AI and the Grid: Meeting Growing Power Demand While Protecting Ratepayers
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House Energy and Commerce Subcommittee on Energy U.S. House of Representatives
Follow its sittingsSpeaker 2
That's right. Most of it sits idle much of the year or a large part. It's like building a highway for every car and truck that exists in America, but not every car and truck is on the road at the same time. Right? Recent studies have analyzed the problem and suggest that if we increase grid utilization, existing ratepayers could save more than $100,000,000,000 over the next decade.
This is a win win. Families, small business owners can save money while we provide abundant energy and most efficiently use the grid that we have already paid for. And the good news is that we have quick ready to deploy solutions like batteries, grid enhancing technologies, and distributed systems. But the challenge is that there are barriers to deployment and savings. There are misaligned incentives that reward utilities for selling as much power as possible and making large capital investments, rather than efficiently using the right power in the right place at the right time.
We also should be rapidly scaling virtual power plants using the batteries, the smart thermostats, electric vehicles distributed in communities across the country to provide grid reliability faster and at a lower cost. These are big opportunities. The Department of Energy estimated that scaling VPPs could serve 10 to 20% of peak load and save about $10,000,000,000 in annual grid costs. And I, after living through a terrible hurricane season, I see a future of great resilience for communities across the country. If we can deploy these batteries and distributed systems at a time when the grid suffers from a natural disaster.
Large load customers like data centers should be part of this solution, and in some places, they already are. And we should be able to agree that data centers must foot the bill for their grid upgrades rather than offload that cost on the families, the families we represent. I think together, we can find ways to require these data centers to be good citizens of the grid, rather than impose their cost on others and help us solve real problems like the interconnection queues, the financings, supply chains, and permitting. Some of the bills we're discussing today move us in the right direction, but they don't really meet the moment. We need real reforms to federal transmission planning, permitting, and a major focus on utilizing the grid that we have now.
So I hope today's hearing is a starting point. I yield back my time. Thanks.
Speaker 1
Thank you very much. The gentleman yields back. The chair now recognizes the gentleman from Kentucky, the chairman of the full committee, for five minutes for an opening statement.
Speaker 3
Thank you. Thank you, Chairman Ladder, for holding this hearing. And I thank my good friend from Florida, the ranking member for those words. I think there is some common ground that we need to find, and we need to get this process moving forward. And we have bills before us today, but we're always open to sit and to talk.
And I appreciate, actually, the highway analogy. Not every car is on the road at the same time. I know you went to college in Atlanta. My son did. And, you could if you timed yourself right, you could get to Atlanta to go pick him up from downtown.
But there were peak times in the afternoon. I know it's not always the daily peak in the electric grid. And so you need to make it more efficient, but you also at times just need new highways and new generation. So I don't I think being more efficient is absolutely something we have to work on together, but I also think there's gonna be the need for more generation as well, as we've seen. So thank you for that, and we will figure out a way to try to find common ground on these.
I'll make that commitment if we can do that. So, but throughout this congress, we spent a lot of time talking about US leadership and artificial intelligence. We evaluated the benefits of AI across every sector of the economy. The national security issues with AI and adversarial nations like China and having whose values control AI is vitally important. We've looked at ways that AI data growth and how it interacts with our electric system.
The world is at a precipice of great change, and we must get this right. It is no secret that energy demands coming from data centers are raising concerns about affordability in our communities. But we are charting a path to ensure, and as the ranking member said, we can find common ground on that data center growth works for all Americans and not just big tech companies when done right. Research and evidence continue to show that low growth coming from data centers actually lowers cost for communities because new data centers bring needed investment into the grid, modernization, while connecting baseload energy that keeps the lights on for everybody for 365 days a year. Even more, these investments raise significant tax revenue.
We're looking at one in my district that's gonna raise significant tax revenue. You know, they can use that to pay for local communities and schools and pay for benefits to local communities like schools and public safety and recreational parks. It should generate a nice source of revenue for if you're gonna locate in a community, you should generate revenue in that community. And that is why legislation before us today focuses on ways to methodically plan, build, and pay for a grid that works for all of the American households. These bills enhance the state's important role in planning a more affordable and reliable grid.
We're also ensuring that data centers are paying their fair share. Data centers should pay for the load that comes into the data center. So while we may not agree with every provision in the bill, these proposals will foster discussion about how to implement a vision of our electric system that keeps costs low for households and ensures US leadership in the next generation economy. So I look forward to today's discussion, and I absolutely do look forward to continued discussions amongst this committee, all members of this committee, to see that we beat China in the race to AI. And thank you, and I yield back.
Speaker 1
Well, thank you very much. The gentleman yields back the balance of his time. The chair now recognizes the gentleman from New Jersey, the ranking member of the full committee, for five minutes for an opening statement.
Speaker 4
Thank you, Mr. Chairman. It's been 15 months since Republicans took control of all levers of power here in Washington, and it's a nightmare for the American people. Electricity prices have increased as much as 13%, and the same goes for the natural gas prices. American families are now paying well over $4 for gas at the pump, and all indications are that things will continue getting worse. Prices will continue to soar as a result of Trump's reckless war in Iran and Republicans' relentless attack against cleaner and cheaper energy.
And these actions are resulting in our nation becoming less energy-secure. Making matters worse, data centers fueling artificial intelligence technologies are throwing the grid into a generation crisis. At a time when we need almost all the energy we can get, Republicans have proceeded with their illogical war on clean energy, dedicating themselves to taking vital sources of power off the grid, and American families are paying the price. Last year, Republicans used reconciliation to wreck our power grid and repeal billions of tax incentives and programs that would have financed hundreds of gigawatts of clean, reliable power. The problem is that I fundamentally find it difficult to trust proposals to fix our problems from the same people who caused those problems in the first place.
President Trump promised that he would cut energy bills in half in his first year back in office. Instead, they're higher than ever. His so-called ratepayer protection pledge isn't worth the paper it's written on because it doesn't have any mechanisms to hold big tech companies accountable for their promises. And given this track record, we should all be suspicious of any Republican promise that they can't actually prevent America's bills from going up. I don't believe it.
And this is the backdrop to today's legislative hearing. Our nation's grid is facing enormous challenges, and those challenges call for big solutions. Unfortunately, I don't think the bills we will review at today's hearings meet the moment. Some of the bills before us today include good ideas. Improving the accuracy of electricity demand may be critical to ensuring that we're not making families pay for data center-related grid infrastructure that's never needed.
Using advanced transmission technologies and more efficient conductors to get more out of the existing grid is a promising idea to keep costs down. And given the difficulties that AI technologies are creating for the grid, the least we can do is try to ensure the grid is getting something positive out of these technologies too. I am also pleased we are considering H. 6,529 from Representative Lansman, which should require FERC to convene federal experts, state regulators, tech companies, and utilities to find pathways to protect American families from rising electricity costs. Ensuring that data centers pay their fair share.
We'll take cooperation across all these groups, and we need to ensure that they're engaging with each other and working together to reduce costs for ratepayers. And while I think some of these bills need tweaks or technical alterations, they're largely small steps in the right direction. But we don't need small steps. We need big steps because we have big problems. And I also want to mention that there is one bill that would be a major step in the wrong direction, and that's HR 6336. The so-called FAIR Act is anything but fair.
It's a purely partisan attack that would make it harder for us to build out the regional, interregional grid infrastructure that all of us know we need to build faster. The FAIR Act would give red states a free ride so they don't pay for the economic and reliability benefits they receive from a build-out of a power grid. The bill is a distraction from the work we should be focused on. So this committee should be holding a hearing on proposals that could help fix the long-term drivers of the current grid reliability crisis and make it easier to plan, permit, and pay for the expansion of the power grid. Unfortunately, committee Republicans turned down an opportunity to include Representative Peter's Speed and Reliability Act, a bill that would do just that.
Mister chairman, I think that's a real missed opportunity, and I'm disappointed that it was not included. With that, though, I thank you, and I yield back the balance of my time, Mr. Chairman.
Speaker 1
Well, thank you very much. The gentleman yields back the balance of his time, and this concludes members' opening statements. The chair reminds members that pursuant to committee rules, all members' opening statements will be made part of the record. And just to let everyone know that votes have been called. And, as we do take our recess to go vote, what we'll do is at the conclusion of the last vote, at the start of it, ten minutes later, we'll resume back here in committee.
So we wanna thank our witnesses for appearing today and taking the time to testify for the subcommittee. Each witness will have the opportunity to give an opening statement, followed by a round of questions from our members. Our witnesses today are mister Nick Myers, the chairman of the Arizona Corporation Commission, mister Tom Falcone, the president of the large public power council, miss Whitney Muse, the president of Muse Energy, and mister Nelson Peeler, the senior vice president of grid Strategy, Planning and Integration of Duke Energy. Thank you very much to our witnesses for appearing today. Just real briefly, we want to pull that mic up close when you speak.
And also, you'll notice the lights. When it goes yellow. You have one minute left, and when it goes red, if you could, finish your statement. Again, we appreciate you being here. And, miss, mister Myers, you are recognized for five minutes for your opening statement.
Speaker 5
Great. Thank you, and good morning, Chairman Lotta, and Ranking Member Castor, members of the energy subcommittee. My name is Nick Myers. I serve as the chairman of the Arizona Corporation Commission, and the views that I'm sharing this morning are my own. As you're fully aware, our nation is experiencing an unprecedented growth in demand for electricity.
A significant part of that growth is driven by artificial intelligence, data centers, and advanced manufacturing. These are positive developments. They represent investment, innovation, economic growth, and perhaps most importantly, a strengthening of our national security. We are facing a pivotal moment in history, a digital revolution. How we structure that growth so that it remains sustainable and fair for all customers, while also putting downward pressure on residential rates wherever possible, is critical.
The principle we in Arizona have relied on to handle large load customers is straightforward. Growth needs to pay for itself. This approach to handling large load responsibly appears to be gaining a national consensus. That means when large new loads come onto the system, the infrastructure required to serve them needs to be funded by those loads, not partially, not over time, in a way that shifts risk to other ratepayers, but fully with real financial commitments backed by financial security instruments such as letters of credit. The Arizona Commission recently hosted a large load shop, where we heard from our electric utilities, consumer advocates, data centers, and other stakeholders.
One thing became very clear. Our utilities can serve this demand, but only if the financial structure is disciplined. Generally, most agreed that a strong tariff design provided stability, transparency, and consistency in combination with the use of energy service agreements as a layer on top to provide flexibility for unique characteristics of any given large load. That allows for growth and protects customers from cost shifts. The proposed ratepayer protection act, which ensures that large load customers are responsible for the full incremental cost of the systems required to serve them, aligns with what we are doing in Arizona, and what I'm seeing across the country.
The bill defines a large load customer as 100 megawatts, which raises an issue we are dealing with in Arizona. How should we define large load customers? At our recent workshop, there was an agreement that 50 megawatts would be a large load. But what about the 20-megawatt customer that is the proverbial straw that broke the camel's back and requires substation upgrades, potential reconductoring, and new transformers? We are finding that whether a customer is considered a large load or not may often be context-specific.
The protecting families from AI data center energy cost act likewise highlights the importance of protecting residential and small commercial customers from increased costs associated with large loads. By requiring a FERC technical conference, it could help raise national attention on this critical issue. But at the same time, various strategies and rate structures to protect ratepayers are already being implemented through state-level tariff design and regulatory oversight. Federal efforts in this area are most effective when they complement those structures, rather than attempting to replace them. On the transmission side, there's an understandable push to expand capacity.
The high-capacity grid act focuses on improving efficiency with advanced conductors. Those are useful tools, but perhaps not a universal solution. While advanced conductors increase line ratings, they may not necessarily improve system reliability, and could simply shift the bottlenecks. In many cases, substations, transformers, and interconnection facilities are the actual limiting constraints. A flexible approach can help ensure the investments deliver the intended benefits without unintended consequences.
The fair allocation of interstate rates act reinforces the principle that costs should follow the entities that cause them, and that states should not be required to absorb costs tied to policies they did not adopt. I was very involved in the Markets Plus greenhouse gas task force that developed the GHG tariffs. The most important principle unifying the states involved was that ratepayers should not have to pay for energy policies adopted in other states. In the West, the grid is heavily intertwined with nonjurisdictional entities such as BPA, SRP, and WAPA. In Phoenix alone, SRP and APS are tightly intertwined, and fully separating costs is unrealistic.
This reality creates a level of complexity that broad, uniform federal approaches do not always account for. States must retain their authority to ensure that the system operates properly, and costs are allocated fairly. Thank you, and I look forward to your questions.
Speaker 1
Well, thank you very much. And, mister Falcon, you are recognized for five minutes for your opening statement.
Speaker 6
Thank you. Chairman Latta, ranking member Castor, chairman Guthrie, and ranking member Pallone. Members of the subcommittee, thank you for inviting me. I don't have as many jokes in my testimony as King Charles. Who knew he would be such a hard act to follow?
My name is Tom Falcon. I'm president of the large public power council. I previously spent a decade as the CEO and CFO of the Long Island Power Authority, serving 1,200,000 customers outside of New York. And prior to that, worked as an investment banker in the utility industry. LPPC represents 29 of the largest state and locally owned not-for-profit public power systems.
I emphasize the not-for-profit. We are in the business of serving our customers and communities, and we have no financial incentives other than doing the right thing for our customers and communities. Our members provide reliable, affordable electricity to more than 30,000,000 Americans across the country, including many districts represented by members of the committee. And our members own approximately 80 gigawatts of generation and operate more than 50,000 circuit miles of high voltage transmission. The issues before the subcommittee are not theoretical for us.
LPPC members currently power approximately 18% of the nation's AI and data center load. And looking at various forecasts, we anticipate serving approximately 36% of the interconnections over the next five years. Over the next decade, we will invest more than $167,000,000,000 in infrastructure and build approximately 60 gigawatts of new generation. The policy challenge is straightforward. The United States should build the infrastructure needed to support AI leadership and economic growth, while ensuring existing customers do not subsidize large or speculative loads.
I agree with my fellow panelists from Arizona that growth has to pay for growth. That requires three practical considerations. First, load forecast must be credible, and load forecasting is the beginning of the planning process. It affects generation planning, transmission, resource adequacy, market signals, customer rates, and reliability. But those forecasts are inherently uncertain when very few large customers drive the projected growth.
Utilities and regulators need to distinguish between committed load and probable or speculative load. Second, rates and contracts must follow cost causation. Existing customers should not provide a free option to large customers that request service, cause utilities to build infrastructure, and then do not use the capacity they request. No developer would build a large skyscraper without an anchor tenant financially committed to use the space, and the same principle applies to the electric industry, especially when those grid investments may last 60 to 100 years, while the technology cycle for those customers is closer to ten years. Large load tariffs and contracts can protect existing customers through minimum demand obligations, deposits, collateral fees, and other tools.
