Transcript: US House Hearing on AI and Energy Resources

On Tuesday, June 4, 2024, the House Energy and Commerce Subcommittee on Energy, Climate, and Grid Security held a hearing on “Powering AI: Examining America’s Energy and Technology Future.” Witnesses gave testimony on topics ranging from keeping cleaner, more efficient energy sources reliable and affordable to how US economic growth, driven substantially by resource-intensive technologies such as artificial intelligence, will be dependent on the modernization of its electric infrastructure.

The hearing featured four witnesses:

• Philip J. Dion – Sr. Vice President, Customer Solutions, Edison Electric Institute
• Tony Clark – Senior Advisor, Wilkinson Barker Knauer, LLP
• Tom Hassenboehler – Chair, Advisory Committee, Electricity Customer Alliance
• Melissa C. Lott – Professor, Climate School, Columbia University

AI and US electric infrastructure

“Digital infrastructure and AI is underpinned by electric infrastructure. One does not exist or grow without the other,” Electricity Customer Alliance advisory committee chair and Coefficient partner Tom Hassenboehler said in his opening statement. Members in the alliance include Google and Microsoft. Hassenboehler argued that the US, with its already strained electricity grid infrastructure, stands to “leave money on the table” and undermine its national and economic security if it cannot “expeditiously” build out energy transmission and generation.

This issue is exacerbated by the “confluence of rapidly and sometimes unanticipated demand growth,” according to witness Tony Clark, who previously served as a commissioner for the Federal Energy Regulatory Commission (FERC). “You have the retirement of significant forms of generation for a number of different reasons,” Clark said. “Some of them regulatory, some of them market, some of them technological changes that have happened.”

While the lion’s share of regulatory work on power generation and advanced energy services is currently done at the state and local level, the federal government plays a key role in promoting a more competitive market, according to Hassenboehler. If enabled, this “can ensure that the benefits from an AI-powered digital economy are realized.”

Remaining competitive with China

The race to compete with China on the development of AI and electric infrastructure was discussed at length. “While we debate whether red states or blue states should pay for energy and transmission infrastructure, China is rapidly building transmission and developing its own AI capabilities,” Hassenboehler said. For instance, China spent $165 billion on its electricity grids, while the US invested less than $33 billion, according to Hassenboehler.

Subcommittee Chair Duncan shared other climate-related concerns over China’s technological growth. “To my knowledge, China doesn't have to deal with the National Environmental Policy Act (NEPA) or the Endangered Species Act or litigation slowdowns that are faced by both producers, transmission lines, pipelines, utilities, et cetera,” he said. In that same vein, Rep. Debbie Lesko (R-AZ) later zeroed in on the Chinese Communist Party, which she said has “no qualms" about powering AI data centers with fossil fuels. “China doesn’t have radical environmentalists,” she said. (China does in fact have an environmental movement, despite severe restrictions on political speech.)

Philip Dion, a senior vice president of an electricity industry trade group, was another witness to expand on issues the US faces in remaining competitive with China. While he agreed with others that fixing supply chain issues and building more data centers are integral to remaining ahead, it’s a “critical issue” when the manufacturing parts are imported from China. “That has to stop. The manufacturing has got to come back for our critical energy projects.”

The future of energy sources

Partisan tensions around clean energy policy were on display in a successive line of questioning from Representatives Debbie Lesko (R-AZ) and Tony Cárdenas (D-CA).

Rep. Lesko – who represents Maricopa County, an attractive destination for AI data centers – characterized her district as being in a unique but “untenable” position due to the Biden Administration’s environmental policies, namely her county’s EPA designation as a nonattainment area for pollutants in line with the agency’s ozone standard. “Can you explain to me how the administration's EPA and regulatory policies are adversely affecting the US growth in AI and the manufacturing industry?” she asked the witnesses.

“We need clean, firm, dispatchable power,” but not “at all costs,” Dion told Rep. Lesko in response. “We can’t use things that are just commercially unproven,” he said in a reference to newer, energy efficient technologies that might serve as alternatives to fossil fuels. Rep. Doris Matsui (D-CA) takes issue with this general framing. “There is a pervasive belief that we cannot provide affordable, reliable electricity with zero carbon sources,” she said. She cited the ways in which renewable energy generation has exceeded total demand in California nearly everyday for over a month as of this spring.

Following Rep. Lesko’s five minutes, Rep. Cardenas said he was “concerned by the rhetoric” from his Republican colleagues who suggested that the solution to a strained energy grid is keeping Americans “dependent on deadly fossil fuels like coal.” This would not only be costly, but “disastrous for our communities and also for the future of the planet,” he said. Earlier in the hearing, Rep. Frank Pallone (D-NJ) expressed a similar sentiment, saying it was “illogical” for committee Republicans to spend the last two years “attacking every element of energy efficiency,” which would lower American families’ energy bills.

Dr. Melissa Lott, a Columbia University Climate School professor, focused primarily on cleaner, more efficient energy solutions, listing out some examples of the negative health and economic impacts of a coal-dependent future. “Overall, those costs are huge. The problem is that we pay for them from different buckets. We pay our power bills with one bucket, and we pay our health bills with another,” Dr. Lott said. Rep. Cardenas added that, “the cost of inaction is far greater than the cost of addressing the contributors of climate change.” He also applauded the Biden administration for passing the Federal Energy Regulatory Commission (FERC) Order 2023, which aims to reduce backlogs for transmission system projects, among other reforms.

Energy and Commerce Chair Cathy McMorris Rodgers (R-WA), Committee Ranking Member Pallone, and Subcommittee Ranking Member DeGette (D-CO), were among the lawmakers at the hearing that expressed support for what they regard as progress made under FERC, including transmission planning and cost allocation improvements. Not all witnesses agreed, however, with this characterization. “There's mention of FERC's recently issued rule on electric transmission planning and that's a good step, but there are other things we need to work on including cost allocation and interregional planning,” said Dion.

Several committee members argued for the necessity of fossil fuels. In his opening statement, Subcommittee Chair Duncan said that “pipelines are essential” to US energy security. Rep. Randy Weber (R-TX), a former air conditioning contractor, later argued that high efficiency standards don’t reduce the cost of energy. “We talk a lot about the cost of electricity and how high efficiency standards help, but they also hinder in a variety of ways,” he said. Rep. Weber stated that the costs associated with, for instance, replacing equipment that meets these standards and litigation opposing pipelines or nuclear energy will be passed onto the consumer.

Dr. Lott argued on the contrary. “Energy efficiency helps us to keep the price of electricity low, which is very important to end consumers,” she said. In the US, she pointed out, one in three Americans are currently energy insecure – an issue Dr. Lott believes energy efficiency can address, like data centers reducing their load capacity and allowing themselves to be flexible during peak demand. “Increasing utilization rates of individual types of generation and having a less swingy demand profile will end up saving consumers money,” she said. “We'll bring down bills and that's good for everyone.”

Some of the bills praised by committee leadership include the Atomic Energy Advancement Act, which Subcommittee Chair Jeff Duncan (R-SC), who introduced the Act, said will “help deploy more nuclear energy, emission free, firm generation;” the Inflation Reduction Act, which became law in August 2022 and created funding programs for clean energy, climate mitigation and resilience, and more; and the CHIPs and Science Act of 2022, which provided funding to support domestic semiconductor production and created federal science programs.

What follows is a lightly edited transcript of the hearing. Check references against the source video.

Rep. Jeff Duncan (R-SC):

If we could have everyone go ahead and take their seats. We're going to start on time today. The Subcommittee on Energy, Climate, and Grid Security will now come to order. The chair will recognize himself for five minutes from an opening statement. We have votes going to be caught at 10:30. We're going to get as far as we can, so that's why we're trying to rush a little bit. I want to thank you all for being here and welcome to the Energy Climate Grid Security subcommittee hearing titled, "Powering AI, Examining American's Energy and Technology Future." We're here today to examine the next frontier of the American economy, the digital information economy. Data centers and AI are powerful tools that give Americans an edge to stay ahead of our adversaries and competitors. We must keep this edge. At the same time, we have to maintain our energy dominance. America is blessed with tremendous natural resources. Our energy future directly impacts our technology future. In fact, our energy dominance will now be the reason for our technology dominance.

For decades, electricity demands have remained flat. That is no longer the case. In fact, we're seeing demand grow at a scale and pace that many utilities have never seen before. By some estimates, demand will grow by 5% per year nationwide through the end of the decade, but in certain parts of the country, demand could grow by as much as 20% regardless of the exact number. We know electricity demand is surging in many places because of data center growth, new manufacturing and electrification. This electricity demand from data centers and manufacturing is not like residential demand that uses little electricity here and there and can be asked to turn off through demand response and virtual power plants. Many of these enterprises run nonstop at 90% of their full potential. They can't afford disruptions, shortfalls, or blackouts that require 24/7, 365 electricity to power American innovation. If data centers, including those using AI, need constant power, they cannot rely upon intermittent resources for that firm and dispatchable power.

At the same time, we're seeing demand surge that grid experts have warned for years that the reliability of our electric grid is in danger of blackouts. Much of this grid reliability crisis is because of the premature retirement of our most reliable resources like coal, natural gas and nuclear power. A perfect example of this is the nation's largest grid operator PJM. Two states seeing some of the largest increases in data center demand, Virginia and Ohio, are in the PJM. PJM is warning us that up to 30% of its generation could retire by 2030, while energy consumption is projected to increase by 40% by 2039. So on one hand we're subtracting our most reliable generation and on the other hand we're saying we need more power. If the US is going to rise to the energy and technology challenge, we must embrace energy expansion. Pipelines are essential to the energy security of the United States.

If we don't have the necessary infrastructure to deliver energy from producers to consumers, we will undercut our economic energy and technology security. If we're going to meet the energy needs and climate pledges of technology companies, we're going to need both new nuclear, both large reactors and smaller modular reactors. The bipartisan work this committee has done on nuclear energy with the Atomic Energy Advancement Act will help deploy more nuclear energy, emission free, firm generation. As we build out this new infrastructure, we must ensure that residential rate payers feeling the squeeze from inflationary policies of the Biden administration are not burdened with even higher utility bills. Despite the many benefits of data centers, we must make sure that calls for electric infrastructure are paid by those customers causing the cost. They should not be disproportionately spread to residential ratepayers and other captive customers. The pace and skill at which we are seeing data centers come online requires data center companies, utilities, regulators, and policy makers to all work together early and often. Communication, new frameworks, and long-term planning are vital to meeting the technology and energy needs of this decade and decades to come. So I want to thank the witnesses for being here today. We look forward to hearing from you and your expertise on how we can meet the energy demands of America's technology future. I'll now recognize the ranking member Ms. DeGette for five minutes.

Rep. Diana DeGette (D-CO):

Thank you so much Mr. Chairman. After 20 years of stagnation, electricity demand is finally set to grow again, driven by everything from data centers to a resurgence in domestic manufacturing to vehicle electrification, America is demanding more electricity. This increasing desire for electricity is a good thing. It means more people are making things in America, whether that's batteries, solar powers or semiconductors. It means the critical industries that power the 21st century are going to be forced here at home rather than outsourced abroad. It means more and higher paying jobs for Americans and in large part, that's due to the investments President Biden and Congressional Democrats made two years ago through laws like the Inflation Reduction Act, bipartisan infrastructure law, and Chips and Science Act. But as we celebrate these new industries being built in the United States, we must make sure our power grid is up to the task. It will be, but only if we make necessary reforms to make sure that it can rise to the challenge.

One of those reforms is making it easier to build power generation and batteries and to connect those resources to the grid. It takes an inexcusably long time for resources to connect to the grid. Now frankly, it's gotten so bad that some rich regional grids have had to pause accepting new requests while they deal with a backlog of existing requests. That's simply unacceptable. Last year the Federal Energy Regulatory Commission made progress by issuing order 2023, which mandated reforms, but frankly, those reforms have not gone far enough. Grid operators must examine more aggressive strategies to allow enough supply to come onto the grid to match the forecasted increase in demand. Another common sense set of reforms would be to get more of our existing grid infrastructure, making sure grid operators are getting the most out of their existing wires and optimizing–

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Philip J. Dion:

In 2023, the Federal Energy Regulatory Commissions, they had the filings that showed what we all know. There's a nearly doubling of the five-year load forecast and similarly, last year NERC noted that the electric peak demand and energy forecast over their 10 year assessments were higher than any point in the other previous decade. While there are many forecasts and we know that and the accuracy of those forecasts is a bit uncertain, the trend line is clear. Electricity demand for this country is poised to grow like we haven't seen for decades. Thus, our member companies are focused on the tools that we're going to need to meet the evolving customer demands. The American investor-owned electric companies have the experience to meet this growth and the reliability needs that technology and companies and data centers need. The regulated business model allows them to raise and deploy capital needed to enhance and expand the grid and enable this growth.

In 2023 alone, we estimate close to $168 billion was invested to make the energy grid smarter, stronger, more dynamic, cleaner, more secure, and $30 billion of that was to adapt, harden, and make it more resilient, especially on the transmission and distribution side. However, as noted, it is still too difficult and time consuming to develop and build the critical infrastructure that we need. The deployment of these domestic projects is subject to a lot of federal and state regulatory oversight and quite frankly, some of these statutes have been used really for protracted litigation to delay the clean energy jobs resources. They add time and they add costs to these critical projects. Look, we support environmental processes that are clear and transparent and efficient and meet all environmental requirements, but we do note that further reform is needed. Resource adequacy is foundational for reliability and that is core to our business and it depends on the ability to design, plan and build and operate the grid.

This is going to require better system planning and collaboration with a lot of stakeholders. There's mention of FERC's recently issued rule on electric transmission planning and that's a good step, but there are other things we need to work on including cost allocation and interregional planning. The need for additional grid capacity will only increase the demand for grid components. Prolonged shortages of these equipment can lead to delays for projects, impair our ability to recover from weather events, cyber or physical events as well. The grid is changing and expanding as it always has because technology is evolving and customer needs and expectations are changing. Meeting those customer needs now and in the future, affordably and reliably, that's what is the core of our business. That's what we've done for a hundred years and America's investor-owned electric companies are confident in our ability to meet the challenges. The regulated business model has proven that it can drive significant investments effectively in a way that keeps costs, impacts to customers fair, but also provides benefits for all customers. We are excited by the opportunities of data centers, AI, the new technology, and we look forward to working with this committee in Congress to help meaningful reforms to ensure America can maintain its lead for the sectors that have potential to transform our economy. I thank you again for this opportunity to testify and I look forward to your questions.

Rep. Jeff Duncan (R-SC):

Gentleman yields back. Mr. Hassenboehler, you're recognized for five minutes.

