by
11 the corporation and any losses are socialized to consumers.
12 The beneficiaries of House Bill 11 also would
13 like to say that there is no market or that PJM isn't a
14 real market and this administrative construct is broken.
15 At the same time, supporters of House Bill 11 say they
16 prefer market-based solutions. What seems clear is that
17 the lack of credit -- and by that I mean payment -- for
18 nuclear powers non-emission profile means that the market
19 doesn't serve their needs. And while I will leave it to
20 PJM to defend its market, I'll offer the following points
21 to consider.
22 As presently constructed and you previously
23 heard, the PJM market seeks to deliver reliable power at
24 lowest cost. Until nuclear generation owners stop making
25 returns they desire due to competition from low-cost 67
1 natural gas, the complaints about a broken market were
2 nonexistent. At the same time, policymakers must be
3 mindful of but not misled about the possible impacts to
4 local communities. Profitable plants are extremely
5 unlikely to close.
6 It's also worth noting that the recently passed
7 New Jersey legislation, out-of-state nuclear units like
8 Three Mile Island were and still are eligible for ZEC
9 payments to subsidize that unit and have New Jersey
10 ratepayers pay the bill.
11 Second, plants out of the money like Three Mile
12 Island are likely to close no matter what you do but will
13 be cast as the we-told-you-we-were-serious to force U.S.
14 policymakers to approve a bad bill. If the goal is to help
15 impacted communities, as Glen noted, there are far more
16 cost-effective ways to do that.
17 I also need to reemphasize, because it was
18 perhaps unclear at the previous panel, that API is not in
19 any way anti-nuclear. We are not leading the charge to
20 close any plants or stop construction of new plants where
21 they exist. Natural gas generation has grown tremendously
22 in Pennsylvania alongside the existing nuclear fleet. What
23 API does oppose is legislation that seeks to undo and limit
24 continued growth in natural gas generation in the
25 Commonwealth. The Legislature should not punish those who 68
1 played by the rules in the electricity market and come into
2 those who didn't like the outcome.
3 In conclusion, I'll leave you with four
4 takeaways. API supports a level playing field where any
5 resource has the opportunity to compete for market share.
6 API opposes subsidies for specific generation types.
7 Pennsylvania's natural gas and oil industry directly
8 supports over 100,000 jobs and indirectly supports over
9 222,000 jobs in Pennsylvania while accounting for 3.4
10 percent of the economy, contributions that could be greatly
11 reduced if House Bill 11 passes and reduces the ability of
12 natural gas to compete. And contrary to much of the
13 rhetoric around this legislation, in the end, this bill is
14 really about guaranteeing corporate profits.
15 With that, Mr. Chairman, I thank you for the
16 opportunity to testify and would be happy to answer any
17 questions at the conclusion.
18 MS. HUNG: Good afternoon. My name is Desiree
19 Hung, and I'm with AARP Pennsylvania.
20 Chairman Roae, Chairman Matzie, distinguished
21 panel, thank you for allowing me the opportunity to testify
22 on behalf of AARP's 1.8 million members in Pennsylvania.
23 At AARP, we believe that no one's possibilities
24 should be limited by their age, and we work to help people
25 live and age as they choose. That's why we're strong 69
1 advocates for fair and affordable utility rates and
2 reliable service. We believe consumers must have access to
3 safe, affordable, and high-quality utility service.
4 Indeed, these are lifeline services that impact the health
5 and safety of residents of all ages.
6 We're here today because we have very serious
7 concerns about House Bill 11 and its proposal to impose a
8 significant new charge on Pennsylvania's electric
9 ratepayers that would benefit the State's nuclear power
10 providers. In fact, when you take a close look at the
11 proposal, the bailout plan is nothing more than a way to
12 increase the profitability of our State's aging nuclear
13 power plants at the expense of electric consumers.
14 House Bill 11 will raise electricity rates for
15 only Pennsylvania customers even though our nuclear power
16 plants provide power to a regional grid that supplies
17 customers in 12 other States. That means Pennsylvania
18 electricity ratepayers would be paying a premium so
19 customers in other States can enjoy discounted electric
20 rates, and we believe that is just not fair.