Those tools are not a barrier to growth. They are a safeguard that allows growth to proceed without shifting costs to families, small businesses, and other customers. Third, federal policy should support best practices while preserving state and local discretion. PRPA has historically been used to require state commissions and utilities to consider federal standards without requiring adoption. If Congress uses that framework here, it should maintain the ability of state commissions and public power governing boards to apply appropriate forecasting and ratepayer protection practices through existing public processes without creating duplicative proceedings or conflicting standards as the current bill does.
There's also a related public power-specific federal regulatory issue that deserves your attention. Treasury's private business use rules for tax-exempt bonds are issued by our members. Those public power utilities need long-term commitments from large retail customers to protect existing customers and finance infrastructure. The current tax regulatory rules can make those prudent commitments difficult when tax-exempt bond facilities are involved. LPPC is working with the treasury on a narrow regulatory solution.
Finally, transmission policy should be disciplined. Planning should begin with an accurate load forecast, evaluate available resources, and then compare the best ways to meet the deficiency, whether through generation, transmission, storage, demand response, reconductoring, grid-enhancing technologies, or other tools. Transmission projects should deliver tangible net benefits to the customers who fund them. Costs should follow benefits and cost causation. Affected states and communities should have meaningful input, and the Federal Power Act's protections for public power should be preserved.
For interregional projects, we agree that affected regions should consent before customers are assigned costs. That is simple customer protection, and advanced technologies should be encouraged where useful, but not mandated without project-specific review. LPPC's message is practical. We serve new loads and build the infrastructure the country needs, but we should do it in a way that protects existing customers, respects state and local authority over retail rates, and gives utilities the tools to distinguish real demand from speculative requests. Thank you, and I look forward to your questions.
Speaker 1
Well, thank you very much. Miss Muse, you are recognized for five minutes for your opening statement.
Speaker 7
Thank you. Good morning, Chairman Lotta, Ranking Member Castor, Chairman Guthrie, and Ranking Member Pologne, as well as members of the subcommittee. Thank you for the opportunity to testify this morning. My name is Whitney Muse, and I am the president of Muse Energy, an energy consulting firm. And I'm here in my personal capacity and not on behalf of my firm.
Prior to founding Muse Energy, I served as senior policy adviser in the office of clean energy innovation and implementation at the White House, and also served at the US Department of Energy. First, as chief of staff in the office of electricity... Electricity, and subsequently worked to establish the grid deployment office, serving as chief of staff and senior advisor. Across these roles, I had the privilege of working on the implementation of many of the policies and programs from the Energy Act of 2020, the Infrastructure Investment and Jobs Act, and the Inflation Reduction Act. This energy subcommittee hearing is a timely moment to discuss opportunities and challenges of load growth that we are seeing in the power sector after two decades of flat growth.
The US is now in an era of load growth driven by multiple sources. Data centers and AI usage, increased manufacturing, and electrification of transportation, heating, and more. This load growth is happening as we are seeing rising electricity prices and escalating concerns about affordability, with a growing need to ensure that consumers and ratepayers are protected. The grid underpins nearly all aspects of our lives. Transmission connects generation resources and loads across the system and moves power from where it is generated to locales where it is consumed, while the distribution system delivers power to individual homes and businesses.
Transmission provides many benefits, including improved resiliency and reliability of the grid, reduced congestion on the grid, and allows for faster incorporation and interconnection of new generation and load. A proactively planned transmission grid that incorporates high capacity regional and interregional transmission lines to connect the lowest cost generation resources yields savings for consumers relative to a more piecemeal or siloed approach. During this hearing, we have the opportunity to review a number of introduced and draft bills. The advanced transmission technology to reduce rates act and the high capacity grid act offer pathways to accelerate the deployment of various advanced transmission technologies and grid-enhancing technologies to increase the capacity of the existing grid. Bills such as the load forecasting enhancement act, the affordable innovation for the grid act, the Protecting Families from AI Data Center Energy Cost Act, all provide opportunities for the Department of Energy and FERC to improve its load forecasting processes and to work with stakeholders to protect families from data center costs as well as to accelerate innovation on the grid.
The ratepayer protection act brings forth many of the topics that have been in discussion quite frequently around having large load customers cover all of the incremental costs of the upgrades. I think there is an opportunity to further refine the definition of how a large load is considered as we look at both data centers as well as large loads in the manufacturing and industrial base across the country. And then there's the fair allocation of interstate rate act, which really offers pathways that would block and significantly stymie and slow the construction of much needed interregional transmission across the country. I look forward to the discussion of all of these bills during this hearing. In this time of load growth, bill pressures, and more, we need action to maximize the existing grid and expand transmission capacity.
DOE, the national labs, and many other entities have produced many studies that point to the value of transmission and of the grid, and more recently provide numerous estimates of the coming load growth. What we need now is investment, technology deployment, and steel on the ground to meet the demands of the moment. Thank you.
Speaker 1
Thank you very much, Mr. Peeler. You are recognized for five minutes for an opening statement.
Speaker 8
Chairman Lotta, ranking member Castor, chairman Guthrie, members of the subcommittee. Thank you for the opportunity to be here today to testify. I serve as senior vice president of grid strategy, planning, and integration at Duke Energy, one of the largest investor-owned electric utilities in the United States, serving more than 8,000,000 electric customers across the Midwest and the Southeast. Duke Energy shares this subcommittee's focus on reliable, affordable energy to support economic growth and America's leadership in AI. Duke Energy serves customers under a vertically integrated utility model in all of our states except in Ohio.
This model allows us to plan, build, operate generation, transmission, and distribution resources in a coordinated and accountable manner under federal and state regulatory oversight. As a result, rates in all of our vertically integrated states are below the national average. Alignment of long-term resource planning with strong state oversight ensures infrastructure investments are prudent and deliver measurable customer value. Power demand is growing rapidly, and I appreciate the opportunity to share how we are serving growth while remaining committed to delivering reliable power at the lowest possible cost. Being a regulated utility carries both the privilege and responsibility to serve all customers, regardless of background or circumstances, in a way that is affordable and reliable.
Duke Energy has a culture of continuous improvement, focused on delivering value for customers. Our scale enables cost-effective operations through strong cost controls and operational discipline. Maintaining a strong balance sheet, leveraging tax incentives, financing cost recovery during construction, scrutinizing storm recovery expenditures, and operating within constructive, stable regulatory environments all help lower costs to customers. We're also leading with customer protections on large load, as large loads come online. Under the oversight of our regulatory commissions, we're implementing well-designed arrangements to ensure that new large load customers pay the full cost of serving them, enter long-term service agreements that reduce risk of stranded assets, and provide financial security measures that protect existing customers.
When integrated responsibly, large customers can support economic development and help limit rate growth by spreading fixed grid costs across a broader customer base. To meet growing demand, we're investing more than $100,000,000,000 over the next five years to add 14 gigawatts of new capacity and associated network transmission. This includes new generation resources, including natural gas, solar, and storage, with nearly 5 gigawatts already under construction. Efficiency improvement shielding an additional 1,000 megawatts from existing nuclear, natural gas, and hydro assets, and grid-enhancing technologies to improve efficiency, performance, and resilience. We're also expanding and modernizing our transmission system through a combination of new lines, targeted upgrades, and grid-enhancing technologies such as advanced conductors.
We coordinate closely with regional grid operators and state regulators to ensure projects are properly scoped, cost-effective, and aligned with system needs. To be clear, transmission does not exist to meet abstract policy goals. It exists to transfer scale and distribute generation to serve all customers reliably and affordably. In regulatory proceedings before state commissions, including North Carolina, I've consistently testified that integrated planning produces lower long-term system costs and produces stronger reliability outcomes than fragmented or siloed approaches. Federal policies should therefore avoid substituting national prescriptions for regional judgment.
Even with strong planning and customer protections in place, infrastructure cannot move forward efficiently if national environmental permitting processes are unpredictable or protracted. Duke Energy supports targeted practical reforms that improve efficiency without weakening environmental protections, including clear timelines and efficient judicial review under the NEPA, the Clean Water Act, and the Endangered Species Act. Duke Energy is delivering the outcomes this subcommittee is focused on. Disciplined investment, prudent planning, and reliable operations to achieve speed to power while protecting customers. We look forward to continue to work with Congress to advance policies that reinforce reliability, affordability, state-led solutions, and lower customer costs.
Thank you.
Speaker 1
Well, thank you very much. And that will conclude our witnesses' opening statements. And we have 206 members to go to vote. So we are going to recess right now, and we will resume ten minutes after the last vote starts. Thank you.
Speaker 1
Oh. Oh, yeah. I do need that timer running. Well, thank you very much. The subcommittee will reconvene.
And, again, I thank the witnesses for the short interview we had there for that series of votes, and the chair will recognize himself for five minutes for questions. Meeting growing electricity demand for data centers will require significant capital expenditures for more generation and transmission infrastructure build-out. Chairman Myers, mister Peeler, and mister Falcon, how can you insulate residential ratepayers from costs caused by the large data centers? Miss Myers, if you'd like to start.
Speaker 5
Yeah. Thank you. The biggest way we're isolating those costs currently is by using specialized tariffs with the energy services agreements on top of it, and requiring that all costs be paid by, that, you know, within the confounds of that agreement by the person that needs the energy. There are various ways we're doing that. One of our utilities is using a subscription model.
Another one is requiring that they, and depending on the situation, it's all very situational, but some of them just flat out are asking them or are providing their own generation. And then, at some point, they may turn that over to the utility. But, fundamentally, we are the big thing we struggle with is the transmission portion of it because, all of that transmission build out tends to be regulated by FERC, and then that comes down as a single number to the state to be dispersed appropriately. But we have no insight into who caused that particular portion of the cost. So what we're doing is in the energy services agreement, having them pay the estimated cost and generally a little bit more.
So if it's $20,000,000 of interest infrastructure cost, they're agreeing to pay 40,000,000 to cover the cost and a little bit more, which puts downward pressure on rates. So that's kind of how we're dealing with that.
Speaker 6
Yes. The same. I think it's important to recognize, Chair Lata, that the way that utilities have operated for 120 years is to divide customers into rate classes and to charge those customers based on the characteristics of their load. What is new here is not that, this is an old and new concept, but that data centers as a rate class prior to ChatGPT in 2023, we really didn't see that much load growth, and we weren't building infrastructure just for a data center. Now that that's happened, you've seen a tremendous number of states, including Arizona, start breaking customers into rate classes and charging them the appropriate rate.
And that rate's gonna be higher because if you're building infrastructure for a new customer, new stuff costs a lot more than old stuff. And so you wanna charge them the marginal rate on the new stuff so that you don't have to raise rates on the old customer. So that's generally the philosophy. There's about 60 tariffs among the states and utilities that are either in place or pending, and it's an old solution. What's new is that this load growth came out of nowhere.
Speaker 8
Yes. So, very similar response. I'll just specifically, we use electric service agreements for large load customers that require commitment from them up front, both financially and a commitment to their load ramps. And the intent is that they pay their share of infrastructure cost up front and that other rate payers not impacted. But ultimately, it becomes a rate structure that they pay the larger portion of the fixed cost of the system based on the needs that they have.
So the customers are protected by the electric service agreements, which are long-term binding contracts from those requesting customers.
Speaker 1
Okay. And, Peeler, you know, amid this historic load growth that is outpacing infrastructure development, how will utilities like Duke take advantage of cost-effective solutions such as advanced transmission technologies that you're gonna get more juice out of the existing system?
Speaker 8
Yes, certainly. So we could currently, you consider advanced technologies like various Getz technologies. More specifically, we have a lot of applications of advanced conductors. We are able to apply those typically in a reconductoring environment that allows us to use existing right of ways that lowers cost for those upgrades, and in many cases speeds the service to those upgrades. So, we evaluate them on a case-by-case basis.
It's not always the best solution, but in many cases, those advanced conductors are a very viable solution for both economics and speed, for new loads.
Speaker 1
In my last 26 seconds, you know, when we're talking about these issues, what about supply chain? You have your supply chain issues, I have about 20 seconds left.
Speaker 8
Yes. So advanced conductors are new, you know, fairly new technology. There are a lot of options out there. Some are tested, some are not. So it is a matter of, you know, selecting the right ones.
They have different characteristics than traditional conductors. They can be more brittle. They can be less resilient to, you know, damage from the elements, for example. So it's very important to select the right things. But supply chain is an ongoing challenge with the demands that we're seeing for new loads, all types of electrical equipment, not just conductors, but electrical breakers, transformers.
The lead times for those have increased over the past few years.
Speaker 1
And sorry, I'm gonna have to cut myself off there. My time has expired, but I'd like to get some more information on that. But, at this, I yield back and recognize the general lady from Florida, the ranking member of the subcommittee, for five minutes for questions.
Speaker 2
Yeah. Thank you, Mr. Chairman. Thanks again to the witnesses. We really need your help because we wanna provide a lot of relief for our neighbors back home. We're just being crushed by higher electric bills right now.
It seems that one of the answers, of course, we're gonna talk about transmission, but in distribution and really squeezing greater efficiency out of the grid that we have right now, if it I know that the efficiency number across the country was about 70%. We were getting 70, and now it's down, you know, 53%, or that means there's a whole lot of time when we have a lot of the grid that's not operating. So how do we build the foundation? From this, from the federal level, what can we do since utilities are regulated at the state level? What is in the power of the Congress to make sure our existing infrastructure is more efficient?
Getting the gets, getting utilities to actually uptake their reconductoring. Miss Muse, maybe you have some ideas on how we get those cost-saving technologies onto the grid, and think of it as a member of Congress. Yes. We can direct FERC. We can make some changes to PERPA.
Maybe set different incentives. What do you recommend?
Speaker 7
Thank you, Congresswoman. I think all of those above would be helpful. I think we saw even in the last administration that there was an uptick in deployment of grid enhancing technologies with support of some of the fund financial incentives that came out of the Congress, including funding for the grid resilience and innovation partnership program that DOE ran, as well as work at the loan programs office where utilities came in for lower cost debt and use that in part to upgrade their transmission systems. And so there are financial incentives that have been helpful. I think the other options that you mentioned in terms of working with FERC, as well as the PRPA 11d standards, are also options to pursue.
I think we really wanna get to a point where we're accelerating deployment. Right? We have examples of pilot programs across the country, the national labs, including Idaho National Lab, has done great work on, you know, different types of conductor, advanced conductor technologies, and sharing best practices and partnering with EPRI and utilities and others so that we are starting to get beyond pilot projects and to get to see more widespread deployment of these technologies.