Tom Hassenboehler:

Thank you and good morning Chairman Duncan, Ranking Member DeGette, Chairwoman McMorris Rodgers, Ranking Member Pallone, members of the subcommittee. Thank you for the opportunity to provide testimony this morning. My name is Tom Hassenboehler. I'm the co-founder and managing partner at Coefficient. I also chair the advisory council for the Electricity Customer Alliance and it is an honor to be back before this committee where I served in various capacities over the course of 15 years from where we stand today. Our strained electricity grid infrastructure and our inability to expeditiously build new transmission and generation seems poised to undermine our ability to bring an American economic renaissance to bear. We stand to leave money on the table and undermine our national and economic security if the US does not rise. To meet this challenge, I'd like to offer three points for this committee's consideration. First, digital infrastructure and AI is underpinned by electric infrastructure, one does not exist or grow without the other.

AI presents an opportunity to the frontier of economic growth in the US, however, our success is not guaranteed. Second, we are in a race to compete with our rivals, particularly China, on the development of homegrown American AI and electric infrastructure. Unlike when electric load was flat or declining, we need a national urgency to establish the electric infrastructure that can power an AI enabled future. Third, electric power regulation has become an obstacle rather than an enabler of efficient and reliable operation of the grid and its necessary modernization. There must be a faster and more coherent way of addressing permitting and multi-state infrastructure development to enable this economic engine to grow and compete with our rivals, particularly China. I'll briefly unpack each of these a bit more. Digital infrastructure is used to power the products that the industrial, commercial and residential customers use to grow the economy.

Goldman Sachs estimates that AI could increase global labor productivity by 1.4% and increase GDP by 7%. Utilities also use data centers and digital services and the systems can all benefit from each other. At the core of AI functionality and advancement lies the physical infrastructure provided by data centers. Data centers are fundamental to our daily lives from facilitating secure financial transactions to enabling the operations of vital public services. Data centers are not just technical facilities. They truly are pivotal and maintain the fabric of our digital economy. The numerous economic benefits that AI offers will be determined by the strength of the electricity delivery system. While the continued headlines of AI driven load growth get all the attention, the adequacy of electricity infrastructure to meet load growth from AI must be put in the broader context of all resurgent load growth. That's a good thing. Demand growth is resulting from a variety of factors including the expansion of data centers, reshoring and resurgence of manufacturing, semiconductor fabrication and transportation and building electrification.

AI is the minority of total load growth, yet it shares the dependence on the electric grid system as do all load growth drivers. While we debate whether red states or blue states should pay for energy and transmission infrastructure, China is rapidly building transmission and developing its own AI capabilities. 20 years ago, Chinese energy consumption was a fraction of US levels and not much higher than Germany. Today China's primary energy and power consumption are larger than the US and Germany combined. For example, in 2022, China spent over $165 billion on its electricity grids. While the US spent less than $33 billion. Policymakers should prioritize the perspectives of those leading the economic development resurgence and who will incur the consequences of reliability risks and rising costs to electricity customers, which brings me back to my third point. To meet this moment, we need all stakeholders to be at the planning table with a much higher degree of transparency and a new paradigm of collaboration.

The Electricity Customer Alliance, a coalition focused on collaboration between commercial, industrial and residential energy consumers. As part of its broader mission. ECA brings together trade associations, consumer advocates, and public interest groups to increase transparency and accountability specifically to ensure that customers are better able to participate and adapt to the needs of a changing grid. We recognize that we cannot achieve this goal alone. Federal, state and local governments as well as utility partners all play a key role in promoting a vibrant, modern competitive market for power generation and advanced energy services. Policy solutions are not out of reach for this committee. They can be enabled, which can ensure the benefits from an AI-powered digital economy are realized. Today's policies governing how we build electricity infrastructure are woefully inadequate to handle new growth and reliably and cost effectively electricity. Customers stand ready to work with policy makers to develop solutions to better align economic and electric infrastructure development to promote regional integration, more interconnected grids to support clean firm base load capacity to modernize grid governance, to close regulatory gaps on local transmission planning and to promote customer-centric solutions on reliability. Thank you for the opportunity to appear before the subcommittee. I look forward to answering your questions.

Rep. Jeff Duncan (R-SC):

Thank you so much. Dr. Lott. You're recognized for five minutes.

Melissa C. Lott:

Good morning Chairman Duncan, Ranking Member DeGette and members of the subcommittee. Thank you for inviting me to speak with you today. My name is Melissa Lott and I'm a professor at the Climate School at Columbia University. I have worked as an energy systems engineer and researcher for more than 20 years across the United States, Europe and Asia, and I've worked at agencies including the US Department of Energy, the International Energy Agency, and the Asia Pacific Energy Research Center. In addition to my role at Columbia, I currently serve on the United Nations Council of Engineers for the Energy Transition and Independent Advisory Council to the UN Secretary General and my full CV has been submitted separately to the subcommittee. My testimony today is going to cover three broad topics. I'll hit the high points and the rest of it is in my written testimony. First, the current role of the electricity system and the potential impacts of all these emerging technologies and trends that we're seeing in electricity demand in the United States.

Second, I'll cover the broad options that can be considered across the nation in order to have the electricity system be able to supply affordable, reliable, and increasingly clean electricity. Lastly, I'll discuss the short set of actions that the federal government could consider to support a reliable and affordable electricity system in the face of this rising demand. We know that electricity is already a vital part of the US economy and that role is expected to grow in part due to these major investments in manufacturing that we've already discussed this morning as well as data centers along with broader electrification trends. Today we see electricity accounting for just under a quarter of energy end uses and we see it serve as a critical backbone to the economy. Net generation grew tenfold from 1952 to 2005 before it flattened out over the last two decades and looking forward, we see electricity demand poised for growth at higher rates than the country has seen in many decades.

This is due to the number of factors we've already discussed this morning, including rising demand from data centers and also industry as well as the adoption of devices like electric vehicles and heat pumps. As highlighted in the memo for today's hearing, the rapidly growing deployment of data centers to accommodate the increasing use of new generative artificial intelligence platforms, GenAI, is driving up demand for electricity, but the investments that have made since the Inflation Reduction Act's passage in 2022, we've seen more than 200 new transportation and clean energy manufacturing facilities being announced. This represents over a hundred billion in new investments and these investments will be much more electricity intensive than legacy factory designs and are highly concentrated in three regions of the United States. That's the southeast, the Midcontinent Independent System Operator or MISO, and the Southwest. Additionally, electrification is increasing for buildings and transportation. Overall, when we look at these trends, we see two impacts that influence the solutions that we can apply.

The first is an increase in total demand. The second is impacts on peak demand for electricity, so the demand at a particular moment in time meeting this rapidly rising demand will certainly require that we bring additional supply onto the bulk grid. However, the required amount of new supply can be reduced in a number of ways as I discussed in my written testimony. By simultaneously investing in the power grid, in non-wire solutions and a diversified set of electricity generation technologies, the US can meet demand while improving reliability, reducing emissions and other types of pollution and also protecting affordability for consumers. Put another way, investing solely in additional energy supplies without also investing in the grid and non-wire solution will result in more expensive and or less reliable electricity for consumers. In particular, additional investments that have already been mentioned today, like an original transmission, can reduce the cost of meeting increasing demand, but investment in non-wire solutions can also bring down peak demand, which lowers overall system costs and improves reliability even without the anticipation of rapidly increasing electricity demand.

The US power grid was in need of modernization investments. The recent forecast for rapidly increasing power demand makes these investments even more urgent and necessary with regards to the power supply. Each technology option comes with a set of trade-offs in terms of performance features and also risks and analysis shows that a more robust, secure and affordable system has a diverse mix of technologies rather than depending heavily or too heavily on any one option. While much of the US regulatory framework for electricity is overseen by state legislatures and public utility or service commissions, the federal government has a significant role to play. Recent examples of leadership from Congress have included back to the Energy Policy Act of 2005, the Energy Independence and Security Act of 2007, the Energy Act of 2020, the infrastructure investment in Jobs Act, CHIPs and Science Act, and the Inflation Reduction Act, and today congress can provide leadership. I highlight three ways in which I see them doing this with additional details in my written testimony, including taking action to streamline rapid investment in transmission as well as new energy supplies requiring demand response in non-wire solutions and ensuring access to opportunities in historically disadvantaged communities, including many rural communities. I would like to thank the subcommittee for holding this hearing. I look forward to the discussion. Thank you.

Rep. Jeff Duncan (R-SC):

Gentlelady yields back. I'll now recognize the honorable Mr. Clark for five minutes.

Tony Clark:

Thank you Mr. Chairman, Ranking Member DeGette. It's good to be in front of your committee again today and I appreciate the invitation to be with you. My name is Tony Clark. I'm a senior advisor at the firm of Wilkinson Barker Knauer. Prior to that, I served a term as a Commissioner on the Federal Energy Regulatory Commission (FERC) and before that, served for 12 years as a member of the North Dakota Public Service Commission. The set of challenges and opportunities that you've teed up here today are really, in my mind, really the question for the electric industry over the next several years. You have the confluence of four big trends that are coming together all at the same time. You have the confluence of rapidly and sometimes unanticipated demand growth layered. On top of that, you have the retirement of significant forms of generation for a number of different reasons.

Some of them regulatory, some of them market, some of them technological changes that have happened. Number three, you have in some way or another a carbon constrained future, whether it's regulation, whether it's corporate buying practices, whether it's state by state policies, you'll have some sort of carbon constrained future and number four, you have no quick or easy solutions in the near term to meet that rapid demand growth. There are some exciting technologies and I think the general trend line that people in the industry see between now and 2050, generally shares a fairly common vision, but meeting that rapid demand growth over the next several years is a true challenge. Now, you add on top of that the subject of this hearing, which is the voracious demand of AI enabled data centers and it makes that issue all the more challenging and it's not to criticize those data centers, we need them here from an American technological leadership standpoint in terms of the global stage, but the challenge is how do we meet that demand?

So I talk in my testimony about some of the regulatory and market challenges that are emerging from that confluence of four events. I highlight, for example, one really interesting solution that's come about in just the last year or so, which is existing nuclear plants effectively defecting from the grid just to serve that data center load. That raises a number of questions in terms of what it means for the rest of the customers that are on the system. They're questions that I think are appropriate for the committee and certainly for state regulators and federal regulators. What can be done to meet this near term challenge that we have? I outline seven points that I think are worthy of consideration. Number one is an appreciation that in the electric industry there's a great deal of variation on how utilities are regulated across the country and the answer for one region may be somewhat different than the answer for another region.

Number two, the markets right now, the FERC jurisdictional RTO markets are increasingly stretched to the breaking point. There are market reform efforts that should happen and I would encourage FERC and the committee to look at those market reforms so that we can see what's happening in the market that's driving generation to make the decisions that it's making with regard to either retirement or defection from the grid. Points three and four both relate to how states and the federal government look at the subsidy and policy schemes that have been in place now over the last several years, which can impact market operations and can impact what incentives there are for resources to be on the grid or not on the grid. Number five, be very clear-eyed about the reliability assessments that are coming out of the nation's grid experts and engineers. There is almost not a week or certainly not a month where there is not some warning from the North American Electric Reliability Corporation or grid operators all saying some variation of the same thing, which is this confluence of events is a big deal and will eventually cause some sort of either cost or reliability issues if we're not able to get ahead of it, so trust the engineers who are talking about this.

Number six, look at meaningful permitting reform and that means in my opinion, meaningful permitting reform for all forms of critical infrastructure, which includes electric transmission but also includes natural gas, interstate natural gas infrastructure, which in many cases supports the renewable transition. And then number seven, I put a pitch in for continuing congressional and federal leadership in the area of nuclear energy. The federal government plays a very unique and central role as it relates to research and development of nuclear power and the ability to incorporate that into future grid planning will be extraordinarily important in meeting these challenges.

Rep. Jeff Duncan (R-SC):

Thank you for that. We're going to move into the question and answer portion at least for the ranking member and myself. So I recognized myself for five minutes with the purpose of asking questions. We're seeing unprecedented changes in both supply and demand and our electric grid. PJM is projecting 40 gigawatts in load growth and 40 gigawatts in retirements. That's a net change of 80 gigawatts. In PJM's own words, the math is not good. On top of that, most of the currently planned electricity generation is from wind and solar, which cannot and does not run at maximum power nearly as long as sources like nuclear, natural gas and coal can. Mr. Clark, in your experience in the utility industry, have you ever seen changes at this scale and pace?

Tony Clark:

Mr. Chairman, in the 25 years that I've been involved in it? No. Your point to 40 gigawatts of retirement, to put that in perspective, that would be something along the lines of the entire installed summer capacity of the entire state of New York that you're losing at a time that you have increasing demand. I've talked to utility companies who've said when they are looking at their planning for the future here they have new data center demand seeking to be interconnected, which is equal to or in excess of their entire installed capacity of their system today. Now, will all of that come online? Probably not, but even if it's 50% or 25% of the projected increase, it's a lot and will be something that utilities and regulators and Congress is going to want to be thinking about.

Rep. Jeff Duncan (R-SC):

Thank you for that. Mr. Dion, the challenges differ in traditional and vertically integrated states like South Carolina versus competitive wholesale regions like PJM. Which regions or market structures might be better suited to handle the scale and pace of the change we're talking about?

Philip J. Dion:

Mr. Chairman. I think let's start with the RTOs and those areas. They were formed about two decades ago and they had the different problems that they were solving for primarily efficiency and efficiency gains. So when you look at those regions, you have to look and talk about maybe that some of the things that need to change out there are in and around their incomplete set of tools. They cannot direct construction of generation, they cannot prevent generators from retiring or as Commissioner Clark talked about leaving the market and they can't control how long it takes. Additionally, they have hundreds of voting members and stakeholders. So I think one of the things that we have to talk about is to say, while it's important for folks to have a say in the process, it's worth considering those stakeholder are those numbers just too large to manage in regards to the adequacy. We have a long history in our business of working with communities, working with local governments, working with local constituents and solving these problems, and so I think that in each of those situations, as Commissioner Clark mentioned, each of the regions are different and so therefore you've got to work with those local communities. You've got to work with those local regulators in order to get the generation and transmission cited that works best for that particular region.

Rep. Jeff Duncan (R-SC):

Thank you for that. As I said in my opening statement, we will not be able to meet the challenge of this demand growth unless we embrace an energy expansion. This means pipelines, natural gas, nuclear, and of course transmission lines. Mr. Hassenboehler, you mentioned in your opening statement China's growth, but to my knowledge, China doesn't have to deal with the National Environmental Policy Act or the Endangered Species Act or litigation slowdowns that are faced by both producers, transmission lines, pipelines, utilities, et cetera. So do you agree that we need to expand the size of our natural gas network by both adding pipelines and generation?

Tom Hassenboehler:

Yes. Congress needs to make it easier to build all types of infrastructure that underpin the digital economy.

Rep. Jeff Duncan (R-SC):

Yeah, thank you for that. Your testimony mentions innovative arrangements and structures for clean firm base load capacity. How can the electricity customers you work with help with the build out of new nuclear to meet this new demand?