21 It's important to note that other States have
22 ignored a bailout for nuclear power providers with no ill
23 effects on their electricity market. States, including
24 California, Vermont, Michigan, and Wisconsin, have seen
25 some of their nuclear plants close without a bailout and 70
1 have experienced no impact on reliability. PJM
2 interconnection, which runs the 13-State electric grid for
3 this region, has already completed its own analysis here
4 and concluded that a lack of a bailout plan here in
5 Pennsylvania will not impact the reliability of our
6 regional electric grid.
7 AARP also has opposed similar single-State
8 surcharges benefiting the nuclear industry in other States.
9 We believe if a surcharge or special payment is needed, it
10 should be considered on a regional basis by PJM, and that's
11 exactly what they're doing.
12 We believe the bailout included in House Bill 11
13 is completely unnecessary. Currently four of five nuclear
14 power generators in Pennsylvania are profitable and are
15 projected to make a total profit of more than $600 million
16 this year alone. In addition, those generating stations
17 are clearing the capacity PJM market, which means, too,
18 that they will remain profitable for at least the next five
19 years.
20 We're also concerned about the size of the
21 bailout. One estimate sets the price tag of a bailout at
22 $500 million, but it's important to remember that will be
23 $500 million per year for at least six years, the initial
24 term of the surcharge in House Bill 11. That's putting
25 Pennsylvania ratepayers on the hook for $3 billion, which 71
1 is far more than the previous bailouts proposed in other
2 States.
3 The current version of the bailout proposal would
4 give nuclear power plants special protections as part of
5 the State's Alternative Energy Portfolio Standards similar
6 to wind and solar power generators, but that law was
7 intended to advance the development of new and innovative
8 renewable energy technology and not bailout last century's
9 nuclear reactors that can't compete anymore in the
10 electricity marketplace.
11 To be clear, AARP is not opposed to nuclear
12 power. AARP is fuel-neutral. However, we strongly oppose
13 the imposition of a new surcharge on the backs of all
14 Pennsylvania consumers and businesses that will increase
15 their monthly bills. The proposed rate surcharge will be a
16 significant burden for consumers of all ages. Higher
17 utility bills will force many individuals and families to
18 jeopardize their health and safety by making difficult
19 choices like turning down the heat in winter, not using air
20 conditioning in summer, having to choose between paying the
21 electric bill, buying groceries, prescription medicines, or
22 paying property taxes. Low utility rates are not a problem
23 for ratepayers, but higher rates are.
24 On behalf of AARP members and consumers
25 Statewide, we are asking you to reject this costly and 72
1 unnecessary bailout. In the end, Pennsylvania utility
2 customers of all ages expect to pay fair and reasonable
3 prices for their electricity and not a dollar more. We
4 need our elected leaders to put the interests of consumers
5 above those of already-profitable nuclear power companies.
6 Pennsylvania electricity consumers deserve nothing less.
7 We thank you again for holding these public
8 hearings, and we look forward to continued robust dialogue
9 on the merits of this legislation, as well as beyond today.
10 I'll be happy to answer any questions if you have them, and
11 thank you once again for allowing me to speak here today.
12 MAJORITY CHAIRMAN ROAE: All right. Thank you
13 for your testimony.
14 We're going to start with brief questions from
15 the Members, so the first Member to ask a brief question
16 will be Representative Matzie, the Democratic Chairman.
17 DEMOCRATIC CHAIRMAN MATZIE: Thank you. And of
18 course if we have time at the end, we can ask more, right?
19 Thank you all for your testimony. Glen, I'll ask
20 you the question because your resume speaks for itself.
21 Thank you for your service also to the State when you were
22 here as a PUC Chairman and as a Member.
23 I've been throwing different ideas in my mind and
24 have mentioned at hearings, at meetings about how I would
25 love to somehow find a way to come up with a policy that 73
1 made sense for everybody. I'm for all-energy portfolio. I
2 mean, I'm from Southwestern Pennsylvania. I've got it all,
3 so I'm from an all-energy portfolio. But put your PUC hat
4 on for a second. And, granted, every State is different.
5 New York did there's different. They didn't have to go
6 through the Legislature. Illinois relies on 80 percent of
7 nukes. Every State is different, I mean, from that
8 perspective.