Speaker 2
So one, you know, I meant in my opening statement, I mentioned some of the barriers, and that's the way that, mister Piero, a lot of investor owned utilities are set up. And, mister Falco, maybe you have some advice for us on this because it seems like utilities are, unless you're in the public sphere, you are incentivized to serve shareholders and sell as much power as possible. So that's one misaligned incentive. And, there are also incentives for major capital investments rather than squeezing out the efficiencies from the existing infrastructure. So how do we change the incentives here at the federal level to save people money and address the load growth that we're facing now?
Speaker 6
Well, thank you for the question. I would say a couple of things just to go through your question. There's the issue of efficiency. And to the extent that you can get load utilization up, that would save a lot of money. There are challenges to doing so.
And the biggest challenge is that while many, including in FERC-regulated markets, we offer incentives basically for interruptibility. We say to the customer, we'll give you a price break if it's interruptible. The desire of that customer to take that depends on the economics of their own business. And so one of the challenges we have right now with rapid load growth from large loads and data centers is that the economics of their business are such that they really don't wanna be interruptible, that the price that we could offer them that makes sense for the utility is they would prefer solid service. We've heard that from multiple.
So it's a challenge.
Speaker 2
They don't want to be, but they can achieve some savings through flexibility if they will agree to turn off some of the power or shift it.
Speaker 6
From our conversations with them, they are more interested if they can get connected faster. Mhmm. And so the economics, they're, you know, if we can offer them a price break, the price break's worth this, but their cost of shutting off is up here. And so it makes them less willing to be interruptible. But if you can connect them faster, they're willing to be interrupted.
And so there are ways to do it, and I think that there are, we are pursuing that in multiple avenues. There are other things that can happen, but there's no substitute for good regulation at the state level to make sure that incentives are in line, that we're building the right things. And some of the things we're talking about here, having the load forecast right, have the customers well defined, charge the right customers the right.
Speaker 2
I'm out of time, but I'm gonna ask each of you to submit some answers for the record, to help the committee help us with these solutions and making sure we're aligning the building blocks for affordability and reliability, and using these modern new tools to squeeze more efficiency out of the existing grid. Thank you.
Speaker 1
Thank you very much. The gentleman yields back, and the chair now recognizes the gentleman from Georgia's 12th district for five minutes for questions.
Speaker 11
Thank you, Chair Lotta, for holding this very important hearing today. And I wanna thank the witnesses for being here to testify the rapid growth of artificial intelligence is contributing to increased electricity demand, raising important questions about the capacity and resilience of our nation's power grid, in addition to the fact that costs are increasing for electricity. I'm glad we're holding this hearing to better understand how we can meet growing power demand while maintaining reliability, affordability, and the appropriate protection for our ratepayers. Chairman Myers and mister Falcon, electric markets around the country vary widely, as do the transmission and generation planning and development practices. A 151 size fits all approach to federal planning requirements on the power sector disregards those differences and could create real challenges to the reliable delivery of affordable power.
How should policymakers strike the right balance between consistent energy policy and react to the reality that regions are structured very differently?
Speaker 5
Yeah. You hit the nail on the head. They are definitely, there's definitely different approaches. For example, the West is way different than the East, just because of the geographical layout, the fact that where there's a lot of additional federal lands. The best way that can congress can help is not to trample on the authorities of the states, but maybe help, standardize those authorities.
We've got a couple of bills that we're talking about here that are doing studies. Those kinds of guidance are great, but we need the flexibility to deviate from that. That's based on the application. Right. So I would say that's one of the best ways we can do to help contain or standardize.
Speaker 6
Mr. Falcon? Yes. I would agree. I think the bills here have struck the right balance in using PRPA in that it requires state commissions and utilities to consider things like best practices and load forecasting, best practices and rates. There's another bill that encourages FERC to call together individuals to design best practices, incentives.
But in the end, there's a lot of local distinction, what's best for Georgia is not gonna be the same as what's best for Arizona, and we should respect those local differences. So I think that strikes the right balance. Make everyone look at it, put out best practices, and then let people customize for what they're facing in their own area.
Speaker 11
Good. Thank you. Mister Peeler, Duke Energy's vertically integrated service territory in the South is very similar to the structure of utilities in my home state, Georgia. Here, utilities are able to methodically plan and design an entire system, and meet peak demand at the least cost. In fact, we have the lowest rates, some of the lowest rates in the country.
Whether it's building big lines to get access to far away renewables or building generation closer to load, utilities like Duke consider and compare all the alternatives to get outcomes that best meet the needs for your ratepayers. Can you walk us through that planning process and how Duke takes cost and reliability into account when deciding transmission and generation investments?
Speaker 8
Yes. Thank you for the question. So it's very important to have all aspects of the understanding the need, so the load forecast, and understanding how to use all the potential solutions such as generation, transmission, and distribution. And the vertically integrated utility under state oversight has the ability to be close to the customers, actually execute the contracts with the customers for large loads, for example, forecast that load effectively with binding contracts, and then evaluate which solutions are most economic, be that a transmission line, generating resource, a storage resource, the use of demand side management, or in reality, the right combination of all of those.
Speaker 11
Thank you. And I'm just about out of time. But mister Falcon and mister Peeler, as part of the transmission planning process, you have to consider cost and benefits of using innovative technologies such as advanced conductors and grid enhancing technologies that can meet a variety of different transmission needs. How do you consider the opportunities of trade-offs of using these types of technologies, and what role should Congress play to encourage their use? And we're about out of time.
So if you could, you know, get back with me on that and answer that question for me, so we can make it a part of record, I would appreciate it. And with that, Mister Chairman, I yield back.
Speaker 1
Well, thank you very much. The gentleman yields back the balance of this time. The chair now recognizes the gentleman from California's 50th district for five minutes for questions.
Speaker 12
Thank you, Mr. Chairman. I think for this hearing, I think some of these, a lot of these bills are fine. I don't think we're getting to really the hard questions yet. I hope we will. On load forecasting, mister Ball's bill is fine.
I think the Harshbarger bill on innovation for the grid is great. I think advanced transmission technology, no NEPA for grid enhancements on existing facilities is fine. Ratepayer Protection Act, that makes a lot of sense. The state exemptions are so broad that they basically wipe out any requirement that state PUCs would do anything. And, I do think that the principal data center should pay at these widely agreed upon, and that they should bear the cost and also the risks.
And so I think you've all testified to that, and I think we should figure out a way to do that together. The bugaboo continues to be cost allocation, and, I'm told that that's the difficult thing. And I think the problem with the fair allocation of Interstate Rates Act from Miss Fedorchak, who has a lot of experience in this, is this concept of state policy not bearing the cost of state policy. That's so undefined. It could mean anything.
I think, you know, in my conversations with Miss Vidorschak and her comments here, she's concerned about kind of Green New Deal style energy costs being foisted on other states. But state policy is sort of a wider thing than that. It could include requiring a coal plant to stay open in Michigan, which is reportedly costing $100,000,000 a quarter, rather than being replaced. It could be requiring coal plants to be built, which is something maybe Kentucky would want. So I don't think that's a good metric.
I do think, however, we don't have to start from scratch. We should recognize that the context, though, is we're not talking about regional trans interregional transmission. We need legislation directing FERC to act on interregional planning rule. And this is backed up by the North American Electric Reliability Corporation, NERC, the entity responsible for keeping the lights on. They've said clearly that at least 35 gigawatts of interregional transfer capability would make the grid more resilient, reduce rates, and enable us to meet the load growth.
35 gigawatts, I think what we built since 2014 is frankly about 4 gigawatts in the United States. We're way behind. We're way behind China, and we're way behind for ourselves. What I hear is that people disagree about cost allocation, and I think to support Miss Fedorchak, you know, you shouldn't pay for benefits you don't get, but you should pay for benefits you get. You should people who benefit should pay.
In the energy permitting reform act or the Manchin Barrasso bill from last term, they listed out these criteria for allocating costs. A, improve reliability. B, reduce conduction, reduce congestion. C, reduce power losses. D, greater carrying capacity.
E, reduced operating reserve requirements. And, improved access to lower cost generation that achieves reduction in the cost to deliver power. I suggest to you that those are really good objective ways to say that people who get the benefit pay, people who don't get the benefit don't. And, obviously, you'd have to go through the regular process to determine, in case by case, you know, whether those criteria were being met. But there are good objective criteria, and would help us meet the objective of a connected, reliable, and efficient national grid and secure grid.
It also includes a ratepayer protection provision, which is, quote, customers that receive no benefit or benefits that are trivial in relation to the costs sought to be allocated from electric transmission facilities constructed or modified under this section shall not be involuntarily allocated any of the costs of those transmission facilities, provided, however, that nothing in this section shall prevent a transmitting utility from recovering such costs through a voluntary agreement with its customers. You can make a deal if you want. That strikes me as sound policy. And the good thing about it too is that it's bipartisan, and it's tested, bipartisan. It passed out a committee 15 to 4 in the senate, and we haven't even taken it up here.
So I would put some of that in my speed and reliability act, which mister Palone referred to. I think we should have that conversation. Another option is to address mister Peeler's concern about uncertainty is to do a minimum transfer requirement that defines a quantity of the amount of power that would need to be transferred among regions. Would give you a sense of what the goal was and could keep you in the planning seat. But what we can't do is let the tail wag the dog.
And what I my sense is that the national interest in a secure, efficient, reliable grid may be inconsistent with the business model of some vertically integrated utilities. And we are here to work for the national interest, not for the interest of these utilities or people who want benefits that they don't wanna pay for. So, I hope, mister chairman, we will get to a conversation, a real conversation about how to do interregional transmission. We are not there yet, a year and a half into this term, but I'm ready to go, and I yield back.
Speaker 1
Thank you. The gentleman's time has expired and yields back. The chair now recognizes the general lady from Iowa's 1st district for five minutes for questions.
Speaker 13
Thank you, Chairman Ladd and Ranking Member Castor, for holding this legislative hearing. Electricity demand is growing faster than at any point in recent memory, driven by AI, advanced manufacturing, electrification. Meeting that demand requires new generation, upgraded transmission, and the regulatory frameworks to support both. The bills before us today address the right set of problems: accurate load forecasting, cost-effective transmission expansion, and making sure infrastructure costs are borne by the customers who cause them. Mister Peter, in your testimony, you highlight using advanced conductors, dynamic line ratings, and other grid-enhancing technologies to unlock more capacity on existing lines and as a bridge while long-lead equipment is being installed.
You also mentioned that Duke Energy is in the middle of the largest capital build out in your company's history, and how permitting reform is a critical enabler to allowing you to efficiently deploy those investments. What do you think about allowing reconductoring and grid enhancement technology deployment within existing right of ways to be considered as a new categorical exclusion under NEPA?
Speaker 8
Thank you for the question. Certainly, anything that speeds the process while continuing to provide the environmental protections is a great tool for us. So we would certainly support that.
Speaker 13
Well, it strikes me as a common sense since you're upgrading a line that already exists, one land that has already been developed. The idea that you need a full government review seems counterintuitive, and the exact kind of friction that slows down necessary grid modernization. Has Duke had transmission upgrade projects delayed or derailed specifically because of NEPA review requirements that applied to work within an existing right of way, and how much time and money would a categorical exclusion like this have saved?
Speaker 8
Again, thank you for raising this issue. So many of the projects that Duke Energy undertakes are not on federal lands, and so we have limited impacts from what you're talking about. So I don't have specific examples. However, I do know this is a significant issue for our friends in the western part of the country, and they may be able to give you some clearer, quantifiable results for what you're asking for.
Speaker 13
Thank you. Mister Myers, the US and China now spend about the same amount of money per year on our respective grids. But for the same investment, China is found to get 25 times as many gigawatt-miles of capacity built as the US. What's contributing to this inefficiency, and how can we fix it?
Speaker 5
That is a great question that I don't know that I have a direct answer to, but I do know the economics between China and the US are way different. In order to go back a little bit to your question about categorical exclusions, I think that might be the biggest incentive to getting conductors and whatnot through the pipeline, at least from what I can tell.
Speaker 13
Thank you. And last week, alongside Energy Secretary Wright, I had the opportunity to tour a data center being developed by QTS in Cedar Rapids, Iowa. This experience highlighted the need for reliable and affordable electricity to meet increasing demand by AI, but also an interesting project because they recirculate the water used. So it uses no more water or anticipates using no more water than one of our super Walmarts within the state. Key to meeting this demand is the development of more high-voltage transmission infrastructure.
Planning processes like the Mid Continent Independent System Operator, our grid in Iowa, MISO. A long range transmission planning process serves as the nation's gold standard for developing new transmission while allocating cost fairly to all those who benefit. Mister Peeler, could you please share more about the urgent need for transmission infrastructure in our country, and how planning processes like LRTP are the most efficient way to meet this goal?
Speaker 8
Certainly. So we definitely need more transmission investment to meet this need. And it’s not just interregional. It really is local, regional, and interregional looked at collectively so that we build the right transmission, economically, reliably, and affordably for the customers. So those three processes need to be tightly linked.
Local planning, regional planning, and interregional planning, such that we develop the right solutions and consider generation along with that planning. So that provides a long-range transmission planning approach where generation is considered as well. So resource and transmission planning linked, local, regional, and interregional are considered together.
Speaker 13
Thank you. I have some other questions that I'd like to submit for the record to be answered in writing, if you agree. And with that, I yield back.
Speaker 1
Thank you very much. The general lady yields back the balance of her time. The chair now recognizes the gentleman from New Jersey's 8th district for five minutes for questions.
Speaker 14
Thank you, chairman. For the past year and a half, House Republicans on this committee have held hearings to discuss meeting our growing energy needs due to AI data centers. Despite all the conversation on it, I'm still not convinced that House Republicans have a real plan to meet these needs. I appreciate the chairman always asking whether we need more or less energy to meet the increasing demand. I believe we're all on the same page there.
And I believe a diverse energy portfolio is important to meet those increasing energy needs. So would you all agree we need an all of the above energy policy in this country? Just yes or no?
Speaker 14
And it's interesting because we've seen that response over and over again. In fact, last year, we had doctor Eric Schmidt come before the committee, and he made it incredibly clear that renewables are essential to meeting our energy needs and to competing with China. In his testimony, he said, quote, China's comprehensive approach to energy coupled with its AI ambitions presents a direct competitive challenge. Failure to accelerate our own energy transition and innovation, receding leadership in technologies that will define the future global economy and geopolitical influence. He goes on to say, the PRC understands the foundational power of AI and energy, and they are investing massively and strategically to achieve global dominance in both.
They are pouring resources into AI R and D while simultaneously building the world's leading renewable energy capacity and modern grid infrastructure. Does anyone disagree with Dr. Schmidt's analysis? Just yes or no? Yes. You disagree with his analysis?
Speaker 5
I think to have renewables is an important part of the process, but I think it needs to be handled on a case by case basis.
Speaker 14
But he's not saying he's only saying renewable. He's just saying what China's doing. If we can view China as our major competitor, then we should be matching their intensity, in my opinion. So just yes or no, do you disagree with his analysis?