Tom Hassenboehler:

Yeah, this is really a great example of collaborative planning when you bring together utilities and customers and the federal government really should explore waste to further look at these types of options, specifically large customers. What's happening with the Duke Energy Tariff is that it allows large customers to directly support carbon-free generation like SMRs and advanced nuclear through innovative financing strategies and contributions that reduce project risk to lower the cost of emerging technologies. It's a voluntary program, so there are protections for ratepayers who are not involved in other customers who are not involved, but it is the type of innovation that's frankly going to be needed in all the different types of markets, both the regulated and the non-regulated states to allow these types of companies to come to the table to be part of an active part of the solution and lowering costs and bringing out this kind of technology.

Rep. Jeff Duncan (R-SC):

Thank you for that. I will say this, I was happy to see Secretary Granholm really embrace nuclear talking about traditional lightwater reactors, but those take decades in development and construction just like we saw how long it took plant Vogel to actually come online and fruition. I'm concerned about the minerals, the mining, and the need for copper for transmission lines. I believe we need more power generation in this country. We all like renewables. I'm an all the above guy, but also know growing demand needs to be met with more baseload dispatchable generation and we're going to do everything we can for that. My time's expired, so I now go to the ranking member for five minutes.

Rep. Diana DeGette (D-CO):

Thank you, Mr. Chairman. I want to talk some more about the importance of long-term planning both for regional and inter-regional transmission lines because that's the way the grid's going to get built out in an efficient way that's fair to consumers, but still generates massive benefits. So Mr. Hassanboehler, welcome back. We're happy to see you even though you're on that side of the room today. I want to ask you how important are good transmission planning practices for ensuring the grid is built out in an efficient way?

Tom Hassenboehler:

Couldn't be more critical in this environment right now. This is obviously a hot topic across the states, across the federal. The challenges of transmission development are not unlike any other types of infrastructure development, but as I said in my opening statement, digital infrastructure and AI is underpinned by electric infrastructure. One does not exist or grow without the other. So we really need to look at that national perspective here and create that sense of urgency when it comes to planning lines that can better connect and help support economies of scale to supply the power that's needed across the country to feed this not just from a regional but from an international and a geopolitical perspective.

Rep. Diana DeGette (D-CO):

Can cost benefit frameworks be helpful in this?

Tom Hassenboehler:

Absolutely, and cost benefit frameworks are part of the opportunity and the challenge that folks are looking at when it comes to regional planning and how to move forward with the next steps from FERC's recent order.

Rep. Diana DeGette (D-CO):

Okay, so can you talk a little bit about what ECA views as some of the most important components of FERC's Order 1920?

Tom Hassenboehler:

Yeah, I think FERC's Order 1920 is a good first step and there's a lot of challenges and implementation. Getting the implementation right is going to be a real challenge. There remains existing issues around how do you deal with local transmission planning. What's been happening around the country is because we don't have a macro regional economic view of how to look at transmission at large and between regions and between inter regions, we often get overbuild of local transmission projects that raise costs for customers and that potentially don't maximize the most efficient output of the system. So this type of approach to encourage all planners to be at the table in a more concise and frankly uniform way across the country at least will help set the same types of assumptions that people are looking at when it comes to linking economic development and the output of the system. What is it trying to unlock?

Rep. Diana DeGette (D-CO):

Yeah, I mean one of the issues with Order 1920 was it's only regional and we really need to look at these interregional relationships

Tom Hassenboehler:

And there's still more interregional needs there.

Rep. Diana DeGette (D-CO):

That's right. Dr. Lott, I just want you to ask you if you can talk briefly about the importance of inter- regional transmission lines, especially with what Mr. Hassenboehler is talking about the data center load growth that's so uneven nationally.

Melissa C. Lott:

When we look at these transmission lines that connect these different regions and also within regions without building them up, the cost of meeting this increasing demand from data centers, but all the other sources of new demand that we're seeing is higher if we don't invest in those numbers, and that's very clear in the analysis. I won't go so far as saying consensus, but that is what all of us are seeing.

Rep. Diana DeGette (D-CO):

Okay. Can you talk about the importance of reforming interconnection processes to make sure we can bring as many generation and storage resources on the grid as quickly as possible to aid in the matching of supply and demand?

Melissa C. Lott:

At a high level, when we're building out our electricity system and all of our generation, we see the lowest cost, most reliable and robust and secure system having three main buckets of technologies that are all in the interconnection queue and in our system in different ways. That's firm dispatchable power variable renewables that have no fuel costs, the marginal costs and energy storage. And so those interconnection queues where we have projects waiting to play in the game and they can't are really problematic. So the question is how can we speed them up and get them through? One of the big challenges we see there is the workforce and also the details and the complicated nature of a lot of those processes.

Rep. Diana DeGette (D-CO):

Great, thank you. Thank you. I yield back Mr. Chairman.

Rep. Jeff Duncan (R-SC):

Okay. The general lady yields back. Subcommittee will now recess for votes on the floor. We're going to try to reconvene 10 minutes after the last vote is called. So the subcommittee will stand in recess and we'll be back.

Call the committee back to order and recognize for questioning for five minutes the chair of the full committee. Ms. Rodgers from Washington State.

Rep. Cathy McMorris Rodgers (R-WA):

Thank you Mr. Chairman.The growth and demand for electricity for our information economy highlights the critical importance of affordable, reliable power for America's industrial and technological leadership. The scale of the potential growth in demand raises questions about what happens if we lock ourselves into policies that cannot rapidly respond to new energy needs and restricts the supply of baseload power that is foundational to our ability to innovate and grow the economy. So I'd like to start with Mr. Dion, Mr. Clark. The committee has held several hearings examining the harmful impacts of policies that drive the retirement of baseload power without adequate replacement. If state and federal policies do not adjust to preserve adequate baseload generation, will the growing demand for reliable energy add additional costs and strain to our grid? And I'll start with Mr. Dion.

Philip J. Dion:

Thank you Congresswoman. As you know, the core principles to our longstanding business are builds on reliability and affordability. I'll add safe and certainly cleaner and we are committed to those two principles and those principles have served us very well for a hundred years and we continue to work and have always worked with members of Congress, this committee and our state and local regulators to ensure that. I think one of the things that's really important that we've talked a little bit about here today is planning, but it's not just planning and stakeholders, it's planning and planning and planning for over a hundred years. That's what we do. We continually plan and look to see what are the things that are out there, what are the things that are happening and how can we meet the demands of our customers. One of the things that we do think about, especially as demand growth has increased and we haven't seen this as I said in a couple of decades, is how are we going to have those new methods of clean dispatchable energy in order to meet that load and those clean dispatchable re energy resources? And quite frankly, any resource has to be commercially viable. It has to work and it has to be economically reasonable. It has to be affordable. So those are the things that we are committed to working on and those are the things that we are looking towards not only this government but also our technology partners, quite frankly some of our larger customers to help us work on things like advanced nuclear carbon sequestration, long duration storage. We need those technologies to come to fruition.

Rep. Cathy McMorris Rodgers (R-WA):

Quickly. Thank you. Thank you. And we need it quickly, otherwise we are going to have, we will not have reliable and it will not be affordable. Mr. Clark, is there anything you want to add?

Tony Clark:

I would concur that how much it will cost is all very much dependent on how we get there and regulation and policy is going to have to adapt to that. I would urge the committee to listen to those RTOs, listen to NERC, and listen to the experts who are saying give us time. This is an issue, this confluence of retirements and rapid demand growth. So one, have the time to be able to do it reasonably and then also lean into those studies which pretty consistently show that the most affordable way to achieve that kind of transition is with a full portfolio of different resources, not focusing on any specific one.

Rep. Cathy McMorris Rodgers (R-WA):

Thank you Mr. Hassenboehler, welcome back to the committee and appreciate your good work on the committee through the years on our side of the aisle. Now many of the companies you represent need massive amounts of power around the clock in order to operate process digital information. Yet these companies have been quiet as EPA seeks to restrict state decisions and drive premature retirements. What should industries reliant upon reliable power supply like the tech sector be doing to help inform policies and to support the expansion of reliable power generation in our country?

Tom Hassenboehler:

Thank you for the question Madam Chairman. And it's true tech companies as well as other commercial industrial companies and utilities do all have clean energy goals as the nation is looking to meet demand for more clean firm base low power, the reality is that parts of the grid continue to be fueled by natural gas and other fossil fuels. We should be focused on collaboration to make sure affordability and reliability is prioritized in the electricity system and frankly between customer classes so that we all know how to build and collaborate together on addressing these challenges to make sure affordability and reliability continues to be prioritized in the delivery of the electricity system.

Rep. Cathy McMorris Rodgers (R-WA):

Thank you. So what happens if electrical power is too expensive or unreliable in the us?

Tom Hassenboehler:

Offshoring and jobs, jobs get lost and China builds it if we don't build it here, China is already, as I mentioned in the testimony, we're in a race to compete with our rivals on this topic. They have priorities to lead on AI growth by 2030. They're building out transmission infrastructure at a more rapid pace than we are. That is the lifeblood of the digital economy. We need to really treat this issue with a little more of a national urgency, not a little but a lot more of a national urgency to make sure we're able to deliver on the promise of the new AI economy.

Rep. Cathy McMorris Rodgers (R-WA):

Yes. Well thank you. Yes, it's very clear there's some warnings and we need to respond to them to make sure that we have affordable, reliable electricity. I yield back.

Rep. Tim Walberg (R-MI):

Gentle lady yields back and I recognize the gentleman from New Jersey, the ranking member of the full committee, Mr. Pallone.

Rep. Frank Pallone (D-NJ):

Thank you Mr. Chairman. We need to rapidly interconnect more resources to the grid as quickly as possible, but I want to discuss other important elements to maintaining grid stability while power demand increases, particularly energy efficiency and demand flexibility. Unfortunately, committee republicans have spent much of their time the last two years attacking every element of energy efficiency and these extreme attacks I think are illogical. After all, energy efficiency reduces energy consumption and lowers energy bills for American families. So let me ask Dr. Lott, can you talk about the importance of energy efficiency and balancing the grid during times of increasing power demand? And you can talk specifically, I hope, about the importance of encouraging energy efficiency at the data centers that will be driving a large part of this demand growth over the next few years, if you will.

Melissa C. Lott:

Thank you very much for the question. So energy efficiency helps us to keep the price of electricity low but also which is very important to end consumers. The bill that is actually delivered is low, so around the country, I'll highlight that we have one in three Americans who's currently energy insecure. They struggle to pay their energy bills and energy efficiency is a key part of that. They often live in lower quality housing where they may have 900 or a thousand square feet and use more electricity than someone living in a three times the size home. So it's an important aspect there. When it comes to energy efficiency within data centers, there are a lot of things that data centers can do to reduce their load and also to allow themselves to be flexible. And so by requiring that, by having that be part of the equation, we can decrease not just the total amount of energy needed but also the peak demand. Give a specific example by having more efficient cooling in these centers, we won't aggravate a summer peak in an already hot part of the country.

Rep. Frank Pallone (D-NJ):

Well thank you. It's also important that we ensure that the grid has sufficient generation resources to meet demand at its highest point and there's a lot of value in shifting from times of high demand to almost any other times. So let me ask you Dr. Lott, can you talk about the importance of ensuring that the new large loads coming onto the grid have the ability to have some flexibility with their demand profile?

Melissa C. Lott:

Yeah, anything we can do to decrease peak is probably a good idea. Incentivizing that helps keep the entire cost of the system low. So I mentioned in my testimony that by increasing utilization rates of individual types of generation and having a less swingy demand profile will end up saving consumers money. We'll bring down bills and that's good for everyone. So when we have these big sources of demand, individual data centers, individual companies, new groups of them, anything they can do to be able to be incentivized to be flexible is good because it brings down that peak. Peak is a challenge.

Rep. Frank Pallone (D-NJ):

Alright, thanks. Now I'm going to ask Mr. Hassenboehler, I didn't realize Tom, that your name was so interesting. Hassenboehler. Can you discuss the perspective of the electricity customer alliance members on demand flexibility for large loads?

Tom Hassenboehler:

Thank you for the question Ranking Member Pallone and it's good to be back again. Flexible demand is critically important for the country, especially as load is growing. Not all load is the same. Many folks need power 24/7. Some are able to be more flexible in how they optimize it to meet the peaks. As Dr. Lott was saying, I think the committee has an opportunity before us to identify and look at barriers to promoting more flexible demand across the country. These are challenging issues. They deal with FERC, NERC, balancing authorities, state regulators. This committee does have the ability to convene those types of folks to try to provide recommendations on what we do to prevent things like implementing curtailment orders. No one wants blackouts. We really want to look at more surgical power cutoffs and making more voluntary curtailments the norm through market changes. All of these things are being playing out in different ways across the country and the committee has an opportunity to prioritize that in a time of load growth because the customers who are driving the load growth really do want to be an active part of the solution and that demand side to activate that demand side more is a critical missing component often in the discussions here.

Rep. Frank Pallone (D-NJ):

Alright, thanks a lot. I don't know if I have time for one more. Let me ask Dr. Lott. While current power domain growth expectations are powered by the growth of data centers in ai, the long-term trend of vehicle and building electrification over the next 25 years will have an even more outside impact on demand growth. Is that correct? That's correct. Alright, because I mean there's been a lot of folks today with good reason on what data centers and artificial intelligence technologies mean for the grid, but I just want to highlight that regardless of the future of AI increases in building electrification and electric vehicle adoption are going to mean that growth and power demand is here to stay and that we need to make sure that we can meet that demand. So thank you and I yield back Mr. Chairman,

Rep. Jeff Duncan (R-SC)

Gentleman yields back. I'll now go to Mr. Latta from Ohio for five minutes.

Rep. Bob Latta (R-OH):

Well thanks Mr. Chairman and thanks for our witnesses for being with us today. I'm going to make kind of a general statement. I don't think there's anybody on our panel witnesses today that doesn't believe that we have to have more power in this country. Is there anybody that doesn't believe that? Because I usually go down the line so I'm going to save a little bit of time. There you go. Back in time, it wasn't that long ago. We didn't have electricity, we have it today. I know my mom growing up on the family farm. She was 15 or 16 before they had electricity and I look at my district today, I have 86,000 manufacturing jobs. I have the largest farm income producing district in the state of Ohio and I don't say I need energy, I need affordable energy because I have to be able to compete with all of the businesses that are out there.

And I know the chairman's already mentioned it earlier about PJM predicting the growth right now of 2.4% from 2024 to 2034, every year at 2.4%. So you're going to 24% increase right there where we're going to have to have. And so it comes down to how we're going to come up with this energy and how we're going to do it because again, we had a polar vortex in the Midwest in 2014. Every power generation station in the state of Ohio was at peak. We did not have a blackout, we didn't have a brownout. I recently asked PJM if we could sustain that same situation and maybe into 2026. So we're in a critical situation out there. Mr. Clark, if I could start my questions with you because I tell you your four points that you made in your initial statement, the number one was the unanticipated near rapid demand growth. It's the first word unanticipated. What happened? Why aren't we anticipating this rapid growth that we have to have in this country to make sure that we can sustain that electrical grid that we have to have?