9 If the General Assembly would put forth a policy
10 that asks the PUC to interject and put forth some policy or
11 effort or regulation or a number on what makes sense, is
12 that something, A, they're equipped to do; and B, is that
13 something that they could actually happen and work?
14 MR. THOMAS: I mean, a couple thoughts on that.
15 I mean, first of all, I think it's important that all
16 Pennsylvanians that are served by electric utility have a
17 choice of where they get their power from. And we've seen
18 tremendous increases in the amount of people that are
19 choosing renewable power in this State, and there's good
20 reason for that. The cost of renewables have come down
21 dramatically. I mean, we're seeing grid scale solar coming
22 in Nevada at about 2.5 cents. Your default rates in
23 Southwestern Pennsylvania right now are probably around 6,
24 7 cents.
25 And indeed, there's options out there. I mean, 74
1 if you go to PA Power Switch, you'll probably see options
2 available in your community to go 100 percent renewable and
3 save money from your utilities. So technology is changing
4 a lot, and it's particularly changing in the renewable
5 space.
6 You know, I look out at the grid right now, and
7 there are some issues that need to be addressed, and they
8 are being addressed, quite frankly, at the wholesale level.
9 We are working through some changes at PJM and at the
10 Federal Energy Regulatory Commission. We really could use
11 a couple rulings from the Federal Energy Regulatory
12 Commission that may help get some of these pricing issues
13 correct. But by and large, I mean, the market is working
14 very, very well. I mean, prices are down, reliability is
15 up, diversity is strong.
16 In terms of what would be a good policy going
17 forward, I would say to you figure out, you know, what you
18 want and then figure out a market-neutral way to go about
19 it. Like I said, if the desire is to reduce carbon
20 emissions in the State, one, I think it's important to
21 recognize, as Todd said, that, you know, our carbon
22 reductions are on track to meet the Clean Power Plan
23 reductions, so we've done yeoman's work on the carbon
24 reduction footprint. Can we do more? Sure. You know,
25 let's have a conversation. Let's try to figure out how to 75
1 treat carbon in a market-neutral way that allows all
2 providers, you know, to participate in that low-carbon
3 future. There's probably technologies out there that have
4 yet to be discovered that could lead to the reduction in
5 carbon. And, like I said, you've got to examine the
6 existing AEPS, which supports a heck of a lot of carbon-
7 producing power.
8 So, you know, putting on my former PUC Chairman
9 hat, I would say a couple things. One, let the market
10 work. Let consumers choose. Don't dictate where they're
11 getting their power from. Let them decide it. And the way
12 things are headed, more and more people are going to choose
13 100 percent renewable because it's in their economic
14 interest to do so.
15 Two, let's have a conversation about carbon.
16 Three, let's talk about these communities that
17 are being impacted by closure. I think there's a real
18 valuable conversation to be had there, so that would be my
19 three-part plan right there, Mr. Chairman.
20 DEMOCRATIC CHAIRMAN MATZIE: Thank you, Mr.
21 Chairman.
22 MAJORITY CHAIRMAN ROAE: Representative Mehaffie.
23 REPRESENTATIVE MEHAFFIE: Thank you, Mr.
24 Chairman. Thank you for your testimony.
25 I'm assuming none of you are going to support my 76
1 bill. I'm kidding.
2 Todd, this question's for you.
3 REPRESENTATIVE NEILSON: Our bill.
4 REPRESENTATIVE MEHAFFIE: Pardon me?
5 REPRESENTATIVE NEILSON: Our bill.
6 REPRESENTATIVE MEHAFFIE: Our bill, sorry, sorry.
7 Thanks, Ed.
8 Before you were with API, you were, as you said,
9 spoke that you were a PUC Chairman in Ohio. It's a good
10 read, too, your testimony that you had in October 15th of
11 2013. You know, I think you hit it spot on. Your concern
12 was about baseload power and how it was going to affect
13 Ohio and what it was going to do for Ohio. And I think the
14 one thing you said is -- and you called it dash to gas was
15 your comment that you made. And you said stated for my
16 concern that the more dependent a system is on one specific
17 fuel type, the more the price risk and volatility there
18 exists for ratepayers. Do you still believe that?
