Hearing of the Senate Energy and Natural Resources Committee - To Consider Pending Nominations

Hearing

Senator Cantwell: "Thank you Madam Chair for this important hearing. It was so good to see our former colleague, Senator Domenici this morning. It reminded me all of the work that this committee has done over the many years.

"I was thinking as I was looking around how glad I am that we are joined by such smart and talented new colleagues, but I am also reminding myself as we sit here that I think there is only a handful of us that were on the committee in 2005- I think maybe four or five of us.

"So, when it comes to this issue I think some of our colleagues are just catching up to speed on the importance of the anti-manipulation laws that are on the books, and to what FERC has done in that regard. So I hope people will spend time on this issue because we had many hearings during this process.

"I am reminded of another hearing we had before the Finance Committee where Rex Tillerson, Exxon Mobil Chairman, testified about how outside Wall Street markets were driving up energy costs which resulted in the headline, "Exxon CEO says Wall Street is driving up gas prices by 50%.' Many don't remember those days, or remember all of the enforcement that now comes into these energy markets. But if we want to have a hearing about whether our manipulation laws are hitting the mark or don't go far enough, then we should have that hearing.

"I don't think that is about Mr. Bay as much as it is about whether Wall Street has been policed in efficient ways to not artificially drive up the cost of energy markets.

"I think energy markets are the lifeblood of any economy. If we don't police them properly, we are going go place ourselves out of economic development. So, Ms. LaFleur, I think you said it best when you said that FERC's job is about interstate transmission lines, correct?"

Cheryl LaFleur, acting FERC chairwoman: "Yes."

Cantwell: "And applying just and reasonable rates, correct?"

LaFleur: "Yes."

Cantwell: "So I think some of my colleagues think that, somehow, you or Mr. Bay are going to decide in some individual state what generation is going to come online. That is for the state to decide, correct?"

LaFleur: "That's correct. As you know under, the Federal Power Act that is left to the states."

Cantwell: "So whether it's coal, or nuclear power, the state decides that. You only decide if it is a just a reasonable rate?"

LaFleur: "That is essentially correct. The state definitely has the right to build generation and decide what they want. Sometimes the rules of how much the generation gets paid in the market effects what gets built, but we don't site generation or require generation to be built."

Cantwell: "Which I think is important - that somehow the long arm of a FERC commissioner could come down and make that decision- I don't hear anybody saying that it has happened so far, right?"

LaFleur: "That's correct."

Cantwell: "No one here is saying this is what happened when this or that commissioner was on, and here is how they drove this policy to favor one source over another. I haven't heard of those arguments. To this point about the commission and manipulation - is there anything that the enforcement division has recommended over the last several years that you have disagreed with as far as a case on manipulation? I mean one that has been decided by the Commission."

LaFleur: "I have not substantively dissented in any of the settlements. I have dissented on a few orders to show cause in terms of the application of the penalty guidelines, and I have also had some procedural dissents in some of the procedures that are used in the investigation.

"I think this is a relatively new area of our work, and it is to be expected that we have debates about how the rules are to be applied -- I think that is why we have five commissioners. I haven't dissented on any of the settlements or the substance of the orders to show cause, just the penalties and procedures."

Cantwell: "I guess I would just say I think that some people think they don't like the fact that Mr. Obama has nominated Mr. Bay -- maybe over you -- to be the head of the Commission, yet you've agreed with every decision he has recommended on manipulation, in principle.

"So at this point, I don't see the difference. Madam Chair, if there is an issue about exculpatory evidence and the comparison between FERC and what the DOJ does on exculpatory evidence, or what the SEC does on exculpatory evidence, let's have that hearing. As my colleague from New Mexico pointed out, let's look at that.

"But, I would say that the decision on releasing exculpatory evidence is left to the commission. It is the commissioner's responsibility, not Mr. Bay's. He is the staff member, at this point. They are the commissioners, they decide.

"So if somebody wants to find fault with the exculpatory evidence, start with the commission. Thank you."

Cantwell (concluding statement): "I, too appreciate this hearing. We're drilling down into detail here on one particular element of the Commission. And believe me, I know it's important, and I guess I would be where the ranking member was in her statement about FERC not being a household name. Unfortunately in the Northwest, we learned it was a household name in the Enron crisis and we depended on it, and we had to depend on it. Otherwise, we would have been the deep pockets paying for much manipulation.

"I just want to make sure we all step back for a second and realize the home run that has been hit by FERC when it comes to enforcing anti-manipulation language that we gave to them in 2005. They are the shining light in a regulatory scheme of making sure that energy prices are just and reasonable. We wish we would have had that happen before - that they would have just been enforced as just and reasonable - but there was a lot of attempts by a lot of previous people to make sure they weren't enforced. That is why we have the new law.

"As far as agencies and the policing of the market, FERC has been a leader. So if we need to get something fine-tuned and right, we shouldn't hesitate to look at that.

"But I would definitely make sure we are hold the commission at large as part of that effort. Madam Chair, I believe so much in investment. I took over your job as Small Business Chair, and I can guarantee you I believe in access to capital. But I also believe that our energy markets cannot be the tool of a lot of people who just want to invest for the purposes of their own manipulation of the market.

"We have to have policemen on the beat. So while drill down here, I will remind people that the policemen have been on the beat and have done a lot of great work."

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