Tony Clark:

I think Mr. Chairman and Congressman Latta for some period of time there's been discussion about the potential for growth and we've seen electrification, electrification of transport, things like that. And so there's some knowledge that something is coming somewhere out there in the future with the especially data campuses that are now looking to site that growth is right in front of the faces of the grid planners and the utilities that serve them because for those data centers, they're coming to those utilities right now and saying, how fast can you get us online? It's all about speed to market. So what was thought about in kind of a general sense is now absolutely right in front of us in terms of the money.

Rep. Bob Latta (R-OH):

Let me follow up with this because again, in your testimony you're talking about the co-locations with the companies and one of the questions out there right off the bat is who do they want to co-locate next to? What type of energy source is it? Is that source going to be there in a few years down the road or is it going to disappear?

Tony Clark:

Mr Chairman, Congressman the co-location strategy that has developed here just recently, I mean within the last year you're really starting to see crop up is data centers co-locating with an existing nuclear unit. And so what will happen under those arrangements is that the data center and the nuclear unit will strike a PPA, power purchase agreement, and they'll effectively--a portion of that capacity is taken off of the grid and goes directly towards serving that particular load. In my testimony, I talk about the economic drivers behind that, but both of those parties are making an economically rational choice, but it is going to have some sort of impact on other customers on the grid if you're taking huge chunks of capacity off. And I would urge especially state regulators who have oversight over retail sales to consider what that impact is and how the public interest.

Rep. Bob Latta (R-OH):

And that's why it is absolutely essentially making sure that we have that source of power to make out there for the companies. Mr. Dion, if I could turn my questions to you in your statement when we're talking about the critical infrastructure that we're going to have to have and you say it's a less discussed out there, but it's absolutely essential that we have and it's one of the things out there and we're also talking about permitting and how we're going to get to that point and we're talking about seven, ten years to get something moving in this country. What's your forecast for the future? Is it bright, grim, or what do you think?

Philip J. Dion:

Mr. Chairman, Congressman, I'm always bright on the United States in our ability to solve issues. I think what you've hit on is a little bit of what you were talking with Commissioner Clark about. I think we've become accustomed, especially in the last two decades, a little bit of victims are our own success, right? The load has been flat, but that doesn't mean that electricity usage hasn't been growing. It's been growing and we've been using the system as we should. It's become incredibly efficient. The problem is that we have essentially two decades and people quite frankly like myself, who started as an ALJ 25 years ago who've never seen this type of growth. And so we have a situation where we have people who have never seen this type of growth and when growth has been brought up before this catastrophic growth, the internet of things, a lot of things, we're going to take a lot of electricity and a lot of things are going to be bad for the grid.

Those things never materialized. The difference, congressman, today though is this is a step change and I think we all need to recognize that and that's the thing that we need to do is we need to begin working, starting with our local commissions all the way up through to this committee to say, don't let the past fool you. There is a step change and we do need to be making these infrastructure investments and we need to get these things cited and permitted quickly. We do not have the time that we used to have even though we did a really good job.

Rep. Bob Latta (R-OH):

Thank you. My time's expired, Mr. Chairman and I yield back.

Rep. Jeff Duncan (R-SC):

Gentleman yields back. I'll now go to my friend from California, Mr. Scott Peters, for five minutes.

Rep. Scott Peters (D-CA):

Mr. Chairman, thank you so much for this hearing. It's a sign that the committee is really getting serious about the energy grid and reliability issues that are facing this country and it's really welcome. So thank you. Today data centers alone account for approximately 4% of total electricity consumption equivalent to 14 million households. And this demand is expected to triple by 2030, which would be the equivalent to the annual usage of 40 million households. The North American Electric Reliability Corporation, NERC, the entity that's responsible for telling us how to keep the lights on, has warned us about the potential harm extreme weather and other threats could pose to the bulk power system. They've said explicitly that a reliable grid will require significant planning and development of the interconnected transmission system. And we hear a lot from my friends on the other side of the alibi-generation and they may be surprised to know that I agree with them more than I disagree that we maybe have retired assets too early, but generations really are not the problem right now.

We have thousands of gigawatts of new generation, both fossil and clean, that are lined up waiting to get connected to the system. The grid though is old. The grid is dumb and the grid is small and under the status quo, we will fail to meet our energy demand, secure the grid against our threats and connect much needed generation to the communities that need it. Every day we waste is a day our competitors gain an advantage, so we need to pass meaningful permitting reform, for example. We can seriously accelerate the construction of clean energy by streamlining development on disturbed or nonsensitive areas like brownfields. We understand the environmental impacts of clean technologies. We should identify suitable areas, collectively study the impact of certain technologies on these areas, provide necessary approvals, and start building. We need to give FERC the congressional backing. It needs to do bold interregional transmission planning reform, which my Big Wires Act would do.

Also, the Speed and Reliability Act that I've introduced would also expedite the construction of critical interregional lines. We need to thoughtfully streamline the judicial review process while encouraging meaningful community engagement so that communities, developers and petitioners aren't in limbo for years. An applicant comes, wants a yes answer, but the applicant doesn't want to be in limbo forever. Yet no is the second best answer. We need certainty. We need a process that's not unreliable and inefficient. The senior senator from Louisiana, Bill Cassidy, said at a recent senate hearing on this very issue, I like to say that folks on the other side of the dais want power lines and the folks on this side want pipelines, but we really want both. And we know that both are essential American businesses also agree. I ask unanimous consent to enter into the record four letters from American businesses, trade associations and customers that were sent to the Senate Energy Committee urging Congress to meaningfully talk about the grid permitting reform and how we might meet growing energy demand. Without objection so ordered. Mr. Hassenboehler, the letter from the Clean Energy Buyers Alliance says right now, outdated federal permitting policies and aging grid infrastructure are standing in the way of new investments in the US economy. Your own organization, ECA, said in their letter, the US electric grid is not prepared for this significant load growth. Does the time it takes to connect facilities to the grid affect where your members choose to build new facilities? And in your experience, is this just a grid issue, a generation issue, or a combination of both?

Tom Hassenboehler:

Thank you for the question and the answer is yes to all of it. It's a complete issue for all three. I mean, the economic drivers who rely on access to electricity are going to go to the places where there are areas of efficient permitting, where there are areas of easy interconnection, which is a huge challenge as you mentioned. And frankly there are areas where they have markets to drive innovation and allow that possibility to help support their growing operations. And so we need all of those things to work better in this country and we need to make it a national priority to compete with China.

Rep. Scott Peters (D-CA):

Yes. I know that for EEI, interregional transmission presents a lot of challenges, but let me ask you again, Mr. Hassenboehler, what are the benefits of interregional transmission connections that would be a net benefit for your businesses?

Tom Hassenboehler:

Sure. Anytime you try to broaden the scope of grid to allow more efficiency of dispatch and to be able to share reserves across a broader geographic region, including multiple geographic regions, especially in times of severe weather threats and other types of challenges that we all have to face, we view it as a good thing and so we need to be competitive in that and have a frank conversation to bring everybody to the table to not only look at the benefits of regional but also interregional transmission planning.

Rep. Scott Peters (D-CA):

Ms. Lott, it's clear that significant investments in the grid can provide data centers with increased access through reliable, often clean power. Can you describe in 12 seconds what some of the barriers are? Maybe I'll ask you to actually provide the answer in writing, but I appreciate you being here and I want to know what the common problems are with pipelines and with electric lines. We'll ask that question for the record. Thank you.

Rep. Jeff Duncan (R-SC):

Chairman yields back and now go to Mr. Walberg from Michigan. Five minutes.

Rep. Tim Walberg (R-MI):

Thank you Mr. Chairman and thanks to the panel for being here today like the space race of the 20th century, we're now in a race against China to be the leaders in data, AI, quantum computing and more. Whoever has the greatest computing power will win and more computing will require more energy. I have faith in our American technology companies to outstrip the competition, but we must have the energy infrastructure to support this demand growth while still ensuring reliable, affordable power for our constituents. And in my opinion, the best way to do this is through a diverse generation mix, a robust and secure grid and increased coordination across the board. So Mr. Hassenboehler, tech companies have said that they have goals of going 100% clean in the near future and subsequently the interconnection between queues in the US are predominantly wind and solar, but we know from experience that at best only 10% to 20% of the projects that enter the queue actually get built because they just aren't viable, especially for data centers who need consistent levels of power throughout the year. So if we want to go clean, my question is why try to rely on technologies that are offline more often than they produce instead of encouraging tech and large industrial companies to work to develop additional nuclear capacity in the United States, which is clean energy as well.

Tom Hassenboehler:

Thank you for the question and it's true tech companies do have and commercial and industrial companies have clean energy goals, but as the nation, as you acknowledge is looking to meet demand, growing demand in a reliable, affordable way, and as the country is trying to transition to more clean firm baseload power, all stakeholders need to be at the table. What's happening now is a change. There's innovation happening with bringing more collaboration to the table to help have so customers can have an output and a say in some of the new firm dispatchable resources that need to do it and so they can share in the technology innovation, the cost and the opportunity. And so we're seeing that play out in different ways in the country right now and it's frankly critical to get everybody at the table right now to really think about those issues in a more comprehensive way.

Rep. Tim Walberg (R-MI):

And speaking truth, in fact, pushing back to some degree and saying, listen, we're not going to be buffaloed into moving forward with something that won't achieve the results we need.

Tom Hassenboehler:

Yep. When competition with China is on the table to drive this AI load growth and all this other load growth that's coming back onto the system, we really need to think about it as critical infrastructure broadly and much more of a national urgency to deal with these issues.

Rep. Tim Walberg (R-MI):

And they're at the point of winning because they're willing to do anything to achieve that and we don't have to. We can do the right things. Mr. Dion, China has committed to become the world's leading AI power by 2030 and is laying the groundwork to accomplish this through massive investment in their electricity infrastructure. For example, as of last year, China had 30 gigawatts of nuclear capacity under construction and another 200 gigawatts of proposed and planned capacity in the pipeline. More than double the current US nuclear capacity of 94 gigawatts, China's spending more on electricity grids than all other countries combined. How can the US build out electricity grid capacity to compete with China on AI and ensure that AI computing stays in the United States?

Philip J. Dion:

Chairman, Congressman, thank you very much for your question. We are the leader now and we need to remain the leader that's first and foremost.

Rep. Tim Walberg (R-MI):

By the skin of our teeth.

Philip J. Dion:

The most important thing for us to all concentrate on is a little bit of what this panel has been talking about. It's that collaborative effort. So one of the things that we talked about a little bit earlier was how did this happen and why did this catch us by surprise? I think part of the reason is that when we're all talking about the various things that are important to us, we need to come together and talk about the things that are important to us as a nation as well, and this is a national security issue. The other thing that I would highlight very quickly with my time is the supply chain issues. We talk about beating China with our energy infrastructure and we need to build more data centers. We need to do all those things and we are with you on all of those things, but when the parts come from China too, that is a critical issue. We need your help and your leadership. We already have supply chain delays. I want to thank Representative Hudson and Chairman Cathy McMorris Rogers for their work, but we have supply chain delays and those are going to continue. Not only that, we are going to continue to cede that ground to China. That has to stop manufacturing has got to come back for our critical energy projects.

Rep. Tim Walberg (R-MI):

Yeah, those aren't sexy issues. They're reality.

Philip J. Dion:

It's part of being with the utility business.

Rep. Tim Walberg (R-MI):

Absolutely. Okay. My time's expired. I yield back.

Philip J. Dion:

I'll now go to Ms. Matsui for five minutes.

Rep. Doris Matsui (D-CA):

Thank you very much, Mr. Chairman, and thank you witnesses for being here today and a special welcome to Dr. Lott, who has a degree from UC Davis, which is part of my district. As each of you have highlighted in your testimony, there are many reasons to expect electricity demand to increase over the coming years, not only from data centers but also from manufacturing and electrification. There are over 1,480 gigawatts of clean zero carbon power waiting in interconnection queues right now, and there's simply no excuse. We can and we must meet new demand with clean power sources. Dr. Lott, all things being equal, which is faster to build, a gas peaker plant or solar with battery storage?

Melissa C. Lott:

It's probably solar.

Rep. Doris Matsui (D-CA):

Okay. Dr. Lott all things being equal, which is cheaper over the lifetime of the project. A gas peaker plant -- I already asked that question. Who ultimately pays for a new power plant?

Melissa C. Lott:

Consumers.

Rep. Doris Matsui (D-CA):

Okay. As we move forward, a cleaner grid, are you concerned that some utilities that aren't planning for deep decarbonization will end up with expensive stranded fossil fuel assets?

Melissa C. Lott:

Organizations that aren't including different commitments that have been made from states, from local communities, and also from the businesses that Mr. Hassenboehler highlighted earlier could end up in a situation where those assets that they invest in are not going to be able to be utilized for a very long time. At the end of the day, they have to be paid for and that could have negative affected issues on consumers.

Rep. Doris Matsui (D-CA):

Okay, thank you. Ultimately, this hearing is about how to decarbonize the grid. There is a pervasive belief that we cannot provide affordable, reliable electricity with zero carbon sources and yet critics of clean energy have consistently underestimated the clean energy transition. In California, we added 10 gigawatts of battery storage in the last five years alone. Two years ago, it was a major achievement when California's renewable energy generation exceeded total demand for a few minutes. Now this spring, renewables exceeded demand in California nearly every day for over a month. Dr. Lott, in light of this incredible progress toward a clean grid, is it possible to decarbonize the grid while still meeting rising demand?

Melissa C. Lott:

Yes. The analysis is very clear on this. We can create an affordable, reliable, and clean electricity system. It requires that we use three broad buckets of technologies. There are many individual technologies in each bucket. The first is zero marginal cost variable renewables. The second is energy storage, batteries and other types of storage. The third is from dispatchable power. Together they play like a team and they can get us to zero carbon.

Rep. Doris Matsui (D-CA):

So we can meet rising electricity demand and still meet the requirements of the EPA Power Plant Carbon Pollution rules.

Melissa C. Lott:

Yes, we can.

Rep. Doris Matsui (D-CA):

Okay. We need to think more creatively about grid capacity. Aside from efficiency improvements, there's an opportunity to shift demand to off peak hours using backup power systems or battery storage. Certain data center operations like training AI models could also be shifted to off peak hours. Mr. Hassenboehler, as we work to meet increasing energy demand, do you see a role for voluntary market mechanisms that incentivize reducing or shifting demand?

Tom Hassenboehler:

Short answer, absolutely. While every facility configuration is different, so it may not work in every case, we need every tool in the toolbox to look at that. And of course, customers want to be a more active part of the solution here and incentivizing voluntary action and voluntary market incentives to help reward the active side of the load for turning their loads off at the right times of the day needs to be part of a bigger conversation about how to move.