19 MR. SNITCHLER: I think you've identified the
20 exact point, Representative. If you look at where we are
21 today versus where we are at that time, the grid is
22 actually more diverse now than it was then. This reported
23 dash to gas, which is we're going to be 100 percent natural
24 gas within the next two to five years, is a fallacy. The
25 strawman took a beating this morning with a lot of the 77
1 concern about all the nukes retiring and everything being
2 replaced by natural gas. Today in PJM it's 3 0 percent
3 coal, 30 percent gas, 30 percent nukes, and 10 percent
4 approximately in renewables. From my seat, that looks like
5 a very balanced portfolio. And I think the reality of
6 where we are today bears evaluation as opposed to where
7 someone suggests that we're on the cusp of retiring every
8 single generator that's not fired by natural gas.
9 I think you also have to look at where EIA says
10 we'll be, and the EIA data out to 2050 suggests that nukes
11 will continue to be 15 percent to 20 percent of the fleet,
12 coal will be 20 to 25 percent of the fleet, natural gas
13 will be somewhere in the 40-ish percent, and the balance
14 will be renewables, which continues to look like a fairly
15 balanced portfolio.
16 The other challenge that we have is that back in
17 -- I'll speak from my Ohio experience because I know it
18 better than Glen knows Pennsylvania. Back around 2 000 we
19 were 85 or more percent coal. There was no discussion at
20 the time about a need for balancing the portfolio, but the
21 situation on the ground, which is really revenue-driven,
22 has changed the position of some folks. And I have copies
23 of testimony from some of the sponsors of your bill or
24 supporters of your bill who would suggest that competition
25 drives innovation and suggests that that's how you get a 78
1 clean future, as well as competition is the ultimate good
2 outcome for consumers. And I think they were right then,
3 and I think they were right now.
4 So I think the concern about a dash to gas needs
5 to be tempered by what are the actual realities on the
6 ground. Does it need to be evaluated and looked at?
7 Without question. But are we at the point now where we are
8 overly reliant on any one fuel source? I would say
9 affirmative no.
10 REPRESENTATIVE MEHAFFIE: Not right now, but it
11 could happen if these plants close, which they're showing
12 you their trajectory is going down and down and they do
13 close them. What is going to replace them such as coal was
14 replaced by gas. So when you have one monopoly taking over
15 and controlling your market, like you said in your report,
16 I find it interesting that, you know, we got to make sure
17 that we don't let one fuel source monopolize that market.
18 And that is the truth. I mean, even in there you said like
19 if pipeline operators can't deliver, the generator can't
20 produce the electricity, and we have those problems
21 throughout, but we've also had the diversity that we have
22 now. And the main point of this bill is to make sure that
23 diversity stays in place and we make sure that our
24 consumers get the electricity that they deserve.
25 MR. SNITCHLER: And if I could respond, Mr. 79
1 Chairman, I think you raise -
2 REPRESENTATIVE MEHAFFIE: I'm not the Chairman.
3 MR. SNITCHLER: No, I was referring to the
4 Chairman, but thank you, Representative.
5 REPRESENTATIVE MEHAFFIE: But thank you.
6 MR. SNITCHLER: I think it's important -
7 REPRESENTATIVE MEHAFFIE: I like the way you're
8 thinking.
9 MR. SNITCHLER: I think it's important to respond
10 to some of your questions. I think you're correct on the
11 one hand, and I think there's a little more perspective
12 that needs to be added. When you look at how pipelines
13 deliver service, pipelines are not built in the same way
14 that electrical wires are built, and so they do not have
15 the same cascading outages that happen when the wires go
16 down. And frankly, that's one of the challenges that
17 virtually every fuel source has regardless of whether it's
18 got two years of nuclear rods or a 90-day coal pile or a
19 firm supply in a gas system. If the wires go down, which
20 is where more than 90 percent of outages come from, it
21 doesn't matter what your fuel source is.
22 So, in the end, I think we have to think more
23 carefully about how we're approaching some of the issues.
24 Pipeline infrastructure is today far ahead of where it was
25 5 or 10 years ago because there's been so much development. 80
1 You have seen better performance as a result of changes in
2 the market administered by PJM that has resulted in far
3 fewer outages because there's far more access to gas
4 supply.
5 So you're right in noting that we have to keep an
6 eye on the future, but I think it's important to see where
7 we've been and where we are today to show that the market
8 is evolving to keep up with what the situation on the
9 ground actually is.
