COMMONWEALTH OF PENNSYLVANIA HOUSE OF REPRESENTATIVES CONSUMER AFFAIRS COMMITTEE PUBLIC HEARING STATE CAPITOL HARRISBURG, PA MAIN CAPITOL BUILDING ROOM 14 0-MC WEDNESDAY, APRIL 15, 2019 9:00 A.M. PRESENTATION ON HOUSE BILL 11 TO AMEND THE ALTERNATIVE ENERGY PORTFOLIO STANDARDS (AEPS) ACT OF 2004 BEFORE: HONORABLE BRAD ROAE, MAJORITY CHAIRMAN HONORABLE SHERYL DELOZIER HONORABLE ROB KAUFFMAN HONORABLE RYAN MACKENZIE HONORABLE THOMAS MEHAFFIE HONORABLE ERIC NELSON HONORABLE TINA PICKETT HONORABLE THOMAS SANKEY HONORABLE MARTINA WHITE HONORABLE ROB MATZIE, MINORITY CHAIRMAN HONORABLE DONNA BULLOCK HONORABLE AUSTIN DAVIS HONORABLE TINA DAVIS HONORABLE MARTY FLYNN HONORABLE PETER SCHWEYER HONORABLE PAM SNYDER 2 COMMITTEE STAFF PRESENT: PHIL KIRCHNER REPUBLICAN EXECUTIVE DIRECTOR HEATHER RODGERS REPUBLICAN LEGISLATIVE ADMINISTRATIVE ASST. II JES BLAIR REPUBLICAN ADMINISTRATIVE ASSISTANT TRAINER BETH ROSENTEL DEMOCRATIC EXECUTIVE DIRECTOR TIM SCOTT DEMOCRATIC SENIOR RESEARCH ANALYST BRETT BIGGICA DEMOCRATIC RESEARCH ANALYST * * * * * Pennsylvania House Of Representatives Commonwealth of Pennsylvania 3 INDEX TESTIFIERS * * * NAME PAGE DAVID SPIGELMEYER MARCELLUS SHALE COALITION............................. 5 RACHEL GLEASON PENNSYLVANIA COAL ALLIANCE........................... 13 MARIA KORSNICK NUCLEAR ENERGY INSTITUTE............................. 2 5 KATHLEEN BARRON EXELON CORPORATION................................... 2 9 MARK SZYBIST NATURAL RESOURCES DEFENSE COUNCIL....................3 4 SUBMITTED WRITTEN TESTIMONY * * * (See submitted written testimony and handouts online.) 1 4 1 P R O C E E D I N G S 2 * * * 3 MAJORITY CHAIRMAN ROAE: Good morning everyone. 4 It is nine o'clock, so we're going to get started here. My 5 name is Representative Brad Roae, and I'm the Majority 6 Chair of the Consumer Affairs Committee. Chairman Robert 7 Matzie is right beside me. He is the Minority Chair. Just 8 real quickly, how we're going to do this today, we have 9 five testifiers. If I could ask all five testifiers to 10 please come up to the table. It looks like there's four 11 chairs there so the last one there has to stand up. Oh, 12 there's an empty chair there. Anyways, we're going to have 13 David Spigelmeyer from the Marcellus Shale Coalition, 14 Rachel Gleason from the Pennsylvania Coal Alliance, Maria 15 Korsnick of the Nuclear Energy Institute, Kathleen Barron 16 from Exelon Corporation, and Mark, oh that's a tough one, 17 Szybist from the National Resources Defense Council. 18 So I think how we're going to do this is we're 19 going to have each testifier go through their testimony and 20 then we're going to open it up for questions from the 21 members, and members can ask questions of any of the five 22 people that are on the panel. So I think we'll just go 23 right down the list here. We'll start with the first one 24 listed here, David Spigelmeyer of the Marcellus Shale 25 Coalition. But before we do that, Chairman Matzie would 5 1 you like to make any opening statements? 2 MINORITY CHAIRMAN MATZIE: Thank you Mr. 3 Chairman. I look forward to the testimony here today and 4 just continuing this dialogue. Thank you. 5 MAJORITY CHAIRMAN ROAE: All right. Whenever 6 you're ready, sir. 7 DAVID SPIGELMEYER: Good morning Chairman Roae, 8 Chairman Matzie, distinguished members of the House 9 Consumer Affairs Committee. Thank you for the opportunity 10 to testify today and share with you some thoughts about 11 House Bill 11. My name is Dave Spigelmeyer. I serve as 12 the President of the Marcellus Shale Coalition. The MSC is 13 a statewide trade association representing nearly every 14 producing midstream transmission and supply-chain member 15 who are fully committed to working with local, county, 16 state and federal government officials to facilitate the 17 safe development of natural gas resources in the Marcellus, 18 Utica and related geologic formations here in the 19 Commonwealth. I appreciate the opportunity to testify 20 before the Committee today. 21 Just over two decades ago the General Assembly 22 embarked on a bold experiment to transform how we deliver 23 electricity here in the Commonwealth. Under the 1996 24 Electric Generation Consumer Choice and Competition Act, 25 the business of generating electricity was separated or 6 1 unbundled from the business of delivering it to end-use 2 consumers. In doing so, a new marketplace was created 3 whereby consumers would choose their electric supplier, and 4 the risk of building and operating generating facilities 5 was shifted from the ratepayer to the private sector. This 6 process of transitioning to competitive markets took better 7 than 15 years. Along the way, owners of generation 8 facilities at the time, including every single nuclear 9 facility that exists today in the Commonwealth, were 10 compensated by Pennsylvania ratepayers for their stranded 11 costs to the tune of $11.6 billion. Almost nine billion of 12 those dollars went to Pennsylvania's nuclear industry. In 13 short, Pennsylvania's nuclear power plants were built and 14 financed by you and me, the Pennsylvania ratepayer. 