Speaker 6
I agree that China is doing everything. I mean, they have a state policy. That way, how much you want to subsidize that area. But we're building all of the above. We're building everything.
Speaker 7
I agree with China's approach to both building everything from a generation perspective, but also expanding their transmission grid, including the high-capacity and high-voltage lines.
Speaker 8
Yes. I agree with the concept that all the resources are valuable, but they need to be valued properly in the overall generation mix to provide the right diverse overall fleet.
Speaker 14
Right. And we listen. I understand we're gonna have disagreements about where we should focus from administration to administration, but it's hard pivots that I think are so disruptive for the energy industry. Miss Muse, when it comes to meeting our energy needs, is a complete shift in priorities between administrations, such as Republicans rolling back clean energy tax credits and terminating billions of dollars in energy grants, helpful or hurtful?
Speaker 14
Yeah. I agree. So would you agree that the Trump administration and House Republicans' actions have set us back on what we knew we need to do from an energy generation perspective?
Speaker 7
It's made it so much more challenging. We've paused a number of projects that were in development, as well as rolled back financial supports for the needed generation and transmission assets that we would like to bring online as soon as we can.
Speaker 14
It's like this ping-ponging effect that I just don't think is productive. And I understand they may have an oil and gas directive from the White House, but cutting off renewable energy, including Revolution Wind off the coast of Rhode Island when it was about 87% done, is the wrong thing to do. And when we look forward, we've seen the president announce a deal with major tech companies that are building AI data centers across the country to require them to bring their own energy to offset growing energy costs, but I have questions about it. Miss Muse, are you aware of any accountability measures that are included in this deal?
Speaker 7
The preferences would align with what we see from the administration on the fossil fuel side.
Speaker 14
I think that's right. So this is why I'm concerned about the, quote, deal, because tech companies are building across the country, and they're doing so without being held accountable for their impacts on our communities. Without guardrails, a tech company building an AI data center could bring additional dirty fuels and pollute the communities around them. So we need them to do more. We need them to bring their own energy, which is just one piece of the puzzle, but guardrails are essential.
That's why I introduced the price act with congressman Kassar, a bill that requires new and existing AI data centers to bring their own renewable energy and fines tech companies for when they fall out of compliance. Because, ultimately, where I'm in agreement with doctor Schmidt is that our response must be equally ambitious to China's. It must be coordinated. It must be decisive. I don't see this administration putting forth an ambitious agenda for our energy dominance.
I see them siloing out their preferred industry, oil and gas, and really trying to sideline renewable energy. That's gonna set us back in this competition with China, which Republicans talk about, but they don't actually do the work to make sure that we're competing on equal footing. And with that, I yield back.
Speaker 1
Thank you very much. The gentleman's time has expired and yields back. The chair now recognizes the gentleman from Kentucky, the chairman of the full committee, for five minutes for questions.
Speaker 3
Thank you. Mister Falcon, you mentioned the king's humor. British humor is always around, isn't it? It was I just wanna say it was he got the irony, I think, of when he was celebrating a document that says these colleagues are absolved from all allegiance to the British crown. That's actually in the Declaration of Independence.
So it was an interesting day yesterday, so I appreciate that. So I'll get back to the subject at hand. So we all want to make sure the locals don't bear the burden and pay for the energy required by data centers. I think everybody on this committee is there. So Mister Myers, Mister Falcon, Mister Peeler, would you talk briefly about why it's necessary to plan both generation and transmission upgrades together, to design an affordable system?
So you have to have both.
Speaker 5
Yeah. I think you do have to have both. Then you don't need transmission unless you have the generation. So, you don't get the power where it needs to go unless you have the transmission. So, I think it's imperative that both get planned together so that the total system upgrade cost can be calculated, and that cost can be appropriately allocated to the customer.
I think that's probably I'm gonna repeat myself.
Speaker 3
So, alright. Good. Mr. Falcon. Yeah. Well, yeah, I get some quick answers for both of them, mister Peeler.
Speaker 6
Yep. Chair Kathryn, agree that you start by identifying a need, a traditional utility planning process. We have a need, and then you look at all the alternatives. You look at the generational alternatives. You look at the transmission alternatives.
You rank them, and then you compete those different alternatives against each other, and you build what's the lowest cost, taking into account the full value of every resource. That is traditional utility planning.
Speaker 8
Yeah. Just to add to that, it's a system. Right? There's a supply. There's demand.
There's transport, which is your transmission. That's how it actually operates. And to build the most optimal system, you need to be able to adjust each of those inputs. So you need to be able to have more generation or less generation, more transmission or less. That's the most optimum way to design.
Speaker 3
Okay. Thanks. And so for the three of his well start, Mr. Meyer. You know, we're looking at one of the big discussion points here is transmission and how you build transmission lines and state and local versus federal lies in the transmission system. And, also, who pays for it, cost allocation, those who use the power just as it passes through your community, do you pay for it?
So those are legitimate discussion points and honest ones we're having to try to come to some solution. So I just wanna ask them in that vein. So available data shows that state siding and permitting for transmission does work pretty well. From 20 to 25, over 29,000 miles of new voltage transmission lines were built in nine states, twice as much as pipeline approvals. So, mister Meyer, is there a do you see a transmission problem that does require federalizing the permitting process for transmission?
Speaker 3
Do you think it would be helpful or benefit? I mean, you'd, you know, you can build what you need to build, do think?
Speaker 5
We can build what we need to build. Our utilities out in the West typically do a pretty good job of making sure that the transmission that is needed is built. I think the question becomes, how do the costs get allocated? If the transmission is built for a specific customer, it's tough to isolate those out, and that's where we could use some help from FERC.
Speaker 3
Okay. So, mister Peeler, so we have the West, and you're the East. So, what about the transmission? Does it need a federal permit to do transmission?
Speaker 8
It does not. It's rare that there's federal permitting issues. So the states typically oversee the local build that covers majority of what needs to be built in our region.
Speaker 6
Most things are permitted at the state level. There are those exceptions where they have a federal nexus. I think we're generally in favor of good planning processes. Mhmm. But I would echo Mister Peeler in that to the extent you have planning processes, it really needs to be integrated.
It has to be local. It has to be regional. It has to be stated. We can't have separate planning processes. It just sets things a
Speaker 3
So is there some need? Because there, if you're gonna build transmission lines, not just that are bigger and broader as we grow. Is there a need for some federal role if there's an issue at state, local level? And how would that work? And mister Falcon may be the right.
Speaker 6
One to answer this if sure. We have existing planning processes at the local and the regional level, especially that are conditioned. We don't necessarily have an interregional planning process. If someone were to add one, I do think it's very important that it work with the existing planning processes. It goes back to your initial question.
We have built things that are interregional in the country in the past. It comes to evaluating what are the best options. And to do that evaluation, you have to have an organized process, especially to.
Speaker 3
The extent if there is a role, if we determine there needs to be a FERC role, it needs to be part of the current system, not a separate distinct in preemption, I guess, be the right word.
Speaker 3
Hopefully, I haven't lost my time, but I was gonna get it on how we allocate the cost of doing that.
Speaker 3
Hopefully, some I don't ask that question. If not, I'll submit it. I yield back, Mr. Chair.
Speaker 1
Thank you very much. The gentleman yields back the balance at this time. The chair now recognizes the gentleman from California's 15th district for five minutes for questions.
Speaker 15
Thank you, Mr. Chair. Thank you to our witnesses for your testimony today. I know that energy affordability is top of mind for all of our constituents, and I'm hopeful that some of the proposals we're discussing today will protect ratepayers and improve the efficiency of the grid. As the witnesses have highlighted, we need to avoid overbuilding expensive infrastructure whose costs ultimately fall on households. One way to do that is through demand flexibility.
Virtual power plants, which aggregate energy storage and other flexible resources, can now orchestrate supply and demand across the grid. In fact, DOE says technologies could effectively provide 80 to 160 gigawatts of capacity equivalent to 10 to 20% of peak energy demand while reducing costs by 10,000,000,000 a year. If we're going to talk about improving grid capacity, I want to make sure that demand response programs in the virtual power plants are part of that conversation. So, mister Peeler, Duke Energy has been expanding its virtual power plant offerings, as I understand it. From your experience, can these technologies reduce the need for costly transmission or generation upgrades?
And if so, would it be beneficial to include them as part of the federal clearinghouse proposed in the Advanced Transmission Technology to Reduce Rates Act?
Speaker 8
Yeah. So we consider demand-side resources as we consider other resources when we do integrated resource planning. And then we have demonstrated that those demand side programs can support, you know, capacity in, you know, peak times. So we're very supportive of demand side programs, but just like all other resources, whether that be natural gas or whether that be renewables, they have their certain characteristics. So they can't fully replace dispatchable generation, but they absolutely are an important complement in the overall resource mix.
Speaker 15
I'm glad to see on the agenda the Affordable Innovation for the Grid Act, which focuses on using AI to improve the grid. FERC commissioner Rosner noted last year that advanced computing tools can reduce the time it takes to perform grid interconnection studies from 2 years to a matter of days. So, Miss Muse, are there specific ways that Congress can encourage adoption of these tools by utilities and grid operators, perhaps through a rulemaking, technical assistance, or a sharing of best practices?
Speaker 7
I think all of the above would be helpful. Building on commissioner Rosner's letter he had to the ISOs that he sent, you know, he highlighted a number of opportunities where companies like Pearl Street Technologies, GridUnity, and Tapestry are already working with the ISOs to streamline the interconnection processes. We'll also highlight that GridUnity is a company that received funding from DOE via the GRIP grant process in 2023 or '24 to help accelerate interconnection processes. And so funding and support from the Department of Energy is also ways to be helpful. Funding and technical assistance.
Speaker 15
Thank you for that. So while I appreciate the bills being discussed today, one topic I see missing from these proposals is a solution that tackles grid supply chain issues. Access to raw materials underpins many of the efforts being discussed today, and we need to focus on innovation, commercialization, and workforce development to secure our supply chains for the grid. I look forward to working with my colleagues in this committee to advance legislation in this critical area, along with some of the bills that are being discussed today. And with that, I yield back.
Speaker 1
Well, thank you very much. Pardon me. The gentleman yields back the balance of this time, and the chair now recognizes the general lady, the at-large member for the state of North Dakota, for five minutes for questions.
Speaker 16
Thank you, Mr. Chairman. Thank you all for being here today, and thank you, Chair Guthrie, for including two of my bills, the FAIR Act and the High Capacity Grid Act. These bills would help unlock more electricity in an age of increasing demand, due in large part to large load growth across our country. I wanna start with a question for each of you. Just a yes or no question.
Do you think it's fair for Americans to pay for infrastructure upgrades from large loads? I'll start with you, Mr. Peeler. Yes or no? No. How about you, Mr. Falcon?
No. Miss Muse? No. Okay. And Mr. Myers?
No. Excellent. Again, a follow-up question. Yes or no? In your experience, have large loads, such as data centers, shown a willingness to pay for necessary upgrades?
Mister Peeler?
Speaker 16
Thank you. We all agree, and so does the president, that it's unfair for Americans to pay for infrastructure upgrades that they do not need. And good thing is large loads are willing to pay for the upgrades necessary to meet the increased demand that they're causing. So I would say that there is a false narrative right now about how large loads will drive up energy costs for everyday Americans. And my home state, I have some experience here.
My home state of North Dakota is carefully designing rates with large loads that are bringing down costs for North Dakota families. The graph behind me illustrates this well. 530 megawatts of new load is coming to the MDU territory. 200 megawatts is already here. And the result is that more than $30,000,000 in savings over the past three years, averaging $250 annually per customer, cost decrease.
The utility expects this number to rise to 30,000,000 in savings annually, all back to the North Dakota families. Mister Peeler, can you talk about how effective contracts or rates with large loads help decrease costs for other customers?
Speaker 8
Yeah. So, effective, as we talked about earlier, we use electric service agreements, which are long term commitments from these customers that assure their load needs and assure their financial backing to pay for the infrastructure. And, essentially, as you've illustrated with your graphic, those large users of energy pay more of the fixed cost of the total system, and, therefore, reduce costs left for the remaining customer classes such as residential and commercial.
Speaker 16
Thank you, Mr. Pieler. So what you're saying is when you spread fixed costs to supply power over more volume, the cost for each kilowatt goes down, and that's exactly what's happening in North Dakota. Similarly, another question, and this is yes or no. Is it fair for states with aggressive energy mandates to pass the cost of meeting those mandates onto other states that don't share those same mandates or goals? Mister Peeler.
No. Miss Muse?
Speaker 6
Yes. We're very sympathetic that people should pay relative to their benefits.
Speaker 16
Just a yes or no. Should the states with the goals pass the cost of meeting those goals to states that don't have those goals? Yes or no?
Speaker 6
They shouldn't pass the cost, but the one catch is sometimes infrastructure has benefits to everyone, and that gets into appropriately allocating benefits and costs.
Speaker 16
Got it. Okay. And then lastly, Mr. Myers. No. Alright.
I think it's that clear. Americans should not be burdened with costs from energy infrastructure that they don't cause, both from state policy decisions or if it's new industrial loads. And that's why I introduced the FAIR Act. It reduces it requires states to pay for their own energy goals and not pass them on to ratepayers in other states who do not share those goals. And I wanna end with this.
Why is this important? Because as shown by the graph behind me, transmission costs are the key driver of increased electricity bills today. We have to get the cost allocation right. That's what we're trying to do here today. And with that, I yield back.
Speaker 1
Thank you very much. The general lady yields back. The chair now recognizes the general lady from Virginia's 4th District for five minutes. Oh, I'm sorry. I'm sorry. The chair recognizes the ranking member of the full committee, the gentleman from New Jersey, for five minutes for questions.
Sorry about that.
Speaker 4
That's alright. Who was going to go next? Jen, do you want to go next? Alright. I'll get done here.
For well over a year, Democrats in this committee have argued that large consumers of electricity, like data centers, need to pay their fair share for power. Anything less, and families across the country will end up paying for Big Tex investments and technologies like artificial intelligence. And reports over the past year have found that residential ratepayers have wound up footing the bill for the grid infrastructure needed to serve data centers. So we have to find a way to make data centers pay the cost of the grid investments they're spurring. So, Miss Muse, I have three questions to try to get through here.
First, what steps can Congress take to help insulate families from costs associated with data centers?
Speaker 7
Thank you for the question. I think that congress can continue to support the needed covering of costs for not just generation, but also for transmission. Right? It is the grid upgrades that are driving many of the costs, that is cost increases in electricity rates. I think support for transmission investment through grant programs, tax credits, and more can help socialize the costs across the entire country through the tax base rather than through the rate base and on the back of all the repairs.