10 REPRESENTATIVE MEHAFFIE: Thank you.
11 MAJORITY CHAIRMAN ROAE: All right. When the
12 last panel was up, Representative Bullock had wanted to ask
13 a question. We ran out of time. Do you have a question
14 you'd like to ask at this time?
15 REPRESENTATIVE BULLOCK: Yes. Thank you,
16 Chairman. When you run out on the last panel, then you try
17 to reconfigure your questioning, so I think I got a
18 question for this panel.
19 Good afternoon. In Philadelphia where I
20 represent many constituents, many who are struggling with
21 energy insecurity, housing insecurity, and rising health
22 costs, I often look for policy and legislation where I'm
23 trying to balance those very real costs for real people
24 with issues like our global economy and public health
25 concerns and environmental concerns. 81
1 My challenge with this bill is that it provides a
2 life-support to a zero-carbon emissions industry, one that
3 I definitely support on an environmental position, but does
4 very little else to lessen our State's carbon footprint.
5 It doesn't move the needle, it doesn't encourage wind,
6 solar, and other industries or increase those opportunities
7 for those industries. I was going to ask the last panel
8 would they be open to a broader conversation. I believe
9 you briefly mentioned that.
10 But I would like to ask AARP, is that a
11 conversation, a very nuanced conversation that you're
12 having with your members? You know, how are they thinking
13 about not just rates increasing but also possibly health
14 costs increasing or other concerns, you know, depending on
15 how we save this particular industry or encourage the
16 expansion of others like wind and solar?
17 MS. HUNG: Thank you for that question. I do
18 appreciate it. AARP members are always concerned about
19 their costs going up, and AARP has a very long history of
20 challenging rate increases all across the board regardless
21 of the actual industry. We're always concerned about what
22 the impact is going to be on our members, and we do have
23 some very serious concerns. I know calls and emails have
24 been going into various legislative offices right now
25 talking about those concerns, so you'll be hearing from 82
1 people, and you can hear directly from them about those
2 concerns because you are absolutely right. Anything that
3 they have to pay more for means they have to pay less for
4 something else.
5 REPRESENTATIVE BULLOCK: I guess are you having
6 those educational moments with them to discuss the nuances
7 here that, you know, an increased air pollution can result
8 in higher asthma rates, higher health costs, along with
9 those increasing rates and how do we balance those two
10 interests?
11 MS. HUNG: Yes, we do our best to educate our
12 members on the facts of whatever issue may be coming up,
13 and we do have those conversations. We do meet with our
14 members. We do have 1.8 million members in Pennsylvania,
15 so it's hard to reach everyone, but we do do our best and
16 we do try to provide information for them so they can make
17 decisions that will benefit them and their families.
18 MAJORITY CHAIRMAN ROAE: All right. Our next for
19 a brief question is Representative Mackenzie. Brief.
20 REPRESENTATIVE MACKENZIE: Thank you, Mr.
21 Chairman.
22 I appreciate the voluntary disclosure that some
23 of the members of our panel provided, and if there's
24 anything else that we should know beyond your current
25 places of employment, I would appreciate it, to hear from 83
1 the other panelists.
2 So my question, I'll start on the left, and I
3 understand I have a brief period of time, so we'll start
4 with Mr. Sunday from the Chamber. I asked the last
5 panelists about their support and the transition of $500
6 million from ratepayers to other interest groups. Those
7 who say that we need House Bill 11 say that if we don't do
8 anything, there will be a significant cost increase. So
9 you're opposed to the bill, so potentially if we don't do
10 anything there could be this cost increase. How would you
11 address that or respond to a claim like that?
12 MR. SUNDAY: Thank you, Representative. Much of
13 the advocacy again is pulling numbers out of the 2016
14 report, which we cosponsored. There's another report that
15 the same study group put out last year, and there's an
16 important clarification that those authors note in that
17 report, which is that, and I'll quote, "Recent PJM capacity
18 market performance with continuing new generation additions
19 in the face of persistent low-capacity prices may suggest
20 that capacity markets have changed in ways that can
21 mitigate the capacity price effect found in our prior
22 results." The report also noted that the total cost should
23 the two plants in question actually shut down, price
24 increases are about $500 million less than the 2016 report.