Rep. Doris Matsui (D-CA):

Could you find this an area where the committee can find bipartisan consensus?

Tom Hassenboehler:

I do hope so. I hope especially as the new drivers of AI growth are trying to be more active in the conversation, they're engaging in every forum. And so there's no reason why on this committee, this forum also shouldn't be a part of that discussion.

Rep. Doris Matsui (D-CA):

Thank you. Even if data centers don't become more efficient, AI could help make many other systems more efficient, which could in turn offset some of the increased electricity demand from data centers. For example, AI can help optimize the electric grid assisting with forecasting, reducing congestion and operating distributed energy resources. Dr. Lott, can you talk more about how AI could help make the grid more efficient in 20 seconds?

Melissa C. Lott:

AI can help across the board supply all of the transmission and distribution systems and demand. The next five seconds I'll just say is that I think we'll be able to do this more quickly than we may be projecting it now if we're able to incorporate AI more effectively into our systems and take advantage of this.

Rep. Doris Matsui (D-CA):

Okay. Thank you very much. Now I yield back the balance of my time.

Rep. Jeff Duncan (R-SC):

She yields back. I now go to Ms. Lesko from Arizona for five minutes.

Rep. Debbie Lesko (R-AZ):

Thank you Mr. Chairman. Mr. Dion, in Maricopa County, Arizona, which is the greater Phoenix metropolitan area, is growing rapidly in my congressional district. They're building the Taiwan semiconductor manufacturing plant. Intel has expansion. We have a department of defense related industries. We have tons of data centers coming. And my question is Maricopa County in Arizona finds itself in a unique if not untenable position. As I mentioned, we are experiencing rapid growth. On the other hand, Maricopa County's ability to support these industries is being constrained by the Biden administration's environmental policies, namely designation of the county as in non-attainment with the EPA ozone standards based on unrealistic measures for that area of the country, which is a desert. So my question is can you explain to me how the Biden administration's EPA and regulatory policies are adversely affecting the US growth and AI and the manufacturing industry?

Philip J. Dion:

Congresswoman, thank you for the question. As my home state, I always believe, I grew up there, that Arizona is in a unique position and it is certainly blessed with a lot of great attributes including space, power generation and wonderful constituents. I think the biggest thing that you're pointing out is the need for coordination in and amongst federal agencies. Each agency is certainly an expertise in each of their areas, but one shouldn't and can't override the other for a long time In our history, when I talk about reliable, safe, affordable and cleaner, it's balancing competing interests. That's what we do all the way down from county supervisors, up through commissions, through the Congress, and that would be a welcome addition to this particular energy universe that we find ourselves in. And the reason I say that is any coordination that we could have to ensure more certainty ultimately in yours to the benefits of all of our customers, it derisks what we should do and what we can do and that is going to make the stable environment that our customers love, that our markets love, and quite frankly, that we need to make this energy future happen.

Rep. Debbie Lesko (R-AZ):

Thank you sir. My next question is for you Mr. Clark. Data centers are rapidly expanding not only in the metropolitan Phoenix area, but in rural areas where land is less expensive and there is access to existing transmission and distribution infrastructure. What are the challenges faced by electric co-ops to provide the energy needs for this expansion?

Tony Clark:

Mr. Chairman and congresswoman, thank you for the question. So co-ops would face many of the same challenges that an investor owned utility would face, which is rapidly increasing demand and attempting to meet it. So they're facing a lot of the same pressures and with an electric co-op, they have a different structure, so it's member owned and they're going to need to pay particular attention to what is this impact on the existing members of the system, ensuring that there aren't cross subsidies and that it's a system that on the whole can be afforded by whole.

Rep. Debbie Lesko (R-AZ):

Thank you very much. And Mr. Dion, I'm going back to you. China does not have radical environmentalists telling the communist party of China what to do. China will likely have no qualms about powering their AI data centers using reliable and abundant coal. They currently have the largest coal fleet in the world by a factor of five. Isn't it likely that if they see an opportunity to advance past the United States in AI data centers, they will use coal power to do so?

Philip J. Dion:

Thank you congresswoman. It's always unpredictable what China will do, but I think surpassing the United States is something that we can all agree on as top of their list and that's why when I made my earlier statement and some of the members talked about it, we need clean, firm dispatchable power. But again, I want to be very clear about what I mean by that. I don't mean at all costs. That's not what I'm saying. And we can't use things that are just commercially unproven. So we do have some time, not a lot, but we do have time and the more time that we have, the better our answers are going to be. But we need to work together with this congress, the DOE, the national labs. We have got to solve this flexible, reliable, lower carbon future together. Otherwise, that is top of China's list.

Rep. Debbie Lesko (R-AZ):

And I agree with you. I think we need an all, everything and above energy policy use all energy sources and with that I yield back.

Rep. Jeff Duncan (R-SC):

Gentlelady yields back. I'll now go to Mr. Cardenas for five minutes.

Rep. Tony Cardenas (D-CA):

Thank you very much Mr. Chairman and also to the ranking member for having this very important hearing and I appreciate the witnesses being here, sharing your opinions and your expertise with us today in front of the American public, it's undeniable that our nation is set to witness a surge in electricity demand and as a result, increased strain on the grid. This is most certainly a challenge that we need to address, but a challenge in the 21st century must be my 21st century solution. That's why I am concerned by the rhetoric I've heard from some of my colleagues on the other side of the aisle, which suggests the solution is to keep Americans dependent on deadly fossil fuels like coal. Going backwards and increasing our reliance on energy sources like coal is not only costly but disastrous for our communities and also for the future of the planet. As a reminder, when coal is burned, it releases several airborne toxins, including but not limited to. Mercury, lead, sulfur dioxide, nitrogen, oxides, and particulates. It similarly releases waste into lakes, rivers, and waterways, which contaminates drinking water supplies and the overall health and wellbeing of people and everyone else on the planet. Dr. Lott, can you please discuss the health and environmental impacts of keeping coal plants online as well as the long-term costs associated with those kinds of impacts?

Melissa C. Lott:

Thank you so much for the question. When it comes to the impacts of coal, you highlighted many of them. So impacts on our air and our water, these have impacts on our lives and our health from before we were actually born. That's what the evidence tells us. And so the costs over a lifetime are huge. Evidence shows that if I had been born in a part of this country just to the south of where I actually grew up on a military base, my life statistically would be about 14 years shorter because of pollution from coal-fired power plants from transportation and industry and a few other sources. So these effects are real and we have a lot of evidence around the impacts of them. We see tens of thousands of Americans being affected and dying from this pollution overall, those costs are huge. The problem is that we pay for them from different buckets. We pay our power bills with one bucket and we pay our health bills with another.

Rep. Tony Cardenas (D-CA):

So basically what you just outlined is that if we choose to be open-minded and keep our eyes open, we can actually quantify the cause and effect, not just the cost of a certain electric bill.

Melissa C. Lott:

Yes, so we have extensive research done by hundreds of people over many, many decades that can link this cause and effect.

Rep. Tony Cardenas (D-CA):

Thank you so much. Ultimately, the cost of inaction is far greater than the cost of addressing the contributing factors of climate change. The Biden administration has recognized this and has not only invested in supporting our nation's grid infrastructure but has worked to put more clean electricity on the grid. For instance, last year, FERC finalized Order 2023, which constituted a series of reforms such as to reduce backlogs for projects seeking to connect to the transmission system, improve certainty in the interconnection processes and ensure access to the transmission system for new technologies. Can you expand, Dr. Lott? Can you expand on how this final rule speeding up in interconnection queue processing will help put more clean electricity on the grid and potentially phase out polluting sources like coal?

Melissa C. Lott:

Thank you for the question. We have so many technologies that are ready to go today at the points that were brought up by members of this panel here to get viable commercially viable technologies onto the system technologies that can lower the cost of power to consumers by speeding up getting to an answer when it comes to these applicants through the queue, we can get those technologies online faster, which it can help us to not just meet rising demand, but also to phase out in efficient polluting power plants.

Rep. Tony Cardenas (D-CA):

In your answers, when it comes to actually literally cleaning up our act, should we be moving to a sole source type of source of electricity or is there room and a right way to do it and having more than one source?

Melissa C. Lott:

The analysis is really clear on the point that we want a diverse set of technologies. They need certain characteristics to get us to the affordable, reliable, secure system we're looking for, but every single technology has a risk. Every second one of them has a trade off, and so by having that diverse mix, we end up having a system that could supply what we want when we need it at an affordable price.

Rep. Tony Cardenas (D-CA):

Thank you. When it comes to AI, what policy solutions could be put in place to reduce the emission associated with deploying AI models and to ensure an environmentally sustainable evolution of ai?

Melissa C. Lott:

There are a number, some of them have been highlighted including energy efficiency in those systems. Also demand flexibility, incentivizing that in the system. Transparency is also a very important part of this.

Rep. Tony Cardenas (D-CA):

Okay. Thank you very much. My time is expiring, Mr. Chairman, I yield back.

Rep. Jeff Duncan (R-SC):

Thank you, Chairman yields back. I'll now go to the gentleman from Augusta, Georgia. Mr. Allen for five minutes.

Rep. Rick Allen (R-GA):

Thank you Chair Duncan for holding this hearing to discuss how AI is growing our electricity needs, my home state of Georgia has been the top state to do business for 11 years in a row. We have great leadership in our state and this economic growth depends largely on abundant, reliable, affordable energy that we have. I just visited to celebrate the expansion of units three and four in commercial operation at Plant Vogel, the first new reactors built in this country. In 30 years, each of these units will power 500,000 homes and businesses for decades to come. Plant Vogel is now the largest cleanest power station in the United States. As manufacturing and data centers are coming to Georgia, nuclear energy is going to play a critical role in ensuring grid security and stability. Mr. Hassenboehler, according to a McKinsey study, data centers in the United States are expected to consume 10% of the country's electricity by the end of the decade. Nuclear energy can play a key role in that and of course these businesses are willing to pay whatever they have to pay to get the electricity that they need. How can tech companies and utilities partner to develop rate structures and terrorists to bring on nuclear capabilities without raising unnecessary costs for residential taxpayers?

Tom Hassenboehler:

Thank you for the question. And first off, collaboration is key and you said it first. There are examples of this playing out across the country in different ways depending on the state and the region. Getting all folks to the planning table early in the process is a top priority. Bringing in and trying to help support the needs of the economy and the economic drivers driving the transition, being able to make it fair and equitable across ratepayers and rate classes is a top priority as well. Making sure cost causation principles are applied, making sure that all things are looked at when it comes to providing the power that these facilities need to support that. And so we think we're just in a time of early innovation in this space. There needs to be a lot more of it. The committee may be able to have a role in helping facilitate that to support more of these types of innovative structures to make sure that customers large, small, medium size residential, all have access to affordable, reliable power and it gets the power that they want in the regions they want, which is clean.

Rep. Rick Allen (R-GA):

Good. Mr. Dion, I saw you shaking your head. Would you like to comment on that question?

Philip J. Dion:

I think I was just writing notes to myself, Congressman, but I will say this, that it is fantastic to see nuclear back in our portfolio, but in order to take advantage of that, we need to continue that trend. We can't really be one and done that is just going to be too difficult. It's going to be too difficult to get a labor force. It's going to be too difficult to get investment. What if you're that person working on that nuclear plant? What's your incentive to get done real quickly when you don't have enough in the pipeline? So we are working very hard on that. We're working with our organized labor partners, we're working with the Center for Workforce Development. That is a critical key component, not just the investments that we're talking about. The last thing I would add is the transparency that we talk about.

It's definitely a two-way street. We need better insight and this is going to be something that we're going to have to really work collaboratively with EEI and our members are willing to do that and it may require some NDAs and other legal vessels, but if we don't get the right load information, then we're going to be wrong. Bad data means bad predictions and so we need to be working to find out what's the real load that's going on and is that load being double counted in any way, shape or form, and what efficiencies can we count on from the data centers and other large users so that we can factor that in so that we are building to meet the needs?

Rep. Rick Allen (R-GA):

Well, this needs to be a bottom up. We solve problems in this country and we can solve this problem. It needs to be bottom up and not top down driven by the federal government. We have the resources to do that and I look forward to working with you to make that happen and we must utilize all energy sources to power our needs. Mr. Clark, how do you see the increase of demand from data centers, AI and other emerging technologies along with the reduction in allowable generation coming from this current administration's policies complicating integrated resource plan's ability to meet this new demand?

Tony Clark:

As I indicated, Congressman and Mr. Chairman in my testimony, this confluence of increasing demand with pressures on existing generation, I think you've heard it from sitting for commissioners on both sides of the aisle. You've heard it from the RTOs, you've heard it from NERC, you've heard it from utility operators. The math at a certain point doesn't work and that's the concern is that the pressure that's being placed on some of these existing resources will speed up a timeline that we may not be able to meet this increasing demand.

Rep. Rick Allen (R-GA):

Okay. Well, Mr. Chairman, I'm out of time. I have additional questions that I'll submit to you for the record. Thank you very much for your testimony.

Rep. Troy Balderson (R-OH):

Thank you Mr. Allen. Next up is the general lady from Florida. Ms. Castor.

Rep. Kathy Castor (D-FL):

Well thank you very much. I want to compliment the majority and minority. I think this is a very important hearing to have right now. We have to do more. It's kind of in the spirit of the new FERC order. We have to plan ahead a little bit better to help businesses and families across America. So thank you to the witnesses for being here today. I think it's also a sign of a robust and growing economy in America and that's very good. We have to tackle this to serve the American manufacturing renaissance and figure out how we better speed renewable resources to power transportation and buildings and make sure that everyone enjoys the benefits of cleaner and cheaper energy. Mr. Dion, I appreciate your remarks early in your sentiment, but boy, in my neck of the woods, I don't see a lot of the utilities leaning into many of these solutions and I think that's holding us back on making the grid more reliable, more resilient, and really being able to lower costs for consumers. So I want to have a conversation with you moving forward, but I wanted to ask Professor Lott to focus on the importance of speeding up the interconnection cues. The challenge cannot be understated. I'd be interested in hearing your perspective on ERCOT's connect and manage approach. Interconnection, which has brought 4.2 gigawatts of new energy generation online in just two years. Are there lessons that other regions of the country could learn from ERCOT?

Melissa C. Lott:

Thanks so much for the question. ERCOT within my home state of Texas has done a lot that has resulted in what you're seeing today, which is a quick addition of additional resources including the boom of wind that we've seen and also the addition of solar and storage that we're seeing take off within it. One of the big things that the state did was invest in their competitive renewable energy zones. So they invested in building out transmission to enable the connection of a lot of new resources. That was fundamental and foundational and there's discussions within the state and within the ERCO system of how do we actually go towards a cress two, step two so that we don't slow ourselves down. Also, the ability to get quickly to yes or no when it comes to projects is foundational and getting these systems online and connected. The problem is not technology. The problem is not building a grid, getting something connected to it. It's actually all the processes that allow you to build this out.