Speaker 4
Okay. Now, well, thank you, Fred. I wanna switch gears to talk about a bill that I have a number of concerns about, and I expressed them in my opening. That is the FAIR Act. Currently, FERC sets rules to ensure that utilities all pay their fair share for power lines that help an entire regional or interregional power grid.
But the FAIR Act upsets those rules and could wind up, in my opinion, making it harder to build the important power lines we need to help bring costs down, and ensure that the lights can stay on. So, Miss Muse, do you think the FAIR Act would make it harder to build and pay for important high-voltage interstate power lines?
Speaker 7
I agree and share your concern that the FAIR Act will make it much harder to build interregional transmission, that high capacity transmission that is most needed to improve reliability and resilience of the grid across the country.
Speaker 7
Absolutely. I think we have states that have a variety of policies. Right? And the reliability benefits that are gained from increased well-planned long-range transmission, as well as the lower cost over the entire footprint, happen regardless of what the state policies are. And so when you have a process that upsets the existing planning and cost allocation processes, you make it much more challenging for all those that benefit from transmission to be able to pay for it.
Speaker 4
Okay. And I think one important lesson to take away from today's hearings is that we have to have a bigger, more resilient power grid, not a smaller, fragmented one.
Speaker 4
But in the bipartisan infrastructure law, Congress gave the Department of Energy a number of authorities to help expand the grid. But Trump's budget attacks those authorities, and I think they're critical to helping our nation grow the grid while keeping electricity affordable. So my last question is, can you talk about how DOE's grid deployment programs help expand the grid without breaking the bank for ratepayers, and how should Congress look to enhance or alter those authorities? And you actually have two minutes for this one.
Speaker 7
It's great. So Congress gave the grid deployment office at the Department of Energy a number of programs to help accelerate grid deployment. We've heard about the Grid Resilience and Innovation Partnership program. That was a resounding success through its first two rounds of putting out nearly $7,600,000,000 of funding to projects across all 50 states. That is funding that was extraordinarily high, had extraordinarily high demand.
We had over $50,000,000,000 worth of applications. And so one of the things would be more funding for these grid resilience programs. It helps bring down the cost by providing some federal dollars to support the funding that utilities and others are putting in for their costs across the country. We're seeing those funding used for transmission upgrades, for new transmission, for the deployment of advanced conductors and grid enhancing technologies, as well as the use of technology for wildfire mitigation, improved monitoring and control of the grid, and more. This was also complemented with funding directly for transmission.
The $2,500,000,000 transmission facilitation program allowed DOE to set up a revolving fund to accelerate transmission deployment. We often have a challenge where we know that we need to build a transmission line, but don't necessarily have the customers in place to do so at that time that we're setting up financing. The transmission financing, excuse me, transmission facilitation program helped get over the hump and really accelerate transmission. Deployment, 2.5 billion went through very quickly. We would love the department to have more funding to continue to deploy dollars for transmission.
And there were a number of other programs, including those supporting the states, the grid resilience, state and tribal formula grant program that gave all states, all tribes, all territories across the country opportunities to pair and partner with their utilities and others to identify needed investments, whether it is hardening the grid, it is inclusion of energy storage, but had a lot of opportunity to make very targeted grid resilience investments to help keep the lights on, help to keep the grid more reliable, and help bring down costs for American families.
Speaker 1
Well, thank you very much. The gentleman goes back, and the chair now recognizes the gentleman from Ohio's 12th District for 5 minutes for questions.
Speaker 18
Thank you, mister chairman, and thank you chairman Latta and chairman Guthrie for holding this important and timely hearing today and for including a draft of the Load Forecasting Enhancement Act. Our nation is at a crossroads. How do we win the AI race against China while lowering energy costs? Our constituents are seeing data centers pop up across their communities and are frightfully asking what we are doing to protect them from higher electric bills. The truth is there is plenty congress can do to make energy more affordable while supporting American innovation.
Many of the bills before us today will certainly help, and I hope they can move forward with bipartisan support. But I must add, to ensure we can meet these growing demands, win the AI race, and prevent higher electricity costs, we also need to enact meaningful and lasting permitting reform. The house has already passed important legislation to reform the outdated NEPA process, address delays with the interconnection of new generation to the grid, prevent future administrations from shutting down baseload power, and streamline the process for approving interstate pipelines. Again, I greatly appreciate the chairman for holding this important hearing and urge my colleagues to listen to our constituents and deliver on policies that modernize the grid, protect ratepayers, and get new power generation online to ensure that the lights stay on. My first question is for Mr. Myers.
Mister Myers, thank you for being here. Can you discuss why proper load forecasting is critical for planning purposes and protecting from underbuilding and, even in some cases, overbuilding? And how can inaccurate load forecasting harm ratepayers and increase electricity costs?
Speaker 5
Well, I think you hit the nail right on the head. You don't wanna underbuild, because then you can't serve the loads that are coming in. You don't want to overbuild because then you have the potential of stranded costs that all get ultimately recovered by the rate payers. So, it's absolutely critical that we have, for planning purposes, an accurate forecast. And, unfortunately, it's very difficult to get that when you've got multiple jurisdictions dealing with the same customer, and that same customer typically has blanket NDAs, for example, that don't allow discussion and coordination between the entities.
Speaker 18
Thank you. Mister Falcon and Mister Peeler, would you like to add anything to that from the public power utility perspective? Mister Peeler, you can go for his feedback.
Speaker 8
I would just add, it's really important to require these large load customers to commit to their loads. So the primary way to do that is through financial obligation, and that helps planning.
Speaker 6
Yeah. I would agree with Mr. Peeler. One of the challenges that we have in load forecasting is that the entities on the other side also have uncertainty about what their needs are. Depends on their business growth, cooling in the data center, and the efficiency of chips. And so they themselves don't know.
And the best thing that we can do is have financial commitments from them that we'll build for you, but we need to hold our customers harmless. That's one of the best tools we have to ensure a good load forecast.
Speaker 18
Alright. Thank you both very much. Back to you, Mr. Myers. In your testimony, you note the Load Forecasting Enhancement Act moves in the right direction by emphasizing transparency and coordination. You also note that the new PURA standards should preserve flexibility while advancing national best practices.
I certainly agree with you. Can you discuss why that flexibility is important?
Speaker 5
Yeah. I have mentioned before the West is not like the rest. We do a lot of things differently out there, and for good reasons. And, what we have found and a perfect example of this would be the nineteen twenty that came from FERC, the FERC nineteen twenty order. That ends up being something that ultimately is busy work for us or ends up tying our hands.
So we need that flexibility so that we can appropriately implement whatever policies.
Speaker 18
Okay. Thank you. Mister Falcon, would you like to add anything about why this flexibility is important?
Speaker 6
Everybody has very different circumstances throughout the country. We have different resources, different needs. We're facing different customer constraints, and it's like anything else. Your ability to react locally to the problem that you specifically have, which may rhyme with someone else's problem but may not be exactly the same, is very important.
Speaker 18
Alright. Keep your mic on, sir. I wanna come right back to you, and we have 30 seconds. In addition to the Load Forecasting Enhancement Act, do you think technical assistance from the Department of Energy or maybe our national labs could further help utilities and public power to incorporate accurate load forecasting methods? 15 seconds.
Speaker 6
Yes. Very briefly, these are the best practices. And the better we research, the better we share those practices, the better off we're all going to be.
Speaker 1
Thank you very much. The gentleman yields back, and the chair now recognizes the gentlelady from Virginia's 4th District for 5 minutes for questions.
Speaker 19
Thank you, Chairman Ladder and Ranking Member Castor, for holding this very important hearing today. I wanna thank the witnesses for being here. Congress must address the growing impact of data centers on energy affordability for families and businesses, especially as energy demand is expected to grow exponentially, some would say explode, in the coming years. And while I'm glad that my colleagues on the other side of the aisle appear to now understand the importance of the affordability issue, their sudden focus feels a little too late. Energy prices have skyrocketed for most of 2025, but not until the Trump administration carelessly ensnared the United States in a reckless and costly war of choice with Iran, pushing energy prices up even higher, that we focused a hearing specifically addressing the alarming impact the data centers could have on energy affordability going forward. And to keep energy affordable, ensure that we are meeting demand, and responsibly power the industries of the future, we must bring cheap and affordable and reliable renewable energy online at a faster pace.
Yet, my colleagues across the aisle and President Trump have devoted much of their time this past year, canceling billions of dollars of incentives to bring cheap, clean energy online, and have canceled billions of dollars in clean energy projects that would have helped us meet long-term demand. Our failure to expand clean energy capacity will have severe repercussions on energy affordability, which is only exacerbated by our failure to move forward with any meaningful reforms to modernize and update the power grid. Now my constituents, along with the entire Commonwealth of Virginia and 58,000,000 Americans, are in the PJM market. We have discussed PJM's disastrous capacity auctions several times over the past year, and electricity prices in Virginia are 14% higher than before President Trump took office. And while fixing PJM's power markets must be a priority, that will take years.
And my constituents need relief now. And as you're probably aware, Virginia is the data center capital of the globe. With well over 600 data centers online or in the process of being built. And Virginians have borne the brunt of the data center's impact. Virginia's utility regulators and Dominion Power, one of our largest investor-owned utilities, foresaw this issue and recently took steps to help protect residential rate payers from low growth issues by introducing a new electricity rate class for large electricity customers like data centers.
And I am hopeful that this will help ease the financial burden that Virginians are facing. Now, mister Myers, Arizona is another state that implemented a large load tariff similar to Virginia's New Dominion rate class. Can you talk about Arizona's experience crafting large load tariffs and how they can be critical to walling off infrastructure costs associated with data centers?
Speaker 5
Yeah. We are generally fairly flexible with the way we are handling the large loads. We do have large load tariffs, at least in a couple of our utilities, but those currently are set at around 20 megawatt range. The recent high load workshop that we had is starting to focus more on the 300 megawatt level incoming, you know, high loads. But, generally speaking, it is pretty much well established, from that workshop that, we need a tariff that defines some certainty, but then we need the flexibility by having the energy services agreement on top of that tariff.
Speaker 19
Thank you for that. Moving on to the specific bills in today's hearing, I have some concerns about HR 6336. The bill and the FERC complaint that inspired it are focused primarily on generation policies. But when you look at the language of the bill itself, there's a much larger impact. The bill defines a covered policy, the policies that trigger the bill's provision, as any policy of a state or local municipality, and I'm worried that definition could catch many policies in its wide net, including, for example, land use policies for energy intensive industries.
So, miss Muse, do you think it's a good idea to apply different cost allocation rules to any transmission need driven by state policy, even if policies are not directly related to energy?
Speaker 7
I show your concerns around the broad nature of the FAIR Act and that there's a wide swath of policies that could get caught in that net, of state and local policies that if that legislation passes would be applied and get caught in the transmission cost allocation process. We need more interregional transmission. PJM is a great example of that, of transmission both interregionally and regionally. And so the ability to accelerate deployment of transmission and not processes and legislations that would slow it down would be helpful.
Speaker 1
Thank you very much. The gentleman yields back. The chair now recognizes the gentleman from Alabama's 6th district for five minutes for questions.
Speaker 20
Thank you, Mr. Chairman. The hearing today is about protecting ratepayers in the wake of the data center growth throughout the country. Power generation, water usage, housing affordability, all are part of local conversations and the knot in my backyard issues surrounding data center build out. I would add to that, the knot in my backyard issue with the transmission lines. Chairman Myers, in your written testimony, I noticed that you said when large loads come into the system, the infrastructure required to serve them needs to be funded by those loads.
And I assume you mean, sorry, whatever the company is that requires this additional power. Would that be accurate?
Speaker 20
Alright. I meant to look up to see how many, if any, coal-fired power plants have been shut down in Arizona.
Speaker 5
Currently, we've had two that were shut down. One of them was just recently last year. The others are still operating, but we just approved them to be converted to natural gas. So they will remain open for the foreseeable future.
Speaker 20
But currently, you have a couple that are shut down with no conversion?
Speaker 5
Well, one of them was shut down a number of years ago and leveled. It will not be converted. The other one, there are discussions about converting it to natural gas and reopening it.
Speaker 20
Are the transmission lines still intact? There are. Well, wouldn't it make more sense to power the put small modular reactors on there, based on the design capacity of transmission lines and power your data center, but also increase the baseload power for the surrounding communities?
Speaker 5
Those are absolutely options that are on the table. Some of the discussions need to center around water use, obviously. Right. And there's a but, yes. The water use is.
Speaker 20
A huge issue in Arizona, obviously, which is probably gonna be a limiting factor in building data centers there. But the main thing that I wanna point out is that we've gotta focus on what is the best way in terms of dispatchable power to provide baseload power in those areas. Mister Peeler, would you agree that demand itself is not the risk, but the lack of proper planning for power generation?
Speaker 20
Okay. Would you agree that demand itself is not the risk, but the lack of proper planning for power generation. In other words, we find ourselves right now in an arms race for artificial intelligence. We gotta build out these data centers, and we've known this for a while. And my perspective on it is that we should have been working as hard as we could to get the small modular reactors approved, commissioned, and located in positions where we could provide the power that we need without raising utility rates for everybody else.
So question remains, would you agree that it's a lack of proper planning for power generation?
Speaker 8
Yes. Certainly, an integrated plan of planning generation and transmission together certainly is key to serving this load. I would agree with your comment.
Speaker 20
So is it your experience that the data center operators are attempting to generate their own power behind the meter, so as not to pull from the grid?
Speaker 8
So in my experience, most of them are not interested in building their own. They're more interested in being served by the grid itself.
Speaker 20
K. Then going back to my discussion with Mister Myers, does it make more sense that we build small modular reactors, and particularly in these areas where they've shut down coal-fired power plants, the transmission lines are still intact. Because going back to mister Myers' point about asking the large load users to pay for everything, the infrastructure and the transmission lines. You still have all these other issues related to permitting and the not-in-my-backyard issues. If
Speaker 20
Wanna do this in an expeditious manner, doesn't it make more sense to go with the small modular reactors?
Speaker 8
So certainly small module reactors are definitely an important asset for the future. And I to your other point, reusing existing infrastructure, transmission infrastructure is a very important concept, to make this effective.
Speaker 20
Okay. Mister chairman, that's my point all along, is that I think we have some common agreement. Just some of my colleagues on the other side of the aisle, they support the SMRs from the perspective of emissions. But I do think this is the most expeditious way that we can address the power needs that we are facing right now for artificial intelligence, competition with China. I yield back.
Speaker 1
Well, thank you very much. The gentleman yields back the balance of his time, and the chair now recognizes the gentle lady from California's seventh district with five minutes for questions.
Speaker 22
Thank you very much, mister chairman. I wanna thank you and ranking member Castor for having this hearing today, and thank the witnesses for being here. It's been almost four years since Republicans took over this committee, and almost four years since ChatGPT was released to the public in 2022. For four years, we've been talking about rising electricity demand from AI and the impact on Americans' electricity bills. But in four years, my Republican colleagues have only made the problem worse.