25 So, one, costs are lower than they originally estimated; 84
1 and two, PJM ended up behaving in a way that they did not
2 anticipate. What we do know is that this bill will
3 dramatically raise electricity costs for commercial and
4 industrial users.
5 REPRESENTATIVE MACKENZIE: Thank you.
6 MAJORITY CHAIRMAN ROAE: All right. We don't see
7 any Democrats on our list, so our next person is going to
8 be Representative Nelson for a brief question.
9 REPRESENTATIVE NELSON: Thank you, Mr. Chair,
10 yes, very brief question.
11 And I would appreciate the follow-up. Even
12 though I know we ran out of time last session, so we did
13 not get to hear FirstEnergy's plan in the event of closure
14 where they may be storing their nuclear waste, as Exelon
15 has disclosed.
16 My question for the panel is if we look at other
17 States nationally, and Illinois that had done a bailout
18 once, they now just past the second bailout out of
19 subcommittee, you know, so they're back going through that
20 process. In the earlier testimony you talked about our
21 goal as a State, and I think in a bipartisan effort our
22 goal is jobs and manufacturing opportunity, you know, to
23 keep our State flourishing. Could you touch on the
24 consequence of increased energy prices on manufacturing
25 such as steel and the potential plastics that we're 85
1 searching for?
2 MR. THOMAS: I mean, I'll give it a shot and then
3 I'm sure Kevin on behalf of the Chamber has some thoughts.
4 But, you know, one of the more, you know, frustrating
5 aspects of discussions, Pennsylvania is so well-positioned
6 right now, and it's for the very points you raised. Other
7 States have made some policy mistakes that are causing
8 their rates to go up. You know, I look at New Jersey, and
9 I've been in battles in New Jersey for a couple years
10 actually going back to 2011. I mean, their rates are now
11 about 30, 35 percent above Pennsylvania's largely because
12 of policy decisions they made.
13 Pennsylvania is well-poised in the region to
14 really be, you know, a home for low-priced electricity if
15 we continue on the path of competitive markets, we continue
16 to allow these markets to work as intended. So, I mean, I
17 absolutely agree with you. You know, electricity inputs
18 are a very important part of any business's decision, you
19 know, and having the ability to have low-cost rates
20 combined with the ability to choose because there are also
21 many, many companies that are voluntarily choosing to go
22 100 percent renewable or pay a little bit more in order to
23 get that service. And that's a great thing. We want to
24 encourage that.
25 You know, consumers should be driving this 86
1 marketplace. And guess what, if consumers demand, you
2 know, certain things, the industry has got to respond.
3 That's the way these things work. I mean, Todd's members
4 are already looking at many ways to eliminate carbon from,
5 you know, their processing. You know, there is great
6 progress happening if we allow the market to continue to
7 provide the innovation that the market can provide. And I
8 worry greatly that House Bill 11 represents a tremendous
9 step backward from that policy.
10 Go ahead, Kevin. I'm sorry.
11 MR. SUNDAY: Thanks, Glen. Thanks for the
12 question, Representative. And just to reiterate, yes, as
13 folks look to Pennsylvania, a difficult tax climate but our
14 energy resources and workforce are a reason they're looking
15 here. Electricity inputs, that's a big marker on the
16 evaluation criteria for new sites, and if we take a step
17 backwards, it's only going to disadvantage us further.
18 We're already in the mid-30s on job creation. I wouldn't
19 want to see us fall any further behind.
20 Further, existing facilities, this is a pretty
21 big sticker shock for them as they evaluate are we going to
22 invest in our facility or go somewhere in the South or
23 somewhere overseas? And there is an economic and
24 environmental consequence to that as well.
25 MAJORITY CHAIRMAN ROAE: All right. Next is 87
1 Representative Pickett.
2 REPRESENTATIVE PICKETT: Thank you, Mr. Chairman.
3 This is for Mr. Snitchler. I was recently told
4 that Royal Dutch Shell has pulled out American fuel and
5 petrochemical manufacturers, and they also announced that
6 they're at odds with API's climate policy. They stated
7 that they're hoping to change their climate policy. Could
8 you please discuss that and Shell's misalignment with your
9 policy at this point?