Rep. Cathy McMorris Rodgers (R-WA):

So what do you say to members of Congress that, I mean the whole system seems to be outdated, it seems to be based on the last century and there would be a lot of angst I would think if congress comes in and bigfoots our RTOs and states, how do we get to a point where we're all working together and pulling the same direction?

Melissa C. Lott:

It's a great question with a complicated answer. The short points I'll highlight is when it comes to the grid, the American Society of Civil Engineers was giving it a C minus grade before all of these numbers came to fruition around we're expecting rapidly increasing demand. C minus in my class is not a great place to be. It's on the cusp of some problematic issues. And so what I'll say is with the grid, these investments were needed. Now there is an opportunity, we speak so much about the challenges with load growth, but actually there's huge opportunities because we have people who want power. We have people who want reliable, affordable power. So the question is what are the different steps that the federal government can take? The point has been brought up earlier about convening people together to facilitate early conversations. Thank you.

Rep. Cathy McMorris Rodgers (R-WA):

Mr. Hassenboehler. You might have some ideas here. You have some experience on Capitol Hill and you're focused on solutions with the Electricity customer alliance, thank you, by the way, for your support of my bill with Senator Cortez Masto, that would make common sense reforms to interconnection. What do you say on this topic?

Tom Hassenboehler:

The key challenges really are before us. It is an opportunity, as Dr. Lott said, to have a broader conversation to really connect the dots between the need, how electric infrastructure really in all infrastructure underpins the digital economy. And so we need to start treating this a little bit more with national urgency when you have geopolitical forces at stake in our adversaries blatantly ramping up their capacities. We also need more visibility and transparency into the existing system. There's plenty of efficiencies and opportunities to utilize the existing structures that we have, the transmission system in a better way. Some of that work on interconnection still is daunting. There's still a need to refine some of the processes and help customers see some of those savings in a more transparent way. There's also challenges on how do you promote more visibility into the system. Grid enhancing technologies and other types of new systems should be looked at from an efficiency economic perspective, not from really any other lens, and there needs to be opportunities to incentivize their uptake in the system through multiple venues, whether that's at the state, regional or federal level. And so it's a daunting task, but this committee is the one.

Rep. Cathy McMorris Rodgers (R-WA):

You're framing it as part of the great competition with China. I also sit on the bipartisan Select Committee on the Strategic Competition with the Chinese Communist Party. It's a long name, but this morning ambassador Nick Burns talked to us about the competition in technology and how we, America, still have the competitive edge, but they are investing a lot and I think you're right. If we can all come together to focus on how we speed cleaner, cheaper resources and get the gets and interconnection problem solved, that's really part of keeping America's dominance on the world stage too. Thank you. I yield back.

Rep. Troy Balderson (R-OH):

Next up is Mr. Weber from Texas.

Rep. Randy Weber (R-TX):

Thank you sir. I want to talk for a minute, Mr. Clark, you talked about the economic drivers associated with cost of energy and I want to lay out some things. I'm a former air conditioning contractor. We dealt with a lot of high efficiency standards in home heating and air conditioning, and let me just tell you that high efficiency standards do not reduce the cost of energy. It increases the cost of equipment when you have to replace all of your equipment with a higher efficiency at the latest standards and a lot more expensive than a 20 or 30-year-old system. So it doesn't necessarily increase, reduce the price of energy. The kilowatt is going to be the kilowatt, you follow me? What the cost of energy is. The cost of generating electricity just for general conversation is number one, the cost of the land takes away the build a plant.

Number two, the construction cost including insurance. Number three, the personnel cost including COLAs, cost of living adjustments, cost of personnel goes up. Number four, the cost of permitting, getting a permit in the regulatory agencies. They have to deal with the cost of those compliance members that have to deal with federal and state regulatory agencies to be fair. And then also the cost of lawsuits when people who are opposed to whether it's pipelines or transmission lines or nuclear energy or whatever it might be, the cost of lawsuits to the objectors who want to prevent energy companies from producing or generating electricity at a price of the rate they need to. What happens is, as y'all all know, the cost of producing and generating electricity has to be passed on with a profit margin to the customers or they don't stay in business. I would also add that there's a cost of maintenance and equipment replacement.

So we talk a lot about the things about the cost of electricity and high efficiency standards help and they do this, that and the other. They also hinder in a variety of ways and all the things I just went through and named, including the cost of permitting, the cost of lawsuits and all the hindrances that it takes really drives up the price of electricity and doesn't benefit the consumer. So I'm going to stay with you Mr. Clark for a minute. Data centers are rapidly expanding in rural areas such as parts of Texas where land is less expensive and there is access to existing transmission and distribution infrastructure. So in your opinion, what are the challenges faced by electric co-ops to provide the energy needs for this expansion? And so I can give you a couple of specific questions. How has the growth of data centers in rural areas impacted utilities, especially when the demand from them exceeds the existing demand in the co-ops? How do they deal with that?

Tony Clark:

Mr. Chairman and congressman, you raised a number of good points in terms of locating in rural areas. Data centers typically will try to look for spots where there may be excess capacity and they can locate in that area in a quicker way. They can interconnect quicker speed to market and cost is really what drives their economic decision making. And so if they can find those little pockets, they'll attempt to do that. What we're seeing in the country is those little pockets of availability or drying up of the amount of transmission that's available, the amount of capacity in the system that is available. We are running a grid that is closer and closer to the edge so they're not finding as many of those spots anymore. That means the next incremental step costs somebody some money. You probably need to have wires and distribution charges. You're probably going to have to add some form of capacity. Someone has to pay for that. Then it becomes a question of how do you design the rate so that some customers are not inappropriately subsidizing other customers.

Rep. Randy Weber (R-TX):

And the other part of that too is as you're having to come out for new power requirements, you need the permitting reform. And we've been criticized in this committee because we're trying to get permitting reform in place so that permits don't take such a long time when the president actually put a stop on LNG, for example, permits for the meantime. That's my district seven ports. We've got more LNG probably than anybody else in the country, maybe even close to in the world, second or third in the world as that may be. But the cost of permits and the delay that it gives, all that does is make the cost higher and higher and higher. So I'm all about high efficiency standards, but let people choose that on their own. I want to go back to this one. So how do we design rates and tariffs so that rate payers are not paying for substations? Transformers, which I would add the president has instigated a new kind of a transformer, which the supply chains like yours really problematic, but how do we design rates and tariffs so that rate payers are not paying for substation transformers and transmission up rates caused by these data centers? You already kind of addressed it, but how about the transformers?

Tony Clark:

Congressman, so this gets down to a cost of service issue and it's the sort of thing that utility commissions are well versed in. I would argue that it needs to be an open, transparent process so that the record is developed so that you know what those costs are and then you're appropriately assigning them to cost causers.

Rep. Randy Weber (R-TX):

It's just that easy. I appreciate that, Mr. Chairman. I yield back.

Tony Clark:

Thank you. Next up is Representative Schrier.

Rep. Kim Schrier (D-WA):

Thank you Mr. Chairman, and thank you to all of our witnesses for being here. I very much appreciated reading your remarks. Load growth and concerns about strain in the Pacific Northwest Energy system is being fueled by a number of different factors. The high tech manufacturing sector in the region is booming. We have Microsoft in our state states moving toward a cleaner more electrified grid and Washington state is also seeing the build out and expansion of data centers like never before, particularly in my district. And of course this is associated with ever increasing cloud services, AI advances and blockchain technologies. And if we are going to remain competitive with economic rivals and shore up domestic manufacturing like is our goal and then run those data centers, we've got to be able to continue to provide abundant and affordable energy. We also need to bring new sources of non-emitting electricity online to meet increasing demand along with these desperately needed grid improvements that we've been discussing today.

Now the interconnection queues, the long wait list for energy projects to connect to the grid is really hamstringing those efforts and the fact that we are lagging behind Europe in replacing sluggish old transmission lines with new carbon core lines is also a hindrance as ranking member Pallone has already noted, the FERC rule is a monumental step for transmission planning and cost allocation to try and resolve these issues. One of the elements that sort of gets lost in this discussion, but my colleague just alluded to, is the supply chain challenges of both substation and distribution transformers, which are so critical to interconnection of so many energy projects that are already there but can't support the grid. So this Congress, I've been focused on ways we can spur investment in our nation's transformer manufacturing capability. Utility organizations have been as well. In April, a coalition of groups including the American Public Power Association, EEI, the National Electric Manufacturers Association wrote a letter to the appropriations committee requesting funding for this effort. And I'd just like to insert that into the record. Mr. Dion. I know EEI has been very supportive of efforts to appropriate funding without objection specifically for transformer manufacturing. I'm just wondering what it will take to shore up our transformer inventory in the midst of increasing demand and an already present and worsening shortage.

Philip J. Dion:

Congress Schrier. Thank you very much. This is a great question and I'll just give a little segway to it. I was just in Seattle this April for our national key accounts meeting where we discussed this very issue with nine state commissioners and around 20 customers. So this is a big issue. It's also an incredibly important issue because we find ourselves for the first time in competition with some of our large customers for the same infrastructure that we need to secure our energy future. So what do we need? It's the same thing that we say all the time. We need some certainty and what we need is we need the ability as electric companies to make purchases, not just purchases for what we need. The long lead times are already here. What used to take maybe two months is now taking 16 months. We need the ability almost essentially to, if you will, hedge against that future that we know about.

While we're uncertain as to what the numbers are and how big it will be, we probably are certain of the trend line and there probably is a no regret strategy in making sure that we have the infrastructure that we need to supply our customers and our communities. And so I think one of the things that we need are some regulatory reforms and working with our large customers, local state commissions to say these things are necessary so we can send the right signals to the manufacturers so that they will increase manufacturing. Right now, they may not have that incentive if their production lines are already full. So we need to do that and I touched on a little bit of what we needed to do with the Center for the Energy Workforce Development. That's critical.

Rep. Kim Schrier (D-WA):

So that market signal is super important. I just want to note from my colleagues that I offered an amendment in committee last year to authorize a domestic transformer manufacturing program for technical and financial assistance at DOE that also needs to come with funding. It didn't make it into the underlying bill, but regardless of how our electricity is generated, everyone in here supports a modernized grid and interconnection and making sure that we have the resources we need in case these transformers go out. And so I hope that we can get a bipartisan fix to this particular linchpin and I yield back. Thank you.

Rep. Jeff Duncan (R-SC):

Gentlelady yields back, and I think we did this upstairs just a minute ago. Chair Griffith who is chairing the Oversight and Investigations Subcommittee, which is going on right now is recognized for five minutes.

Rep. Morgan Griffith (R-VA):

I appreciate it. Thank you Mr. Chairman, and I apologize to the witnesses. I was upstairs chairing another hearing, so I was not able to be down here, but it's always good to be with you all and thank you so much for your testimony. I may be able to catch up with it later on C-Span. Mr. Clark, according to Electric Power Resource Institute, data centers of Virginia currently consume 25% of power and by 2030 the upper end of their estimates, suppose 46% of Virginia's power will go to data centers with all the baseload plant retirements in our neighboring states and in Virginia, how in the world will Virginia be able Virginia power companies be able to retire any dispatchable resources such as coal plants or natural gas plants and meet the energy demand of the future?

Tony Clark:

Mr. Chairman and congressman, it's an issue I think about often because when we moved from North Dakota here to the capital area and I was appointed to FERC, I moved to Loudoun County and I now reside within the stones throw of a few substations and a lot of transmission lines. The load center that's being built out in Virginia and especially Northern Virginia is tremendous and it's unlike anywhere else in the country. The challenge, and I think the answer to that question to meeting the challenge is it has to happen at regulatory processes in Richmond and then at FERC, which is there needs to be a very open, transparent record developed to ensure that as resources are brought on to serve this load, that the rate design is done in such a way that customers that benefit from the new resources are the ones who pay for those resources. And there's not inappropriate cross-subsidization from those customers who aren't benefiting from the new resources that are brought on. So it's the sort of nuts and bolts cost of service rate making that regulators are familiar with doing, but it's going to be very, very high profile the amount of dollars that we're talking about.

Rep. Morgan Griffith (R-VA):

Right. And while the local folks might want to pay a little bit of it, they shouldn't be carrying the lion's share. Is that what I hear you saying?

Tony Clark:

It should be, Congressman. Exactly. It should be assigned based on beneficiary and if you don't benefit but for your activity, you wouldn't benefit from it then you should.

Rep. Morgan Griffith (R-VA):

Now a big part of that energy consumption is to keep everything cool. Isn't that right?

Tony Clark:

Congressman, that's a big part of it. It's not only running all those processors, but it's the cooling of them as well. Especially, well obviously in the summer in Virginia.

Rep. Morgan Griffith (R-VA):

Which has always amazed me why we can't get more of these facilities locate in my part of the state down in southwest Virginia because A, we're a little bit higher altitude that makes it cooler in the first place. Plus we have all these abandoned mines and we have some abandoned coal mines. We also have an abandoned limestone mine, one of those. I've been in the limestone mine. It's about three to four stories high, all kinds of space. It's truly cavernous. It's a manmade cave and I got a little bill passed a few years ago that if you're using water out of the mine, because it's obviously it's down in the mine, it doesn't have any life forms in it, so you can avoid the NEPA studies, just seems to me that would make sense. And of course we already have base load generation from fossil fuels. That's why the coal mines are there and there's also power plants there because it's close to the coal mines. So it just seems to me that, it just amazes me. Why do you think people aren't looking at moving the data centers to places where it actually would require less electricity? And I say that because the mines as you know, but maybe the public doesn't know back home the mines are naturally cooler because they're underground?

Tony Clark:

Congressman, it's a great question. It's one that comes from a northern tier state, it's one that I've asked about as well. Data center developers will tell me that it's a number of factors and sometimes they do look at northern areas, either northern areas or places like in Southwest Virginia where you have less cooling needs to cite their plants, but it's a complex formula that includes access to telecommunications networks. It includes the embedded cost of energy in that particular region. I think there was just a confluence of events that happened that was anchored in Northern Virginia, right outside the nation's capital, which had a huge telecommunications network in addition to very affordable rates that encouraged that data center ally to grow up where it did. But I think there are opportunities for other parts of the country that offer advantages like the ones that you talked about.

Rep. Morgan Griffith (R-VA):

Well, and one of the things I think we have to do is look at our fossil fuels as a base load because we are talking about going into this other realm where we use the renewables and I'm fine with that, but to generate enough electricity to do the data centers that we all want to have the technology that we all want and to do other things, we have to continue to look at fossil fuels and there are ways to do that. We have a company called Mova. They can pull carbon or carbon dioxide, whatever you want to pull out. They're doing it because we put so much pressure on coal. They're not looking at that. Although that's what they started off looking at is looking at coal-fired power plants. They're now doing ammonia out of chicken coops, but they have a flatbed process that works. They're not the only technology in the country, but maybe if we started looking at other ways besides just shutting down our fossil fuel plants, we could provide the electricity for data centers and provide the electricity for the American people that they want and need. I yield back.