Last year, Republicans' big ugly bill slashed tax credits for clean energy products, rooftop solar, and energy efficient home appliances, and that definitely did not help. Then the Trump administration tried to cancel hundreds of millions of dollars for infrastructure projects that were upgrading the power grid to deliver more power for less money. That definitely didn't help either. Then Republicans on this committee spent months trying to gut efficiency standards for home appliances, which have saved American families hundreds of dollars every year. Once again, that definitely didn't help.
So here we are, four years later. I'm glad my Republican colleagues are actually having this hearing, and I think some of the bills we're considering today are a good first step. But, frankly, Republicans are dollars short and four years too late. Democrats have put forward a range of solutions that would bring down electricity costs, but Republicans have refused to work with us. Clearly, they don't take this problem seriously.
I support the use of advanced transmission technologies, and I'm glad to see Republicans on this committee supporting these technologies. But where were my Republican colleagues when the Trump administration illegally canceled dozens of DOE grants that supported those same technologies? Some of these grants have been reinstated with new conditions, but the pointless uncertainty and delay have a cost. Miss Muse, you helped run the DOA grid deployment office, which is responsible for the grid resiliency and smart grid grants. I call it the bipartisan power on act, which was included in the infrastructure law and created the GRIP grant program.
Miss Muse, how did the GRIP program support advanced transmission technologies? And can you give me some examples of projects that were canceled?
Speaker 7
Certainly. The Grid Resilience and Innovation Partnership Program had $10,500,000,000 available through the bipartisan infrastructure law. And part of some of the prioritized areas that we supported through the Grid Resilience and the Smart Grid grants were to deploy grid enhancing technologies to increase capacity on the grid, to use AI and drone technologies to help with transmission line inspections, AI and machine learning technologies to help accelerate the interconnection processes, and more. Okay.
Speaker 22
Miss Muse, the goal of this hearing is to consider legislation that will help power AI data centers without raising residential rates. But the GRIP grants were already doing that before they were canceled. Can you give me an example of how GRIP projects were helping to expand the grid without increasing residential rates?
Speaker 7
Absolutely. In your home state of California, there was an over $600,000,000 project led by the California Energy Commission to harness advanced reliable grid enhancing technologies for transmission, which was a public private partnership to drive large scale expansion of transmission capacity and improvements to the interconnection process to increase and accelerate equitable access to renewable energy across California.
Speaker 22
Mister Falcon, a number of GRIP grants were awarded to public utilities. What's it like for public utilities suddenly and without warning? Losing multimillion-dollar grant that the federal government has signed a contract to deliver.
Speaker 6
Rep Matulio, obviously, whenever we have changes and we're going down a certain path and then have to go down another path, it causes some challenges. And in the case of your Palm District with SMUD, I know they were awarded a such grant.
Speaker 22
Okay. Mister Peeler, there's been a lot of interest in how flexible data centers can be in terms of how much energy they use and when. Can you explain what that means, and how Duke is approaching data center flexibility?
Speaker 8
We're working with data centers and with research organizations like EPIRI to determine what value and how to attribute the value of flexibility. It's still early, but, you know, we're optimistic that there will be some opportunity there for them to provide flexibility.
Speaker 22
Okay. We've seen reporting that electricity usage from data centers can be highly variable due to rapidly changing compute demands. Has that presented challenges to utilities from a reliability standpoint?
Speaker 22
Okay. Okay. Mister Falcon, unlike for public for-profit utilities, public utilities are accountable to the rate payers, and that makes public utilities particularly sensitive to rate increases. Can you give real world examples of how the public utilities are managing to accommodate new data centers and other commercial customers without raising residential rates?
Speaker 1
Could I, I'm sorry to interrupt. The general lady's time has expired, but could you provide a written response to that question for her? Certainly. Thank you. The chair now recognizes the general lady from Tennessee's 1st District for 5 minutes for questions.
Speaker 23
Thank you, mister chairman, and thank you to the witnesses for being here today. I wanna thank you for taking the time to speak about the urgency to meet the energy demand. You know, it's simple economics. Demand is surging, and if we want affordable rates, we need to supply to match. And that means improving the capacity of our existing grid and building reliable generations to connect to the grid, and that was yesterday.
I've heard from several stakeholders, including TVA, MISO, PJM, that AI in advanced computing tools can be one of the keys to enhance grid capacity, operations, and reliability. And just to put it in real terms, there was an operator, one operator, that slashed a single step of its interconnection study process from nearly 2 years to 10 days, and that's monumental when it comes to energy. And I have a bill called the Affordable Innovation for the Grid Act, will help identify opportunities to enhance our grid through AI and find out what are the obstacles that are slowing down deployment. So, mister Peeler, what can advanced computing actually do for the grid right now, what's standing in the way?
Speaker 8
So your point about utilization of AI and advanced computing for study work is very valid. We're looking at that as well, utilizing some of those tools.
Speaker 8
To your point, it does reduce the study time. Yeah. It also reduces the management of massive amounts of data. So I think support for those types of tools and best practices, you know, opportunities to support those is very valuable.
Speaker 23
Great. Mister Falcon, how do we get more capacity out of the grid infrastructure we already have?
Speaker 6
Well, there's a number of things. Some of it is flexibility, but as we talked about a little bit earlier, there are limits on the amount of flexibility you can get because the customers' economics are different than our economics. But offering programs and allowing customers to choose whether they wanna provide more flexibility to price is a very important thing. Certainly, spending every dollar efficiently. Your bill does that by encouraging, you know, the research of technology.
We've talked about advanced capacitors and others. I think the important thing is to support and encourage these technologies, but not necessarily to mandate their use, because it really depends on the use case.
Speaker 23
Yeah. Mandate is not a nice word. You know, earlier this year, TVA sent a letter to its local power companies asking for feedback on how to enable large load customers while protecting, you know, residents from undue cost increases. And, mister Myers, how are your members working with state regulators to ensure homeowners and small businesses don't end up subsidizing Internet energy needs of large load customers?
Speaker 5
Yeah. Well, like I've kinda said, we are focusing on having a clearly defined tariff, but then having the flexibility for the energy services agreement. But the whole point of that is to make sure that costs are appropriately covered, even if we don't have direct insight into those costs. For example, the FERC transmission issues.
Speaker 5
So those between the two of those, that allows us to tailor the specific plan for that specific customer so that they can cover all of the costs that's needed to upgrade their facilities. And each one's going to vary differently because of location, power needs in that area, things of that nature.
Speaker 23
Mister Falcon, as we work to build a new generation to modernize the grid and interconnect new large loads, what are some of the unique challenges for rural areas like my area and East Tennessee? And how do we ensure those rural communities are protected from subsidizing those data center costs?
Speaker 6
And one of the interesting things that we've seen is we've seen a lot of demand in rural areas because those are places that you can generally build. Yeah. And so, I do think it's the importance of making sure sometimes these are served by very small utilities. Maybe they get their power from TVA, but you may have a local distribution utility. Helping and educating those small distribution utilities on the types of financial contracts and other requirements that we're seeing in places that are more advanced.
One of the bills in front of you today does that because it mandates that everyone at least take a look at it. And so I think that our leading edge utilities that have been dealing with this, if you're Duke or some of our members that have overwhelming demand, are a little bit further down the curve, but ensuring that that knowledge is spread is very important.
Speaker 23
It is because there's a lot of resistance in rural areas to building those data centers. And, you know, the local, I guess, their local mayors and, know, commissioners, they just don't want them. But they need to know, and we need to educate them on why they need it. So thank you, sir. And with that, I yield back, Mr. Chairman.
Speaker 1
Thank you very much. The general a yields back, and the chair now recognizes the gentleman from New York's 20th district with five minutes for questions.
Speaker 24
Well, thank you, Mr. Chair and ranking member. I appreciate this hearing, and I'm supportive of several of the bills before us today. Recently, Senator Chris Van Hollen and I have introduced the Power for the People Act, which proposes many of the same strategies to ensure that residential ratepayers are not footing the bill for data centers' electricity demands. But I do worry that the suite of bills before us today is not comprehensive or ambitious enough to meet our current moment. For example, there's nothing to promote in regional transmission or demand reduction.
With that said, I'd like to focus on a few areas where I do see opportunities for bipartisanship. Smart planning starts with accurate load forecasting, and we know forecasting these large loads is indeed challenging. We need better coordination amongst regions, states, and utilities to plan and predict our growing electricity demand and reduce uncertainty. So I'd like to go down the line of witnesses. If you could just provide a yes or no.
Can the federal government provide greater support to the entities responsible for conducting these forecasts? We'll start at this end, please.
Speaker 24
Sure. If I hear it. Just a yes or no response to whether or not the federal government can provide greater support to the entities responsible for conducting these forecasts.
Speaker 6
Yes. Certainly, especially in spreading best practice and researching best practice.
Speaker 24
Yes. Okay. The local forecasting enhancement act provides a good start to address this challenge. My legislation, the Power for the People Act, takes a slightly different approach. I think we're ultimately in agreement on the need for coordination and harmonization of practices across regions.
Miss Muse, you worked at DOE, and I assume you also work closely with the national labs. Do you believe there is room for analyses, modeling, or technical assistance that DOE and the labs could provide to support improved load forecasting methods?
Speaker 7
Absolutely. Load forecasting is incredibly dynamic and growing more so where resources from DOE and from the national labs can be helpful. I think also the technical assistance provided to the broad set of stakeholders that are participating in the process would also be helpful, drawing on DOE's years of work with those stakeholders, the regulators, the legislators, the policy, and state energy offices and more.
Speaker 24
Thank you. And I'd also like to ask about the Ratepayer Protection Act. My legislation, the Power for the People Act, also seeks to encourage states through PERPA to create separate rate classes for these large loads, ensuring that project developers cover the costs of any necessary generation, transmission, or distribution infrastructure upgrades. The majority's bill has set the definition of large loads at 100 megawatts of power demand, which is more than enough to power a small city. I've proposed 50 megawatts.
Chairman Myers, what do you think is the right place to set that large load def?
Speaker 5
definition at? As I mentioned, in our last large load workshop in Arizona, it was pretty much agreed upon that 50 megawatts was a good number.
Speaker 24
Okay. And, miss Muse, what do you think? Is 100 megawatts of demand too high a standard?
Speaker 7
I think you can bring in a lot more than just status on our loads, and we really need to be mindful of as we're crafting these different classes. But the 50 megawatt threshold, I think, gives us more visibility into the data center loads that are coming on under that 100 megawatt threshold.
Speaker 24
Thank you. The near-term load growth projections we are seeing are, frankly, hard to comprehend. To me, they suggest that we cannot build all the necessary infrastructure fast enough, especially when coupled with major backlogs of grid and generation equipment. At the very least, we're going to need every tool at our disposal, and that includes grid-enhancing technologies and reconductoring to maximize the performance of our existing infrastructure, but also much more energy efficiency, demand response, and other strategies to reduce peak demand throughout the entire system. We're also going to need to make it easier to build cost-effective transmission.
And, yes, we're going to need more renewables. There are good ideas being proposed at today's hearing. But if we actually wanna address these issues without increasing costs for everyday Americans, then we need to get serious about embracing policies that the majority has dismissed in recent years. And with that, I thank you, Mr. Chair, and I yield back.
Speaker 1
Well, thank you very much. The gentleman yields back, and the chair now recognizes the gentlelady from Florida's 15th district for five minutes for questions.
Speaker 9
Thank you, Mr. Chairman. After years of relatively flat demand, electricity use is rising rapidly, driven by AI, data centers, and advanced manufacturing. The challenge before us is straightforward. How do we build the power infrastructure America needs without shifting the costs and the risks onto families and businesses? We know the demand is coming.
The question is whether we plan for it responsibly by protecting ratepayers, maintaining reliability, and ensuring the grid is ready for long-term growth. Mister Peeler, I'd like to begin with you. In Florida, utilities like Florida Power and Light have taken a proactive approach to large load growth before major data center demand arrived, requiring data centers to pay their own way, fund 100% of the infrastructure they drive, and commit to long-term contracts with financial assurances so existing customers aren't left stranded with costs. At the same time, high load factor customers can help reduce pressures on rates by spreading fixed costs across more users. From your perspective, what are the key elements utilities need in place to ensure large load growth reduces, not increase pressure on residential rates?
Speaker 8
Yeah. Thank you for the question. So it as I've talked about before, it's very important to understand the actual load and the need, and then to be able to plan an integrated solution for that, which is transmission, distribution, or generation, as well as making a financial commitment from those large customers so that those customers pay their share. And with states like Florida, with the state oversight, the state is able to ensure that as those rates are set up, those customers are paying their share and that no subsidization is occurring from the residential and commercial and other class of customers. So primarily clear commitments from the large customers, which ultimately result in a financial long term obligation so that there's no subsidization to those residential customers.
Speaker 9
Thank you. And, Falcon, innovative grid technologies offer significant benefits in ensuring reliable and resilient energy delivery, beyond their essential role in meeting electricity demand growth and enhancing grid efficiency. For decades, DOE has played a crucial role in commercializing these technologies through national laboratory test beds, competitive awards for private sector innovators, support for public-private demonstration projects, and technical assistance for industry. As a result, utilities in Florida, like the Tampa Electric Company, are already deploying many of these tools. How could a DOE clearinghouse help your members modernize their systems and improve the reliability and affordability of electric service for customers?
Speaker 6
Thank you for the question, Representative Lee. Agree with everything you've said. At the end, utilities, one of the wonderful things about utilities is that we're not in competition with one another. We share a lot of best practices. We learn from each other.
But someone has to go first, pioneer technology, try it out, and then share that best practice, and then everyone else picks it up. And so, those are very valuable test beds. They help to work on early projects, and then those early wins spread to everybody else.
Speaker 9
And your testimony also highlights the importance of distinguishing between committed, probable, speculative load, particularly with data centers. How can utilities and regulators improve load forecasting so we don't overbuild costly infrastructure based on speculative demand, and ultimately pass those costs on to consumers?
Speaker 6
It's a very challenging thing because load forecasting typically looks at what past trends have been, what customer inquiries have been. But now we have some very large customers that are applying in many, many places, and it's almost like a free option. And so that skews the load forecast quite a bit, and the information is on the other side of the table. Those customers know better what they plan to build than we're ever going to know. And so that is the importance of distinguishing and looking to financial commitments, because the financial commitment reveals that the entity is serious about building in that location and isn't just shopping around.
So the bills that are here encourage that by spreading best practice on load forecasting, but also looking for financial commitments in that ratepayer protection act. Both are very valuable to try and get to the right number. We don't wanna overbuild. We don't wanna underbuild.