10 MR. SNITCHLER: Thank you for the question. I
11 read the same report that they have elected to terminate
12 their membership with AFPM. They have elected not to
13 terminate their membership with API and continue to have
14 ongoing discussions about addressing concerns about
15 climate. An API has said that we believe that climate is a
16 serious and important issue, and we think that innovation
17 can help us drive to solutions that will have meaningful
18 outcomes.
19 Member companies that participate at API are
20 engaged in, as Glen noted, actively trying to reduce
21 methane emissions, spending millions of dollars of their
22 own money to research carbon capture projects in order to
23 find ways to continue to reduce emissions from power
24 generation and other services that they provide as well.
25 So the industry is working very hard to try and address 88
1 some of those questions.
2 But the real issue I think here is that House
3 Bill 11 isn't so much a climate bill as it is an economic
4 bill, and so if this panel elects to have that kind of a
5 conversation, API would want to participate and engage in
6 that discussion with you. But that's not really the
7 subject matter of the bill.
8 I do think it's important to note because not
9 everyone is aware that a number of API members are heavily
10 invested in the renewable space not just in the United
11 States but globally and have taken the perspective that
12 they are now energy companies, not merely oil and gas
13 companies or oil and natural gas companies but have a
14 broader view of how they view energy and are trying to
15 engage in that space. And I think that's part and parcel
16 of the same discussion that you mentioned.
17 REPRESENTATIVE PICKETT: Thank you.
18 MAJORITY CHAIRMAN ROAE: Chairman Matzie.
19 DEMOCRATIC CHAIRMAN MATZIE: Thank you, Mr.
20 Chairman. And again, thank you. A follow-up question
21 really probably for Todd. The efforts of the gas industry
22 relative to natural gas if in fact nukes would go away -
23 let's hypothetically say they all went away and gas was
24 looked at, like some folks have mentioned, would pick up
25 the slack so to speak. How would that affect -- and again, 89
1 we believe -- and I was a strong supporter in a bipartisan
2 manner to get the petrochemical tax credit passed to bring
3 Royal Dutch Shell to Beaver County where, quite frankly,
4 it's always sunny in Beaver County for everybody. What
5 would that do from a manufacturing -- is there enough? I
6 mean, because that was one of the goals when we passed the
7 petrochemical tax credit, when we worked with the Chamber,
8 when we worked with labor, when we worked with all the
9 stakeholders was we want to get as much gas out of the
10 ground as possible so we can have a renaissance.
11 MR. SNITCHLER: Mr. Chairman, is your question do
12 we have enough gas -
13 DEMOCRATIC CHAIRMAN MATZIE: Right. Yes, yes.
14 MR. SNITCHLER: -- to do all those things? The
15 short answer -
16 DEMOCRATIC CHAIRMAN MATZIE: And still supply -
17 MR. SNITCHLER: The short answer is yes. As I
18 noted in my testimony and more so in my written testimony,
19 the volume of natural gas and oil that's being produced
20 today is at record highs. The amount of natural gas and
21 oil that can now be moved bidirectionally -- it's not all
22 coming from the Gulf but moves from the various shale
23 formations around the country and can be delivered into
24 various markets -- makes much easier the ability to move
25 commodities to the markets where they're most desired. And 90
1 you're seeing that with pipeline infrastructure buildout
2 near and around the Shell facility that's under
3 construction in Western Pennsylvania, which is vying for
4 the same kind of projects that Ohio and West Virginia would
5 love to see as well.
6 And so the short answer is yes, there is
7 sufficient supply, and I can point you to the fact that we
8 have seen record exports via LNG over the last year, and
9 you have seen prices actually decrease in natural gas
10 around the country on average because you're seeing
11 commodities that have a point where they can export to
12 market and get a higher price are willing to then produce
13 and move that commodity where they can get that price. So
14 if the price is right, to borrow a phrase, you're going to
15 see the commodity move to where it needs to be.
16 DEMOCRATIC CHAIRMAN MATZIE: Okay. Thank you.
17 Thanks, Chairman.
18 MAJORITY CHAIRMAN ROAE: All right. Next is
19 Representative Delozier.
20 REPRESENTATIVE DELOZIER: Well, thank you, Mr.
21 Chairman. I would like just to get some feedback. This is
22 a question that I've received from constituents in emails.