Rep. Jeff Duncan (R-SC):

Gentleman yields back and now I'll go to Ms. Fletcher from Texas for five minutes.

Rep. Lizzie Fletcher (D-TX):

Thank you so much, Mr. Chairman, and thanks to all of our witnesses for being here today for your testimony. I think it's been really helpful and obviously this is an important issue that we on our committee are very focused on. I'm going to pick up on a couple of the things some of my colleagues have already talked about this morning, but I think it's clear to all of us that the recent explosion of growth in AI has the US poised to be the leader in this new emerging industry. And we have seen, as we were just discussing, a surge in interest in developing new data centers to support investment demands from the market that will drive economic development. Certainly we're seeing them in my home state of Texas as we are across the country, but these data centers do provide or create really new challenges, and that's a real tension where I live as we are trying to meet increased demand, they're trying to pull the power and there's a concern about this increased demand.

At the same time, we are experiencing tremendous stress and capacity issues on our grid, and that's something that everybody is talking about at home. I know that we talked earlier about some of the statistics at the Electric Power Institute. Electric Power Research Institute expects the data centers to be as high as 9% of electricity demand by 2030, and that these AI queries are expected to take a lot more, maybe 10 times the electricity of a traditional Google search. So as we think about all of that, even though this fast-paced growth is exciting, it's going to exacerbate the existing issues that we already have that we are already struggling to address in my home state and elsewhere in the country. Of course. So one of the things I know Mr. Weber talked about, I know Mr. Peters talked about, I'm going to pick up on that theme a little bit because one of the things we talk about here a lot is permitting reform and the need for permitting reform.

And we know that today it can take on average 10 years to site, get the permits, do the construction, and that's setting aside other slowdowns in the process just to build new transmission lines. And I think one of the challenges that we have is that Congress really needs to move forward on permitting reform. And so the time I do have left Mr. Dion, I want to address first a couple of questions to you because in your testimony you talked about how the deployment of domestic energy infrastructure to meet growing energy needs is hampered by the existing permitting process. I think that is certainly true. Do you think that we can add adequate generation to meet the expected demand growth over the next decade under the current permitting process?

Philip J. Dion:

Thank you, Congresswoman, for the question. I think the question is twofold. One, the demand predictions that we have, how accurate are they and how dire are they? As I said in my testimony, I think the trend line is clear that it's going to be more probably than less and that the cost of underbuilding will outweigh the cost of overbuilding. So I think first and foremost that the need is there. The issue that you bring up is the permitting timelines that we talked about. So we know that we have certain rules, we know that we need to make certain transitions and we know we need to do that in a decade, and we know that these processes take a decade or longer. That's the problem. So we definitely need your help. We can meet the goals can build, the infrastructure can be built in a couple of years and it can be built much more cost effectively.

The delays are not just delays and things aren't getting done. The delays are also cost delays, both the carrying costs, but also the cost of doing business. We know that prices usually over the course of a decade will go up, and that again does pass on to our consumers. So again, we do have the time, but we do need more certainty, especially in and around the ability for repeated litigation rounds and if you will, second bites at the apple, more certainty, more clarity around that will help reduce that timeline and we can get it done.

Rep. Lizzie Fletcher (D-TX):

Thanks. I want to take the time I have left to move on to Dr. Lott, my fellow native Texan here. You testified about the need for Congress to commit or to consider demand response and other non wires solutions, and I was just wondering, I've only got about 20 seconds, but can you talk a little bit more or supplement for the record, because I'm going to run out of time exactly what these are and how these technologies can help optimize performance and manage peak demand to drive down costs. I think that's a really critical issue for us.

Melissa C. Lott:

Submit for the record, quick answer is it helps us with peak. It helps us to better utilize our assets by being more flexible, but I'll provide more details.

Rep. Lizzie Fletcher (D-TX):

Thank you so much. I yield back.

Rep. Jeff Duncan (R-SC):

Gentlelady yields back. I will now go to Ohio's Mr. Balderson for five minutes.

Rep. Troy Balderson (R-OH):

Thank you very much Mr. Chairman and thank all of you for being here today. My first question is going to be for Mr. Dion and Mr. Clark. Amazon, Google, Meta, Microsoft and QTS all have data center operations in Lake County, which I represent. Mr. Hassenboehler, you've discussed the benefits of data centers to the US economy and we've certainly seen those benefits in my congressional district that I represent. And last year Amazon announced a nearly $8 billion plan to build additional data centers in central Ohio while Google announced they will build new data centers in the area to power the company's AI innovations. I'm very, very excited and grateful to have these companies investing in central Ohio and in the 12th congressional district, but with these investments and increased electrification, we're almost seeing historic demand growth. In fact, last month, AEP, a provider in the state of Ohio, said they are forecasting average growth closer to 20% a year. A few weeks ago, AEP's interim CEO told the Senate Energy and Natural Resources Committee that we cannot substitute our 24/7 dispatchable generation, Mr. Clark and Mr. Dion, would you agree with that assessment? Mr. Clark?

Tony Clark:

Yes.

Rep. Troy Balderson (R-OH):

Mr. Dion?

Philip J. Dion:

As I mentioned previously, yes.

Rep. Troy Balderson (R-OH):

Thank you. Recently the EPA finalized their section one eleven rule on power plants, dubbed the Clean Power Plan 2.0, which will drive existing reliable power into early retirement and prevent new natural gas fire plants from coming online. At the same time, the EPA is actively considering a new rule to cover the existing fleet of natural gas fired plants. Mr. Clark, given the increased demand on the grid that we discussed today, what would be consequences if the EPA were to go through with a similar stringent rule covering the existing fleet of gas fired generating units?

Tony Clark:

Congressman, I can only point to what the grid experts have been talking about when they analyze this. And if you look at what the grid operators are saying, the North American Electric Reliability Corporation is saying they have concerns with the direction and the pace of the amount and the rapidity of the retirement of either baseload or dispatchable resources.

Rep. Troy Balderson (R-OH):

Mr. Dion?

Philip J. Dion:

Congressman Balderson, the issue of existing power plants is an incredibly important one to us that's keeping this system going at this moment, planning for new gas, and whether that is with new technology or with new fuel sources like hydrogen, we can do that. But we have expressed concerns. We have talked and we will continue to talk about the need for the existing generation to stay online in order to meet the reliability needs that we have.

Rep. Troy Balderson (R-OH):

Thank you. If you look at the generation Q, less than 5% of the projects are dispatchable 24/7 generation. Mr. Clark, given the weather dependent nature of wind and solar. Is that number concerning to you?

Tony Clark:

Congressman, the challenge is that you can hit an inflection point in terms of the amount and different types of resources that are being brought in. Renewables and intermittent resources certainly serve a purpose and they can be very important, but you still do need dispatchable resources on the system. What happens at a certain point incrementally is you bring on more and more renewables. They become less and less valuable with each increment because they're not providing as much capacity. So what you need is other resources that can back those up. Typically in electricity markets today, it's been natural gas that does that and enables even more of those renewables to come online.

Rep. Troy Balderson (R-OH):

Thank you. And do you think that will get better or worse as the EPA's role regulating new gas fire plants goes into effect?

Tony Clark:

Congressman, I personally have concerns with the impact of the EPA rules and what it may mean for the natural gas sector, natural gas, and you can look at every reliability study that's out there still today plays an enormous role in the reliability of the grid day to day, especially during those hours of the day and during net peak demand times when weather dependent resources aren't available.

Rep. Troy Balderson (R-OH):

Thank you. I do appreciate all of you being here today, and thank you again for holding this hearing, Mr. Chairman, these are extremely important issues for our constituents in the future of this country. I believe the best thing we can do at this moment is to ensure grid reliability is to prevent the administration from forcing our existing dispatchable generation into early retirement. That's why this week I'll be introducing a Congressional Review Act resolution with Ranking Member Capita, excuse me, to disapprove of the EPAs Clean Power Plan 2.0. I'd like to thank my colleagues on this subcommittee for working with me on this and for your support and I look forward to continuing pushback against the EPAs unworkable and dangerous mandates. Thank you, Mr. Chairman.

Rep. Jeff Duncan (R-SC):

Chairman yields back. I'd like to take a moment, recognize the former chairman of the full committee and I'm going to let Ms. DeGette recognize the special guest.

Rep. Diana DeGette (D-CO):

Thank you so much Mr. Chairman. We were so happy to see our former Chairman, Henry Waxman, come into the room today. Henry, we miss you and we think about all of your years of wonderful service to this committee in this congress. Welcome.

Rep. Jeff Duncan (R-SC):

Mr. Chairman. Welcome back. I'll now go to Mr. Tonko for five minutes.

Rep. Paul Tonko (D-NY):

Thank you Mr. Chair. Mr. Chair, let me echo the thanks also for your great leadership Chairman Waxman. It was an honor to serve with you on this panel. As we have heard, data centers are only part of the forecasted demand. Much of this growth is attributable to the hundreds of recently announced manufacturing facilities across our country. So while load growth may present challenges, it certainly is not a problem. It is representative of incredible economic development opportunities that are occurring because of the policies put in place by the Biden administration and how democrats a more robust, modern, flexible and well-planned grid is key to overcoming these challenges. And I truly believe there are efforts underway by FERC, by DOE and others to ensure we continue to have a reliable and decarbonized electricity system. So Mr. Dion, how many EEI members made or have many EEI members made ambitious commitments to reducing greenhouse gas emissions?

Philip J. Dion:

Congressman Tonko, I would have to get you the exact number, but the vast majority of our members have it. And in fact, I think the record is pretty clear and that we have been leaders, as I mentioned, we've increased the usage of electricity, but our emissions levels are down 41% from 2005 levels. So we're on this path.

Rep. Paul Tonko (D-NY):

Yep. Well we appreciate that and I thank you and Mr. Hassenboehler, do many of the members of your alliance, which include some of the largest companies in the country, have ambitious commitments to reducing greenhouse gas emissions? Yes, they do. We appreciate that also. And thank you. So it sounds like there is some agreement from major electricity producers and consumers about the importance and the possibility of achieving sustainability goals. Dr. Lott, why are you confident that the United States can meet its growing electricity demand while maintaining reliability and reducing emissions?

Melissa C. Lott:

Thank you so much for the question. My confidence comes from the numbers and the modeling and the availability of technologies. Technologies are not where they were 20 plus years ago when I started. We've integrated in the system, we've exceeded our expectations, we've learned a ton about what it takes to integrate higher levels of variable renewables, energy storage, et cetera. So we're not going into this with an empty slate. We've already learned how to do it and we have the technologies that are available.

Rep. Paul Tonko (D-NY):

And to this end, EPA has proposed what I believe are fairly modest rules to limit carbon pollution from our nation's largest power sector emitters. So Dr. Lott, have you seen any evidence that EPA's one eleven standards are unachievable or threaten the reliability of our electricity system?

Melissa C. Lott:

How it is executed is key, but no, I have not.

Rep. Paul Tonko (D-NY):

Well, certainly EPA and other independent analyses agree. So we thank you for those answers. And Dr. Lott, how important is the long-term certainty provided by EPA standards which set clear rules for utilities, for grid operators and others to plan for?

Melissa C. Lott:

I apologize. That question was for me?

Rep. Paul Tonko (D-NY):

Yeah.

Melissa C. Lott:

Yes. Sorry Congressman, I apologize. Would you mind repeating the question?

Rep. Paul Tonko (D-NY):

Sure. How important is it that long-term certainty provided by EPA standards which set clear rules for utilities, grid operators and others be a drive for sound planning?

Melissa C. Lott:

Yeah, so long-term certainty is on the top of the wishlist for so many different stakeholders that I engage with. And they allow you to effectively plan when you have rapid changes, a lack of predictability, it is very hard to take all of that uncertainty and effectively build out your system.

Rep. Paul Tonko (D-NY):

Thank you. And we should not forget that they are our tools beyond building new generation that can help meet some of this new demand That includes making our grid more flexible by embracing demand response programs. Even if some data centers require uninterrupted power, many other loads will be more flexible and there is a long history of commercial and industrial energy customers participation in demand response programs to support improved grid management. So Dr. Lott, how can expanding demand response programs improve reliability,

Melissa C. Lott:

Demand response, both in terms of routine demand response, so down daily peaks or summer peaks and also in the face of extreme events is incredibly cost effective. And being able to bring you more of it into the system gives you another tool in the toolbox. So it gives you another tool so that you can better utilize the resources you already have, which drives down the overall cost of the system. And there's a lot of potential there that remains very much untapped.

Rep. Paul Tonko (D-NY):

Thank you so much. I do not deny there will be challenges ahead for our grid planners and our operators, but I hope we can do our part in Congress to provide the tools and the incentives necessary to speed up the build out and modernization of our electricity infrastructure to continue to maintain a reliable and decarbonized system during this time of change and great opportunity. And with that Mr. Chair, I yield back.

Rep. Jeff Duncan (R-SC):

Chairman yields back and now go to Mr. Pfluger from Texas for five minutes.

Rep. August Pfluger (R-TX):

Thank you Mr. Chairman. Mr. Clark, let's talk about just what you see the demand increase being over the next, just call it 10 years. I think this hearing is interesting because we're talking about AI data centers, but that's one aspect of the demand increase we're going to see and probably a very large aspect of it, but just in general, how much electricity percentage wise should we expect to see demand increase in the next 10 years?

Tony Clark:

Congressman and Mr. Chairman, the figures vary depending on what resource you're looking at, but it would appear that we are moving towards a system that over the last few decades might've been a half percent growth system a year, something like that, relatively stagnant to, I mean, you see anything from two to 3% or more growth annually that starts to add up very, very quickly in your home state of Texas. It's been a leader in demand growth and it doesn't look like it's slowing down. An important part of it looks to be these data campuses, but there are other drivers as well.

Rep. August Pfluger (R-TX):

Yeah, I think one of the reasons that we have a lot of concerns is because we just don't see a really realistic plan to meet that demand increase. In fact, the power providers have been here and they have testified in front of Congress and they said the greatest threat to our grid is the lack of sources to power that grid because it seems that especially this administration has put all their eggs in one basket, which might make us feel good about it, but it doesn't actually turn the power on and might not keep up. Mr. Dion, I'd like to ask you, talk us through just the electrons and the reliability factor. How reliable are some of the things that are being pushed by the administration and compare that with other sources that you prefer?

Philip J. Dion:

So Congressman, thank you very much. I appreciate the question. I think I've mentioned before, the hallmarks and the tenants that we live by are the ones that have for a hundred years are the ones that have to drive us, right? Reliability and affordability, reliability and affordability. We've talked, I haven't, but a lot of other people have sat at this table and a lot of other people have sat there and we've talked a lot about the diversity of supply and all of the above and diversity supply and all of the above, and that was during a flat load period. We have to get really serious about this. Very, very, very serious about it. And at the end of the day, if it is not commercially viable, if it doesn't work and if it doesn't do what it's supposed to do, and if it's not affordable, then it won't happen. Just a quick example, we are all for energy efficiency. We are all for flexible demand. We like flat loads. That is actually something we talk about a lot. It benefits all customers, but when we call upon that flexible load, it has to respond. It cannot be voluntary, it cannot be wishy-washy. It has to respond otherwise we can't count on it and we have to have something behind that firm to make it reliable.