Speaker 1
Thank you very much. The general lady yields back, and the chair now recognizes the general lady from Washington's 8th district for five minutes for questions.
Speaker 25
Thank you, mister chairman, and thank you to all of our witnesses. AI brings both tremendous opportunity and risk, and I'm thankful to the chair for focusing on this really important topic, focusing on the exponentially rising data center demand for energy and how to responsibly meet that need, and also how to maximize the potential of our power grid. AI impacts are a really big concern for my constituents in Washington State. The people I represent are worried about what the emergence of AI means for their jobs, for their privacy, and, specific to this hearing, for their utility bills and keeping the lights on. Compared to last year, and you've heard this from several people, we are paying nearly 15% more on our utility bills in the 8th District.
Studies are showing that by 2028, the Northwest energy supply may not always be able to meet the energy demand during peak times. Much of this stems from the administration's rollback of needed investments that would bring affordable and clean energy to the grid. Some stems from sluggish improvements to our grid. And the exponential growth of data center energy consumption will add more and more demand. While these companies are expected to reap tremendous benefits from advancing AI using our data and our power, they cannot benefit on the backs of our hardworking families who are already being hit with rising utility bills.
If these big companies want the energy, these corporations are gonna have to reach into their own deep pockets to fund it, build it, and, if needed, connect it to the grid. Mister Falcon, you represent many community-owned public utilities in Washington's 8th Congressional District, like Snohomish and Chelan PUDs. We also have a neighboring Grant PUD. The flexibility that local authority allows has enabled utilities to set up frameworks and cost-allocating policies that protect residential rate payers, and they've all done it in a little bit of a different way. What are some of the mechanisms that public utility districts in my state are using to protect ratepayers as data centers move in?
Speaker 6
Well, thank you for the question. We have five members of LPPC that are in the state of Washington, including the three members you just mentioned. Fortunately, to date, those members have benefited from having capacity available, and they have marketed that capacity to large data centers, so it's actually helped to lower rates. But they're now in a period where those inquiries, those new inquiries, will require them to build new load. And in each of those cases, what they're looking for are those types of financial commitments from the other party to ensure that they are not, you know, the issue is you in Washington, you have wonderful hydropower and very low rates.
The new cost to build is going to be up here, and you wanna make sure that you charge your existing customers this rate, and the new customer this rate, and not a blended rate.
Speaker 25
That's right. And they have done things like secure commitments to stay, to not just pick up and move all those computers when it's more convenient to go somewhere else, and to put the responsibility for energy, for transmission, and the like, on these companies. Mister Peeler, you have detailed in your testimony that regional judgment is critical when making decisions on data center load growth at the federal level. How do we ensure that every ratepayer nationwide is protected from these costs while including these regional, local considerations?
Speaker 8
So I think it's important that there be state and local decision making as you just described in your district because those are the folks who are closest to the customers and closest to the issues. I think from a federal perspective, it's useful to set direction, and outcomes, not prescribe the exact policy. So I think this body can prescribe some of those outcomes and objectives so that those local and state authorities can make those decisions best for their locality and customers.
Speaker 25
Thank you. And, miss Muse, I have barely any time left, 30 seconds. But you mentioned the importance of accurate forecasting. This is really hard to pin down, partly because there is some unpredictability, and partly because these big corporations don't open their books. Is there anything that we can do to nudge data center developers to provide more accurate and complete data to power planners, while respecting confidentiality?
And you can submit that for the record if you don't have.
Speaker 7
A short answer off the top of my head, so I will put that one into the record. Thank you.
Speaker 1
Thank you very much. The gentleman yields back. The chair now recognizes the gentleman from Texas' 12th district for five minutes for questions.
Speaker 26
Thank you, Mr. Chairman. Thank you to all the panelists for being here. Mister chairman, if it's okay with you, I'm gonna yield as much time of my five minutes as Miss Fedorchak from North Dakota needs.
Speaker 16
Thank you, mister chairman. Thank you, Rep. Goldman. Appreciate that. As we started talking about earlier, we're gonna be making massive investments in our power grid and all this infrastructure. It's absolutely essential that we get the cost signals correct in doing so so that the people causing the costs pay for them.
I previously spoke about how transmission costs are driving up utility bills for American families, and that's one of the reasons why I introduced the High Capacity Grid Act, which would help us push more power through the existing transmission infrastructure. Mister Myers, a fellow commissioner, I'm a former commissioner. It's good to see a fellow commissioner here. Can you quickly talk about the advantages of reconductoring existing lines versus the cost of permitting new ones, and the requirements involved in that?
Speaker 5
Yeah. From my understanding, as you pointed out, the permitting is a big advantage. Reconductoring with existing infrastructure means a lot less hurdles to jump through, and that means timelier infrastructure build out. That means lower costs for the ratepayers because you're not going through all of those, you know, NEPA studies and everything else potentially. So I think that's maybe one of the big benefits.
I would caution that sometimes reconductoring does push costs down the line to, again, transmit, substations and transformers and things of that nature, but that's not always the case. So I think there's room for a policy like what you have as long as there's some flexibility in there to make sure that certain situations can be dealt with appropriately.
Speaker 16
Absolutely. And that's why FERC is in charge of setting kind of the standards, and folks like you would ultimately see this through to the ratepayers' costs. So thank you for that. The ultimate goal here is to, as you said, push more power through existing lines as fast as we possibly can. And that's the goal of the High Capacity Grid Act.
Thank you to my friend and colleague, Rep. Goldman, and I'll return the balance of his time to him.
Speaker 26
Thank you. Thank you, representative. Myers, between better load forecasting and strong ratepayer protections, what single reform would best help Texas balance reliable, affordable power for families with the massive new demand for data centers?
Speaker 5
I think, honestly, permitting reform is probably the biggest thing, at least from my vantage point. That's the thing that tends to be the most headache at the federal level.
Speaker 6
Permitting reform would be right up there. I do think the ratepayer protection act is important. Get the price right, and it solves a lot of problems.
Speaker 26
Many of my constituents in Texas are concerned that their electric bills could rise because of the rapid growth of AI data centers in ERCOT. Speaking of the ratepayer protection act, how important is it for congress to consider measures like that legislation, which would require large companies to cover the full incremental costs of the upgrades needed to serve them and to provide financial assurances upfront? Chairman Peeler.
Speaker 5
I think that the states honestly are already doing it, and we're well down the path of going, doing that. I don't see a problem with this particular act. I just don't know how effective it will be if we're already going down that route.
Speaker 6
I think the primary benefit of the act is that it spreads the best practice. Our members, you know, the load growth is not equal across the country. It's very high in Texas. The utilities in the states that have really high load growth, Texas, Virginia, Georgia, they're well down the path, the state commissions have acted. I think it has a benefit for folks that are the second or third tier of demand, in spreading the best practice.
Speaker 8
I think the states are best positioned to manage this across all rate classes. It's all retail rates. This is one retail class of customer. Their best position, I think, is to determine the appropriate way to manage that.
Speaker 26
Super. Thank you all again for being here today, Mr. Chairman. I yield back the balance of my time.
Speaker 1
Well, thank you. The gentleman yields back. The chair now recognizes the gentleman from Ohio's 1st district for five minutes for questions.
Speaker 28
Thank you, mister chairman, and thank you for considering the Protecting Families from AI Data Center Energy Cost Act. This is our bill to, you know, get FERC to bring key stakeholders together to work through some of the questions that have been raised in this hearing and to provide recommendations as to what we should be doing to better protect rate payers, you know, across the country. I agree, you know, with some of the comments that, you know, some states are ahead of the game and some states aren't, and it depends on any number of factors. Nationally, we need to see real leadership in laying out all of the ways in which we're gonna protect rate payers because the number of these large load data centers is, you know, I mean, the trajectory is pretty intense. And the, you know, yes, we have a transmission issue.
Right? That is one of the most important things we've gotta resolve, and then we've gotta get more and more energy onto that grid. But in the meantime, FERC, you know, could easily pull together these key stakeholders. And, you know, the way our bill works is it says to FERC bring together major stakeholders to develop detailed recommendations and best practices to ensure high, rising energy costs from data centers aren't passed on to communities. I am a couple questions and start with you, Miss Muse.
Who one, how important is this, in your mind? How quickly could it be done, and who are those key stakeholders, in your opinion?
Speaker 7
Certainly. Thank you for the question. I think FERC has the ability to pull together a technical conference relatively quickly, although I don't want to speak on behalf of the staff over there. I think they do them. They run them regularly throughout the year.
I think you had a great list of stakeholders in the bill. I wanted to call attention to and support the inclusion of the ratepayer advocates. I think the consumer protection piece of this and the consumer advocate voice, having them in the room at the FERC technical conference will be really helpful, along with the utilities, the regulators, the state energy officers, other
Speaker 28
Yeah. I just think it would clearly, they can do this without the legislation, and we will push on FERC to do that. But, hopefully, we'll get this, you know, onto a markup calendar, and we can get it passed. Anyone else wanna jump in on that, mister Myers?
Speaker 5
Sure. I think overall, this is a good way to proceed. I think we might wanna consider leaving this a little bit open in the sense that with NERUK, the National Association of Regulatory Utility Commissioners, we do have interactions with FERC all the time. There's actually the FERC, state federal collaborative that convenes. That might be a venue that we can do something with, with this as well.
So maybe be careful about limiting it.
Speaker 6
I agree that FERC has in the past and can and should have a convening authority. Narrow state commissions are throwing a public or a plug. It does say public utilities right now, but I would also add public power utilities and consumer utilities. Sorry. I would also add public power utilities and consumer on utilities as groups that would be helpful.
Smart?
Speaker 8
Yeah. I think it's a good idea. Again, bring smart people together that have different views of the problem. Yeah. Right?
And I think you'll get a lot of good output from it. Good.
Speaker 1
Well, thank you very much. The gentleman yield is back, and the chair now recognizes the vice chair of the subcommittee, the general from Texas, for 5 minutes for questions.
Speaker 10
Hey, mister chairman. Mister Myers, I'm gonna come to you. In your testimony, you highlight the significant growth Arizona is experiencing and how this growth, while beneficial in many ways, is placing a strain on utilities and other components of the state's electrical grid. As you can probably imagine, I'm from Texas. As you can probably imagine, Texas also is experiencing rapid growth, and getting in front of the challenges associated with this growth is absolutely critical to ensuring our grid is protected during seasons of peak demand.
We've just had seen that happen. The Load Forecasting Enhancement Act would help to predict and forecast how this growth can be better managed, as large load additions from data centers and other projects continue to be added to the grid across the country. For you, the question is how could the provisions in this bill be implemented best to navigate those anticipated increases in electricity demand?
Speaker 5
Well, that's a great question. I don't know that I have an answer for you. I would like to get back to you on that one in writing if I can.
Speaker 5
I don't have a magic wand. I think that's a loaded question, to be honest.
Speaker 10
Well, there's a lot of things in Texas that are loaded, so that makes sense.
Speaker 10
Mister Peter, I'm gonna come to you. One of the challenges communities and rate payers are facing, by the way, we'll give you a couple minutes to think through that. What the challenges rate payers are facing is rising costs associated with large load customers, such as data centers, being added to the grid, as you mentioned in your testimony. The ratepayer protection act would require large load customers to cover the full incremental cost of any additional generation, transmission, or distribution upgrades needed to meet the demands of those customers. Has there been any pushback?
Do you anticipate there's gonna be pushback from large load industry customers on these provisions?
Speaker 8
So I think we've talked about a couple times that large load customers have been willing, have voiced willingness to pay their share. I think the issues may become in the details of how you count that. Right? So I think each jurisdiction state has a mechanism to determine that the cost impacts. So it may be difficult to create a single cost formula for nationwide.
I think that's the only issue. Not the concept of should they pay, and will they pay. It's the details.
Speaker 10
When you say the large load customers have indicated a willingness to pick up that extra slack for a better.
Speaker 8
All indications from my experience is they're willing to pay their share, appropriately.
Speaker 10
When you say a large load of customers, is that two of them, three of them, six of them?
Speaker 8
More than that. Certainly, the large, the very large hyperscalers have expressed support for paying their share.
Speaker 10
Yeah. Is there a mechanism in place? I mean, they say that verbally, you know, which is a good, it's a start, but is there a mechanism in place where we could hold them to that?
Speaker 8
Yeah. So financial commitments, long term contracts, take or pay requirements, overseen by state regulatory authorities, is our current approach to that.
Speaker 10
Do you think we have the authority to enforce that even though there are states overseen by state regulatory authorities?
Speaker 8
I think the states do. It's a retail agreement, which is a state jurisdictional agreement.
Speaker 10
K. Okay. And finally, I'm gonna come back to you, Mr. Falcon. In your written testimony, you highlight the importance of planning when it comes to welcoming large load customers or other entities into communities, to create jobs and connect the electrical grid. Without proper planning, I'm going back kinda what Hissingham was with the state having jurisdiction, but without proper planning, localities and ratepayers could be in jeopardy of bearing the majority of all of the stranded cost risk associated with unused electricity capacity, especially in Texas when it's hot or in some states where it's really cold in the wintertime.
So those local folks could be stranded with the cost risk associated with unused electrical capacity or over-investments in electrical infrastructure for specific customers. How would you suppose that localities and large load customers work together throughout that planning process? Kind of what he said. They're making some promises. How do you get the localities in on that?
I mean, is it those promises. You know what? A pie crust promise is it's easily made and easily broken. Yeah. Okay.
How do you deal with that?
Speaker 6
Do I need? Chair. The most important thing is that they put those promises into a financial contract and guarantee them. Otherwise, they are meaningless.
Speaker 1
Well, thank you very much. The gentleman that yields back. The chair now recognizes the gentleman lady from Texas 7th District for 5 minutes for questions.
Speaker 29
Thank you, Chairman Lata, and thank you, ranking member Castor, and thank you to our witnesses for being here today. I'm glad we're holding this important hearing, as the debate around permitting reform continues. That's certainly something we've been talking about in our subcommittee and full committee. And many of the bills that are before us today would make incremental improvements to our electrical grid's ability to meet demand from AI. It seems to me that they fail to address the core blockers to building transmission at scale, and that's planning across regions, permitting, and a workable cost allocation.
So I'd like to focus my questions on the last of these three issues and, in particular, talk about the FAIR Act. The FAIR Act prohibits grid operators from charging the cost of transmission projects to other utilities if any part of the drivers of a project are related to state policies. The bill provides no specific definition of state policies, and it's pretty clearly targeted at states that have renewable portfolio standards or otherwise incentivize renewable energy generation. And I know that many of my colleagues have expressed concerns in this room about red states paying for blue state policies, but I do believe that this bill is written, has a lot of unintended consequences. And, certainly, I live in a red state.