15 Contrast that to today's marketplace. Captive ratepayers 16 no longer pay the freight to build, operate and subsidize 17 electric generation. Rather the risk to build and operate 18 generation facilities is borne by private investors who 19 must carefully evaluate the marketplace and deploy limited 20 resources as in efficient and effective manner as possible. 21 The business environment created in Pennsylvania through 22 the Competition Act sent positive signals to the investment 23 community. This response was significant and has sparked 24 new capital spending and the creation of thousands of jobs 25 as companies take advantage of clean, abundant and locally- 7 1 produced natural gas. Preliminary estimates of this 2 capital investment show that nearly $13 billion in 3 construction costs for new or converted power stations just 4 in Pennsylvania alone. Other estimates put the capital 5 investment in the tri-state Appalachian region at more than 6 $25 billion. Many of these projects that have received 7 critical permits have been built or are nearing 8 construction, yet fundamentally changing the market rules 9 through re-regulation and mandating more than 70 percent of 10 our electric generation portfolio threatens this private 11 capital investment and the jobs and revenue it will bring 12 to our local communities. Operators have demonstrated a 13 willingness to take on 100 percent of the risk of their 14 investment, but they need the certainty, predictability and 15 reassurance that our Commonwealth is committed to the 16 principles that first attracted the investment itself. We 17 have heard the argument that this abundance of new natural 18 gas power generation may serve the interests of consumers 19 today but may not in the future should natural gas prices 20 rise. This fear is premised on an argument that nuclear 21 power will go away. Let me put those arguments to rest. 22 First, nuclear power generation, as an industry, 23 is not going anywhere. Pennsylvania's nuclear industry is 24 indeed -- and the nuclear industry across the PJM grid is 25 profitable and healthy. According to the USEIA, nuclear 8 1 generation within the United States has reached an all-time 2 peak in 2018 and has increased by 4.8 percent since 2012. 3 Second, power generation in the PJM market does 4 not operate as a cartel. Operators cannot and do not 5 conspire to fix prices or limit supply. Each commercial 6 power plant is competing against every other power plant 7 regardless of the fuel source. As importantly, the General 8 Assembly has prescribed laws which dictate how electricity 9 must be purchased and empowered the PUC to oversee and 10 enforce those laws. In short, the system is working. Some 11 have decried the supposed early retirement of some nuclear 12 plants as emblematic of a struggling industry; however, the 13 retirement of individual power plants that are not 14 economical is nothing new. Certainly across the United 15 States six nuclear power plants have announced retirement 16 plans. Four of those facilities are single-reactor 17 facilities while the other two have announced retirements 18 due to a variety of local significant factors including 19 opposition from environmental organizations. Despite these 20 announced retirements, there remains a strong, healthy and 21 highly profitable nuclear industry within Pennsylvania, PJM 22 and across the United States. 23 Pennsylvania is fortunate to have a diverse and 24 abundant portfolio of energy resources, and this has led to 25 extremely diverse and well-balanced portfolio of power 9 1 generation. The diversity of our portfolio works to the 2 advantage of Pennsylvania consumers as various fuels act as 3 a hedge during times of price volatility and increased 4 demand for power. Perhaps no state in the nation has as 5 diverse a generation portfolio as Pennsylvania according to 6 DEP's comprehensive energy assessment with roughly equal 7 parts coming from nuclear, coal and natural gas. In fact, 8 in 2018 nuclear energy generated the largest percentage of 9 electric power in Pennsylvania at 32 percent. 10 It is also imperative to understand that 11 Pennsylvania does not exist on an electric generation 12 island. Electricity is generated, transmitted and 13 distributed across the entire PJM regional transmission 14 organization which stretches from Illinois to New Jersey. 15 As such, we have the ability to import or export 16 electricity into neighboring RTOs as the market would 17 dictate. The diversity of resources available to 18 Pennsylvania's consumers across the entirety of our 19 electric grid is well positioned to serve the needs of our 20 residents regardless of individual and economic power 21 plants if they choose to close.