Rep. August Pfluger (R-TX):

Reliability and affordability, Dr. Lott. I asked this question to Mr. Carey probably two years ago and I said, our renewables base load capable. So two years later I'll come back to you, are renewables base load capable?

Melissa C. Lott:

Renewables are not 24/7, 365 capable in an economic way. Technically as an engineer, I can design you a system, then we have to pay for it. So what we find is that you want to mix of renewables because they are cheap when they're there, you want to compliment 'em with storage and you want to compliment 'em with firm dispatchable power that can be there 24/7, 365 and design the market so that everyone can get paid effectively to keep their systems well maintained and online.

Rep. August Pfluger (R-TX):

Do you believe that government should be designing that system?

Melissa C. Lott:

I think I'm going to actually look to the gentleman to the left of me.

Rep. August Pfluger (R-TX):

Just your opinion, how far should government interject itself in designing that system so that we keep up with the dispatchability?

Melissa C. Lott:

So what I was going to say is the engineers, the people running the system, they know where the bogies are, they should be involved in designing it When it comes to government, there's a strong role for bringing the people together that need to talk and need to plan together. That's the effective role.

Rep. August Pfluger (R-TX):

I love that answer. I want to leave it to the engineers to design a system that works. And that's really, I think what this hearing is about is let's leave it to the private industry to figure out what works, what's affordable, what's reliable, what helps us geopolitically and let's keep government out of it to the extent that they are completely squandering the resources that we have here in this country and it's hurting Americans, it's hurting our position economically and worldwide. So I'm sorry I didn't get to our last witness, but Mr. Chairman, thanks for a great hearing. I yield back.

Rep. Jeff Duncan (R-SC):

[Indistinguishable] is back. I'll give her a chance to sit down. You want me to skip?Okay. I'll now go to the future governor of North Dakota, Mr. Armstrong for five minutes.

Rep. Kelly Armstrong (R-ND):

Thank you, Mr. Chairman. Mr. Clark, how has the growth of data centers in rural areas impacted utilities needs?

Tony Clark:

Mr. Chairman, Congressman, good to see you. The impact in rural areas, much like the impact anywhere is dramatic. If you have the size of load that some of these data campuses are being dropped into the system to the degree you have excess capacity or some available capacity that's there, you may be able to incorporate it relatively quickly, to the degree that you are running at the edge of scarcity, which increasingly our system is, then that's going to present challenges in a rural area, which you have is a smaller rate base to spread some of those costs across. So of course the issue of cost allocation becomes even more important in a rural area.

Rep. Kelly Armstrong (R-ND):

Well, and the reason I ask is because we have a pretty rural economy in North Dakota, we have some unique weather conditions that make these things really appealable and we're having one going in Williams County and we're in the heart of the Bakken and we might run out of power. I mean, just when you look at the infrastructure and the way it looks, I was wondering if you could go into a little more detail about the administration's policies and zero emissions policies would have on regional transmission RTO wholesale markets,

Tony Clark:

Mr. Chairman and congressman, I guess a couple of points on that. Any policy, putting aside its merits or legality or things like that, that has the effect of decreasing the amount of availability of capacity or causing the retirement of capacity faster than otherwise would is going to put more strain on that system with regard to the RTOs. And I think taking off from where Dr. Lott was, I agree with everything that's said about there'll be some mix of energy efficiency, demand response, solar batteries, renewables and dispatchable capacity. Designing a market around that is extraordinarily difficult because the markets are designed to run what's cheapest to run right now. And so that's been a 20 year process for trying to get those market signals corrected.

Rep. Kelly Armstrong (R-ND):

Well, and I think that is, I mean functionally for six years in Congress and particularly on this committee, I mean we have very aspirational goals and that's great. We should want to have, the problem we run into I think is when aspirational goals and that policy comes at the direct hindrance of operational implementation. And I don't think we spend near enough time here talking about the actual economics of power production. I always use miso and this as an example, and Republicans are guilty of this to some degree or another one. We were way late to this game politically, we just were and not understanding that our consumers are demanding cleaner power. If they want to put a carbon score on a soybean, we'll figure out how to do it. We grow a lot of things in North Dakota. We don't produce there, but also when renewables get above a certain percentage on the grid, they better go from like 27% to 85% in a really quick hurry because I need Coal Creek and Coyote to produce to be able to be economically viable in June because I'm really, really going to need them in February.

And you even saw this with the EPA, right? And the peaker plants in Indiana and pulling them out of the rule because all of a sudden somebody looks around and says, well, without those, we might not have heat in winter. And so that's always been my question on this. I don't have a, and I've tried to figure out a better and more unique way, but you're one of the smartest people I know on this, and I've said this, I said, let's just take the most aspirational version of renewable energy and that can power the United States for 360 out of 365 days a year. What do we do? The other five, what is the policy we put in place? So we have nuclear power, coal fire power, natural gas power to make sure that the greatest country in the history of the world doesn't go dark for five days. And I think we don't have enough conversation about what that really, really looks like moving forward with data centers without data centers, but the economics of power production. Do you have any opinions on that? That's a long question. You got 45 seconds.

Tony Clark:

40 seconds left. So it's at the core of market design that FERC is trying to deal with, and honestly, it's increasingly challenged because of the amount of public policies and subsidies that are now in the markets themselves.

Rep. Kelly Armstrong (R-ND):

I mean primacy and repower matter to those.

Tony Clark:

Congressman, the markets were designed around the idea that prices would do the heavy lifting with regard to reliability and investments. And increasingly what we have now is a price signal that's broken in public policies that are overlaying that market design. So it's going to require either an entire market redesign or you're going to continue to see the sort of things that we've seen in the last few years, which is increasing concerns about units that are still needed for reliability, retiring and leaving the market.

Rep. Kelly Armstrong (R-ND):

And then last, because I'm two seconds over, you've had a great career and it's great to have you here. If you ever thought about going full circle and going back to your very first job, we may have an opportunity to have one of those open depending on what happens in two weeks. So I appreciate you being here, and I yield back.

Rep. Jeff Duncan (R-SC):

Chairman yields back, not seeing another Republican. I'll now go to Mr. Barragán for five minutes.

Rep. Nanette Barragán (D-CA):

Thank you, Mr. Chairman. Smart planning for the new data centers that power AI will be critical to ensure they're powered by clean energy, not fossil fuels. Dr. Lott. Can utilities, private industry and government work together to ensure new data center locations rely on clean energy and that the increased growth in energy demand is accurately forecast?

Melissa C. Lott:

Yes, they can. And there's a role for the federal government facilitating those conversations. I'll also highlight a point that came up earlier, which is that so many of these companies have these goals and they're looking for solutions. And for the most part, in conversations with them, they're telling me, we don't want to be utilities. We need utility partners to work with us so we can achieve our goals.

Rep. Nanette Barragán (D-CA):

Do you have any suggestions on how that conversation should go between all those that I just mentioned?

Melissa C. Lott:

There's a lot of different levels. We've spoken about some of them today, which is when it talks about investments in the grid is one example because when you talk about enabling claim power to come on quickly, efficiently, and remain affordable, you are talking about a grid conversation. How do we build out the lines we need repower, the lines we have, et cetera, all the non wire solutions, there's conversations between those groups. There's also conversations at the local level of how do we get to yes, where we're getting a supply that can remain affordable and serve all consumers while meeting very quickly the needs of these growing demand centers.

Rep. Nanette Barragán (D-CA):

Great. Thank you Mr. Chairman. I'd like to enter into the record an article. It's dated April 12th, 2024 from the Latitude Media. It's titled, Microsoft Says Georgia may be overstating Data Center Growth. The article reports on how Georgia's proposed to build three new fossil fuel powered gas plants based on an overestimated power demand without objection from new data centers, which Microsoft disputed and raised concerns about unnecessary dirty energy generation that would be added to the grid.

Rep. Jeff Duncan (R-SC):

Without objection. So ordered.

Rep. Nanette Barragán (D-CA):

Thank you. Mr. Hassenboehler, how is your organization working with utilities and public service commissions to ensure that there are transparent, accurate demand projections for electricity from new data centers so that new costly power plants are not unnecessarily built, which can put a burden on low income rate payers?

Tom Hassenboehler:

Thank you, Congresswoman for the question. It is a top critical issue that we all need to be addressing. We need to really better align economic and load forecasting with electric infrastructure development. There needs to be more transparency in this process across all stakeholders. More need to be at the table on an earlier basis. The load forecasting is very tricky. As you know, there's a lot of uncertainties right now that are coming in place. So the only way to break those barriers down is to bring more collaboration between the utilities and the customers driving the load growth in order to better plan for these types of arrangements.

Rep. Nanette Barragán (D-CA):

Well, thank you. And Dr. Lott, how will load growth from data centers affect grid reliability and what should governments do to ensure underserved communities aren't hit first by reliability issues during extreme weather, such as say a heat wave?

Melissa C. Lott:

Yeah, it's a great question. Thank you so much for the question, Congresswoman. When it comes to these new huge demand sources that come integrating into whatever their agreements are, flexibility during these extreme events so that we aren't leaving people unsafe in their homes during periods of time. So figuring out how we build up that system, whether it's integrating storage, integrating flexibility in their demand, so they can be one of the big responses when extreme other events happen, which they do. In addition to that, you can integrate more demand response not just in those big industrialized but the rest of the system.

Rep. Nanette Barragán (D-CA):

Great, thank you. And Mr Hassenboehler, in my last question, how are members of electricity customer alliance integrating AI into your operations to optimize data center efficiency and predictive maintenance, which can reduce energy costs and lengthen the lifespan of data centers?

Tom Hassenboehler:

There are many examples that are just playing out on that front. AI uptake is all about increasing productivity. It's all about optimizing visibility into systems and being able to predict more generative outcomes for challenging situations. I'd be happy to provide for the record a long list of examples of ways that AI is helping to mitigate some of these issues on the energy development side, but also create new opportunities and economic development for that angle.

Rep. Nanette Barragán (D-CA):

Great. Well, I want to thank all the witnesses for your work. The AI space is one, there's a lot of conversations on and everybody's trying to figure out how best to get ahead of it, and we're already behind it. And of course the energy issues that will be created by AI are so important. So I appreciate the hearing today. Thank you I yield back.

Rep. Jeff Duncan (R-SC):

Gentlelady yields back. I now go to Dr. Joyce for five minutes.

Rep. John Joyce (R-PA):

First, I want to thank Chairman Duncan and ranking member DeGette for allowing me to waive on to this important hearing. As we have covered in several E&C hearings, AI will have a revolutionary effect on every aspect of our lives. With everything from medical services to energy exploration, AI will add efficiency and precision that will allow Americans to receive faster results and have a more productive and dynamic economy. There should be good news for all Americans, but great news for Pennsylvanians, as Mark Zuckerberg said in an interview in April, access to energy is going to be the largest constraint to AI and data centers. Pennsylvania, with its reliable nuclear and natural gas assets can provide an excellent future home for this industry. The problem is the Biden administration's rush to green agenda is crippling our ability to generate power.

PJM, which is the nation's largest RTO and includes my district in Pennsylvania, released a report last year projecting 40 gigawatts of reliable dispatchable generation to retire by 2030 PJM labels. The majority, these retirements as policy-driven decisions, nearly all 94% of the proposed replacement pile for these retirements are renewables, which historically have only a 5% rate of completion. This was PGMs projection before the EPAs recently finalized one 11 role in a statement issued by PJM. In response to that role, the grid operator expressed its concern that these roles would only make matters worse. Specifically, it cited the growing demand being discussed at this hearing today saying, and I'm quoting, we are seeing vastly increased demand as a result of new data center load. The EPA has not sufficiently reconciled its compliance states with the need for generation to meet dramatically increasing load demands on the system.

There is a fundamental mismatch between our surging demand for energy, including the growth of AI and the outcomes being driven by irresponsible environmental regulations. Mr. Clark, you have testified today that price formation in the RTO markets are at a breaking point, your words due to in large part, to subsidies and policies that undermine basic wholesale market principles. What can be done at the federal level to address this and what actions states like mine should utilize PJM and the utilities be considered to ensure the necessary dispatchable generation is in place to serve, not just data centers, but also the energy that so many families in Pennsylvania rely on.

Tony Clark:

Congressman, thank you for the question. It's a good one. So if you listen to the smart folks at the RTOs, what they will say is, the challenge that we have is there is less and less money, there are less revenues that are coming through the energy markets, and that's because prices in the energy markets are suppressed. There are more and more resources that are zero fuel costs, so there's less money coming out of the energy markets that makes the retention of capacity that much more important because you have to be able to have some sort of sufficient revenue to maintain capacity that's still needed for reliability. So it makes capacity retention mechanisms that much more important than the RTOs in a vertically integrated state, in a regulated state, which Pennsylvania is not. There's a little bit more direct path to make sure that that capacity is retained. It's more challenging in the RTOs and they working with FERC are going to have to come up with mechanisms that ensure that that needed capacity is still available and in the market so that it can support reliability.

Rep. John Joyce (R-PA):

Mr. Clark, within the last 10 years, nuclear assets in Pennsylvania we're at risk of closing largely due to the deregulated energy market that you just mentioned and an abundance of low price, plentiful natural gas. Do you agree that specific regions behind the meter, there can be agreements arrived upon that can give nuclear assets the certainty that they need to continue to operate and make investments in their plants?

Tony Clark:

Congressman, that's certainly been a strategy that the merchant nuclear operators have looked at, and I think it's one that undoubtedly is driving more revenue into some of those key assets. So on the plus side of the column, it helps retain units that I think are national assets and are needed to be retained. The challenge is that does have an impact, that particular strategy on the rest of the customers in the system, and that you're taking out hundreds of megawatts of capacity out of the supply stack that serves the rest of the customer base. And that's going to have some sort of impact on those customers that I think should be looked into and it's probably a regulatory issue that needs to be addressed.

Rep. John Joyce (R-PA):

Mr. Chairman, I thank you again for allowing me to waive on and my time has expired. I yield back.

Rep. Jeff Duncan (R-SC):

Gentleman yields back and that'll conclude the question portion. Seeing no other members, I'd like to thank our witnesses for being here. You did a fabulous job in answering members' questions, providing a lot of information. Members may have additional questions which they'll submit to you guys. Remind members they have 10 business days to submit additional questions for the record, and I would ask the witnesses do their best to submit the responses within 10 business days upon receipt. Ask you unanimous consent concerning the record documents included on the staff hearing documents list without objection. That'll be the order and without objection, the subcommittee will stand adjourned.