23 So we have the situation where the APS went in, subsidized
24 alternative energy. We needed a strong market, support
25 alternative energy, so we have a government subsidy for 91
1 that. These same individuals that are supportive of
2 supporting alternative energy are now saying no more
3 subsidies. So the rub there is that they support subsidies
4 for certain types of our grid but not other types of our
5 grid.
6 So my question really -- and I just want feedback
7 on responding to that kind of argument as to the fact that
8 they do not want to assist in this venue, but they don't
9 want to get rid of AEPS because they feel that the
10 government should subsidize alternative energy. So what is
11 the argument necessarily on the fact that we're picking and
12 choosing which ones government subsidizes? We were talking
13 competitive markets. If we're truly talking competitive
14 market, shouldn't everyone be on the same playing field and
15 there be no subsidies and they compete as they will be who
16 can survive?
17 We're talking alternative energy obviously
18 becoming stronger, which is good, we need that. We want to
19 support the alternative. But if we truly are talking about
20 a competitive playing field, white they not all even and
21 either not subsidized or subsidized? Thank you.
22 MR. THOMAS: Yes, I'll take a stab at that. And
23 maybe I should add to my list for Representative Matzie a
24 fourth thing and that is for this Committee to have a good
25 conversation about the existing AEPS program in the State. 92
1 I think if, you know, you pull that the layers of the
2 current AEPS program, I think there would be a lot of
3 surprise about where that money is actually going. I mean,
4 there's a money going to a lot of waste coal piles in West
5 Virginia. There's black liquor facilities in Maryland.
6 There's, you know, solar facilities in North Carolina. And
7 I know there's been some legislative action to address
8 that.
9 But the vast majority of those dollars are not
10 flowing where I think this Committee thinks those dollars
11 are flowing for. And I really think before you even
12 consider expanding it -- and let's talk about -- I mean,
13 we're talking about going from, you know, 18 percent to 68
14 percent of the AEPS, you know, dictating where resources
15 came from in the State, so I think a careful examination of
16 what the current AEPS looks like is in order.
17 I think, you know, it was passed along time ago,
18 it hasn't been revisited that much. I'm not sure it
19 continues to reflect the priorities in this room, you know,
20 and I think we need to be open to the conversation of
21 possibly getting rid of it and letting consumers just
22 choose on their own. It's remarkable to see how many
23 people -- I mean, cities, towns, the city of Pittsburgh,
24 the city of Philadelphia, you know, Schuylkill Township in
25 Chester County, Marion Township in Montgomery County, you 93
1 know, all these communities are making the choices to go
2 100 percent renewable because the market allows them to do
3 it. And guess what, it's starting to become more
4 affordable to do it.
5 So, yes, I think it's a terrific question, you
6 know, and what I would say to your constituents is, yes, I
7 think it's time we relook at existing AEPS and make sure
8 it's still making sense.
9 MAJORITY CHAIRMAN ROAE: All right. I don't see
10 any other questions, and we're pretty much right on time
11 here. Members have to be on the Floor at one o'clock.
12 But I would like to thank both panels for your
13 testimony today, and I'd like to thank the audience. You
14 were a good audience. Everybody listened well. Nobody
15 interrupted or anything, so I appreciate that. And thank
16 you to House security and the House staff, the Executive
17 Directors, and so on.
18 I encourage all the Members to please read the
19 complete packets. And I do want to make a correction.
20 Earlier I said the State House website would have this
21 information. Well, somebody sent me a message that that
22 might not be the case. But if you go to my website,
23 www.RepRoae.com -- Roae is spelled R-o-a-e -- that's where
24 it's going to be. I'm going to see if I can get it added
25 to the PA House GOP website, but www.RepRoae.com is a 94
1 website where the testimony is going to be.
2 And thank you again, everyone, for participating
3 today. And I'll see all the other Members up on the Floor.
4 Thank you.
5 Representative Matzie, the Democratic Chair, do
6 you have any -
7 DEMOCRATIC CHAIRMAN MATZIE: I'm good.
8 MAJORITY CHAIRMAN ROAE: He said he's good.
9 Thank you.
10
11 (The hearing concluded at 12:56 p.m.) 95
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