I live in Texas. And in Texas, parts of which are outside of ERCOT and hence would be subject to the bill, ensuring that our grid can withstand hurricanes and extreme weather is crucial. And our public utility commission and our electric utilities use system resiliency plans to improve grid reliability through physical system upgrades, through technical modernization, and operational improvements that will prevent and reduce outages for Texans and protect against natural disasters. So, miss Muse, I wanna direct my first question to you. Would the FAIR Act cover any state policy that creates a transmission need, whether those are straight grid state grid resilience policies or simply policies to do with any large consumer electricity?
How would this impact states with interregional connections that face hurricanes or other extreme weather events?
Speaker 7
Thank you. The FAIR Act is written quite broadly to include just a broad swath of state and local policy, and so it is unclear kind of what would fall into that category, which is why I have concerns around it, as it would slow and really stymie in a regional transmission. We have a real need for transmission to improve the resilience and reliability of the grid as we are looking to build a grid that is bigger than the weather so that we can move power from, you know, where it is very hot, where it is very cold, where there is extreme need for power to places that may not have as high demand. And the way to do that is to build transmission lines that connect the grid more fully across state lines.
Speaker 29
Thank you. And I love the way you describe that building, a grid that's bigger than the weather. I think that continues to be a concern for all of us from Texas, in every part of the state. But certainly on the Gulf Coast where I live, we are concerned year round about the grid and about making sure we have that. And I think, you know, another thing that I wanna put to everybody on the panel, so maybe I'll just go down the line here.
Different states and different regions may even disagree on whether to count certain social or environmental benefits or policies when evaluating a transmission line. But would everyone agree that the benefits of grid upgrades to reliability and affordability should be accounted for as FERC already requires today? Mister Myers?
Speaker 5
I think, yes. I think it is important to note that what defines a benefit does vary from state to state, and that is hardly ever going to come to an agreement, which I think is maybe the crux of your concern.
Speaker 6
I would just say that transmission is generally broken into three categories. You have economic, which is things that just make sense, and they pay for themselves. You have reliability, which you need for reliability purposes. And then there's the third category, which is generally public policy transmission. By definition, those don't meet the economic or reliability criteria.
I think one of the questions is, okay, if one party is incurring or has a public policy that requires an upgrade, how do you allocate those costs? But a big thing I would say is any investment has a benefit. And so if something costs $100 and its tangible benefits are 80 and it's driven by public policy, it doesn't mean that the $100 should be allocated just to the person driving the public policy. Probably the $80 of tangible benefit should be allocated in a way that we traditionally do, and maybe the other 20, I leave that up to Congress. But there is a benefit to every upgrade.
Speaker 29
Well, thanks, Mr. Falcon. I've run out of time for my questions. So, miss Muse and mister Pilar, I'm gonna ask you to please submit answers to that question for the record. I'll submit it through our process so that you get it sent back to you. You don't have to write it down and remember it, but we'll get it over to you. I thank you all very much for your testimony, and I thank you, Chairman Ladin.
You're back.
Speaker 1
Well, thank you very much. General Lee's time has expired, and he goes back. The chair now recognizes Jim from South Carolina's 7th district for five minutes for questions.
Speaker 27
Thank you, Mr. Chairman. Thank you to the witnesses for being here today. I'm proud to have Duke Energy's Robinson nuclear plant in the Congressional district of South Carolina. The plant employs 500 people and is a major source of tax revenue for Darlington County, certainly in energy. Just last week, I was thrilled to hear that the NRC approved Robinson's application to operate for an additional 20 years through 2050, which is important for both the local area and the entire state.
It's an exciting time for the district, for South Carolina, and certainly for Duke Energy. In light of the growing demand for power, though, there is discussion about permitting reforms to ensure the production and supply of power. Last week, the head of the National Association of Regulatory Utility Commissioners wrote a letter to the leaders of the Senate Energy Committee who were reportedly involved in permitting reforms themselves. This letter made several points about reforming federal permitting processes, reducing red tape, not increasing it, and concluded with respect to transmission siting that members, quote, should resist any effort to concentrate even more authority over local siting decisions in the federal government. Mister chairman, with unanimous consent, I'd like to submit that letter to the record.
Without objections, ordered. Thank you. Mister Myers, from your perspective, is the answer to faster energy infrastructure permitting to create more federal permitting bureaucracy over state decisions, or less?
Speaker 27
And would you like to expand on that? What is the rub here on why the federal government maybe is not best equipped to handle that?
Speaker 5
Well, I think that neighborhood clutter you just referenced pretty much sums it up very well. I think every time the federal government gets involved, it ends up costing more, from a time standpoint, if not monetary, for states to get things done. We have a pretty good record of implementing these projects fairly quickly. I think the biggest benefit the federal government could provide is permitting reform, judicial reform as part of that process, and just removing the red tape.
Speaker 27
Yeah. Mister Peeler, mister Falcon, if a federal backstop steps over through integrated planning at the state level, or even the regional level, what can that mean for affordability and household bills? We'll start with you, Mr. Falcon.
Speaker 6
Representative Frey, I think the important thing, you know, the big debate is whether FERC should have citing authority. And I think the important thing is whatever planning process Congress decides, it should be an integrated planning process. It should work with the existing processes, not be an add-on. There shouldn't be shopping of transmission projects, and those projects that are selected have to provide benefits to customers. I used to be the CEO of an electric utility, and, let me say that if money goes to projects that don't provide value, that's less money for things that do provide value.
So there has to be adequate protections that we're selecting the right projects, and it really delivers consumer value.
Speaker 8
I would agree with mister Falcon and just add, in addition to his comments, it can slow down the actual construction and completion of the projects as well.
Speaker 27
How should integrated planning, process work to ensure the lowest cost to rate payers?
Speaker 8
Yeah. So it's important that all factors, inputs to planning as well as the levers for solutions be considered. So load is an input, and solutions are generation, transmission, distribution solutions. I think that works best when it's closest to the customers. And in general, that means at state regulatory levels for resource planning.
And transmission planning should support resource planning. They should be integrated together, all options considered as the best solution.
Speaker 27
Thank you for that. Switching back to nuclear, with you, Mr. Peeler. We're looking at legislation about protecting residential ratepayers today against extraordinary growth in power demand, particularly from data centers. How does new nuclear factor in for Duke as you evaluate what is in the best interest of your customers, the balance?
Speaker 8
Yeah. As you well know, nuclear is a cornerstone of Duke Energy's generation fleet. It served customers well for decades. It's a capital-intensive effort. We're focused right now on lengthening the lives of the plants we have, just like the plant you mentioned earlier, as well as getting more out of the plants we have.
So we actually have upgrades underway at our existing fleet of over 300 MW. That's like a new SMR for the existing fleet. And we continue to have new nuclear as one of our choices in our integrated resource plan. So continue to look for that at the right time, at the right cost for the customers. It'll be incorporated.
Speaker 27
Thank you for that, Mr. Chairman. I see my time has expired. I yield back.
Speaker 1
Thank you very much. The gentleman's time has expired and yields back. The chair now recognizes the gentleman from Texas' 33rd district for five minutes for questions.
Speaker 17
Thank you, Mr. Chairman. You know, our nation's energy infrastructure currently carries a D plus grade from the American Society of Civil Engineers. And one of the reasons why is because we really are relying on the twentieth century power structure to help us figure out how we're gonna get through the twenty first century AI manufacturing revolution. People talked about data centers already, and about 70% of our transmission lines and transformers are more than 25 years old. And in many parts of the country, about 60% of our circuit breakers have been in service for over 30 years.
And so it took us a hundred years to be able to agree that we have today. But, really, because of an explosion of AI and data centers and manufacturing, we are now being asked to essentially double that capacity in the next 25 years, which is really astounding if you think about it. And here's the real problem. We're seeing about 5, about a $5,000,000,000,000 infrastructure deficit in the energy sector. And while utilities spend about 35,000,000,000 a year on transmission, it really is a drop in the bucket when you compare it to the total need for a resilient, modern grid.
And I think that we all know who has the capital and the urgency to help fill this gap, and it's the hyperscalers. We shouldn't just view data centers as a burden on the grid. Instead, we should really seize this build-out as the most powerful leverage point we have for grid modernization. We should ensure their entry into the market pays for the backbone upgrades that benefit the entire community. As Congress, we can also help coordinate this build-out.
Otherwise, big tech companies will simply build their own behind-the-meter power plants. And that's not going to help the grid, and that's not going to help the constituents that all of us serve. We can have private investment channeled into every infrastructure plan that benefits everyone. And so I want to ask Miss Muse, you served in the White House and at the DOE. And I know that you know as well as I do that these bills are a good start, but they are only on the margins of a massive problem.
If we wanna really seize this moment of a massive load growth to modernize the grid for the next fifty years, what is the big move we are missing? And if you were drafting a trillion-dollar grid act today, is there a structural reform that we're just not talking about yet?
Speaker 7
Thank you for the question. There's huge opportunity to build out the grid. And the ASC study that you mentioned, you know, it really points to the need for significant upgrades and improvements to modernize the grid to really meet today's what we're asking of an of today's economy. I think we need, look, we need a much better, a much more connected grid. Right?
You talked about what we need. We need significant interregional transmission, much better capacity and connection between the different regions or the Eastern and Western interconnection, and if they'll have it, ERCOT as well. But just as we were better able to move power across the country, you mentioned a need not only for generation, but also for grid upgrades. I think those are hugely important. We haven't talked in this hearing, but supply chain constraints and workforce allow us to have both the parts and the people to build that grid and then to go into modernizing it.
We wanna ensure that we are able to do that in a timely fashion and not face delays.
Speaker 17
Yeah. Yeah. No. Absolutely. Mister Peeler, I wanted to ask you.
Now, we're talking about an investment gap in the trillions of dollars, and I know that utilities like yours are doing some investing, but the hyperscalers have the capital, and they have the urgency. In your vertically integrated model, is there a structural or regulatory wall that prevents us from taking that private capital and using it to help build the backbone of the grid?
Speaker 8
Yes. So we're investing, you know, over 100,000,000,000 over the next five years. It's significant investment. But as we've, you know, kind of I've mentioned several times earlier, the hyperscalers, the data centers, they're willing to pay their contribution. And then the benefit of that being part of the overall system benefits all customers.
So I don't see a burden other than we need to move forward with things like permitting reform and others that slow us down today. So the ability to have financial commitments from these large folks for them to commit and then for us to move ahead. And some of the things you mentioned, supply chain, all those are continued challenges, but we need to push past those and build this infrastructure that benefits all customers.
Speaker 17
Yeah. So, you know, with that sense of urgency that we've talked about, how can we turn that into a public good that lowers rates for our constituents? Because, obviously, affordability is something that people are really paying attention to now.
Speaker 8
Utilizing the investment from those large customers and their large usage will lower the fixed cost that all customers pay. So those large customers will pay a larger portion of the system cost.
Speaker 1
Thank you very much. The gentleman yields back, and the chair now recognizes the gentleman from Michigan's 10th District for 5 minutes for questions.
Speaker 21
Thank you, Mr. Chairman. We're here today because the stakes could not be higher. The United States is in direct competition with China to lead the future of artificial intelligence. Winning that race will require more than innovation. We require the ability to generate and deliver massive amounts of reliable power.
It's clear energy demand is rising fast, driven in large part by data centers and advanced computing. That presents a real opportunity, especially for states like Michigan. Data centers can bring investment, jobs, and long-term economic growth, but we have to get the fundamentals right. Local control, brownfields before farmland, protect our water, and keep electric bills low. How do we make sure Michiganders actually benefit from that growth without being stuck with the bill of a billion-dollar infrastructure and projects for Silicon Valley?
How do we ensure ratepayers aren't subsidizing massive new loads, and how do we do it about protecting critical natural resources like water that these facilities depend on? Because at the same time we're trying to win this AI race, Lansing is pursuing aggressive and costly net-zero mandates that are driving up costs and reliability risks. We're talking about a projected $386,000,000,000 price tag, adding $2,746 per year to utility costs, or about 228 more every month for families. That's the price tag of Lansing's Green New Deal agenda, and Michigan families are paying for it every single month. And reliability is not theoretical.
NERC already warned that regions like MISO face elevated risk as we retire reliable generation faster than we can replace it. So here's the challenge in front of us. We need to build. We need to compete. We need to win.
But we cannot do it in a way that forces families to pay more for reliable energy. That means making sure that those who drive new demand pay their fair share, making sure that our generation mix can actually meet peak demand, making sure policy is grounded in reality, not just ambition. We can and will win the AI race with China, and we will lead the way in Michigan. But we won't do it by charging Michigan families $228 more per month for a grid that can't even keep the lights on. So, Mister Peeler, thank you for being here today.
It's clear that data center growth is a major driver of increasing electricity demand. As we work to compete globally, what are some of the best mechanisms to ensure that hyperscale customers pay the full incremental cost of generation, transmission, and infrastructure required to serve them, so that residential rate payers are not left subsidizing that growth?
Speaker 8
The method to do that is to ensure that those particular customers who drive that demand growth are on the hook financially and for the long term, to cover their costs. And that means long-term contracts. That means financial obligations, and that means take or pay obligations.
Speaker 21
And is it true that if the power is available, having additional payers will actually lower residential electricity rates?
Speaker 8
Yes. A higher user of energy, a higher megawatt hour user will absorb more of the fixed cost of the system, and those fixed the less fixed cost would then flow the remaining rate there.
Speaker 21
So, thank you. Commissioner Myers, we want to attract additional investment. We want to diversify our economies, but we also have these data center investments, and we have a duty to protect our consumers. What guardrails, in your opinion, are most effective in ensuring that communities see the economic upside of these projects while avoiding cost shifting onto existing ratepayers? And how should regulators account for impacts on critical resources like water?
Speaker 5
Sure. I think some of the guardrails can include things like increased minimum bill thresholds for those large customers, financial guarantees, meaning if they leave the system early, they're still going to be on the hook for paying what they committed to. Extended contract terms is another piece.
Speaker 5
puzzle. As was already said, contributions in aid of construction, meaning they're going to fund what they need, and they're going to be held accountable for that. So I think, fundamentally, it all boils down to the tariff design and the service agreement that lies on top of it.
Speaker 21
Those are very good points. Michigan knows all too well about broken promises for large corporations that shirk their responsibility to the community. We'll make sure that we learn from the past so we can have a brighter future. Mister chairman, that'll yield.
Speaker 1
Thank you very much. The gentleman yields back, and the chair is seeing no other members wishing to ask questions. We wanna thank our witness for appearing for us today. Members may have additional written questions for you, and I remind members that they have 10 business days to submit the additional questions for the record. I ask that our witnesses do their best to submit responses within ten business days upon receipt of those questions.
I ask unanimous consent to insert in the record the documents included on the staff hearing documents list. And without objections to be awarded, without objection, the subcommittee will stand adjourned. Thank you again for being with us today.
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