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Y4. AP 6/1: En 2/2/98/pt. 6
ENERGY AND WATER DEVELOPMENT

APPROPRIATIONS FOR 1987

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COMMITTEE ON APPROPRIATIONS

JAMIE L. WHITTEN, Mississippi, Chairman EDWARD P BOLAND, Massachusetts

SILVIO O. CONTE, Massachusetts WILLIAM HI NATCHER, Kentucky

JOSEPH M. McDADE, Pennsylvania NEAL SMITH, Iowa

JOHN T. MYERS, Indiana JOSEPH PADDABBO, New York

CLARENCE E. MILLER, Ohio MIDNEY R YATES, Illinois

LAWRENCE COUGHLIN, Pennsylvania DAVID R. OBEY, Wisconsin

C. W. BILL YOUNG, Florida EDWARD R ROYBAL, California

JACK F. KEMP, New York LOUIS STOKES, Ohio

RALPH REGULA, Ohio TOM BEVILL. Alabama

GEORGE M. O'BRIEN, Illinois BILL CHAPPELL, JR., Florida

VIRGINIA SMITH, Nebraska BILL ALEXANDER, Arkansas

ELDON RUDD, Arizona JOUN P. MURTHA, Pennsylvania

CARL D. PURSELL, Michigan BON TRAXLER, Michigan

MICKEY EDWARDS, Oklahoma JOSEPUL D. EARLY, Massachusetts

BOB LIVINGSTON, Louisiana ('HARLES WILSON, Texas

BILL GREEN, New York LINDY (MRS. HALE) BOGGS, Louisiana TOM LOEFFLER, Texas NORMAN D. DICKS, Washington

JERRY LEWIS, California MATTHEW F MCHUGH, New York

JOHN EDWARD PORTER, Illinois WILLIAM LEHMAN, Florida

HAROLD ROGERS, Kentucky MARTIN OLAV SABO, Minnesota

JOE SKEEN, New Mexico JULIAN ( DIXON, California

FRANK R. WOLF, Virginia
VIC FAZIO, California

BILL LOWERY, California
W G. (BILL) HEFNER, North Carolina
LES AVOIN, Oregon
DANIEL K. AKAKA, Hawaii
WES WATKINS, Oklahoma
WILLIAM H. GRAY M, Pennsylvania
BERNARD J. DWYER, New Jersey
BILL BONER, Tennessee
STENY 1 HOYER, Maryland
BOR CARR, Michigan
ROBERT J MRAZEK, New York
RRHARD J DURBIN, Minois
RONALD D (OLEMAN, Texas

FREDERICK G. MOHRMAN, Clerk and Staff Director

Nese dhe arrintendent of Decuments Cannon Sales Offiæ

ENERGY AND WATER DEVELOPMENT

APPROPRIATIONS FOR 1987

THURSDAY, MARCH 13, 1986. FEDERAL ENERGY REGLULATORY COMMISSION

WITNESS AVTHONY G. SOUSA, ACTING CHAIRMAN FERC

Mr. BEVILL. The subcommittee will come to order. Chairman Sousa, I just want to say at the beginning that we're certainly pleased with your operation. And FERC has a very good track record, and we appreciate what you all are doing down there, and I'm sure you're going to carry on in the usual tradition. So we're pleased to have you with us for your first visit with this committee.

Before you begin your statement, I would like to call to your attention a situation involving the SEGS-II project. We have discussed this before and I know you're aware of my interest in it.

Do you agree that on this project, and similar projects, FERC should not change its policies and rules in midstream, even in some cases after the projects are finished?

Mr. SOUSA. Yes, Mr. Chairman, I do agree. It's a question of an element of fairness here. And if we do enunciate any policies or rules at the early stages of any matter, then it's only fair that we do not change these policies or rules later on because there would be reliance, and in some case detrimental reliance, on those rules and policies.

Mr. BEVILL. Yes.
Mr. Fazio. Mr. Chairman, would you yield?
Mr. BEVILL. Yes.

Mr. Fazio. I want to thank you for asking the question. I appreciate the answer. And I, simply on behalf of people interested in renewable energy and certainly the people in my State, want to lend support to your efforts and thank you for those you have made in this regard.

Mr. BEVILL. Yes. We're talking about the world's largest solar project there that is completed, and then someone comes up and says oh, we're not sure you ought to even have a license. And that sounds like the way that the Nuclear Regulatory Commission used to operate. Fortunately they are improving now. They used to wait until the plant was built, and then they'd say why, you can't use het material, those pipes don't meet the standards. And we're experts on that kind of thing, so we sure don't want you all to get

to that.

(1)

SOUSA. Mr. Chawe should be oper their past reco

Mr. Sousa. Mr. Chairman, we don't want to look up to the NRC as an example of how we should be operating.

Mr. BEVILL. We want you to look at their past record as a way not to operate.

Mr. Sousa. Yes, sir.

Mr. BEVILL. Yes, sir, that's right. And as I say, in all fairness to them, they've improved a great deal and we're glad they have. Of course, they couldn't go anywhere except up. You may proceed as you wish, Mr. Chairman. STATEMENT OF ANTHONY G. SOUSA, ACTING CHAIRMAN, FEDERAL

ENERGY REGULATORY COMMISSION Mr. Sousa. Thank you, Mr. Chairman, and Members of the subcommittee. I appreciate this opportunity to discuss with you today the Federal Energy Regulatory Commission fiscal year 1987 budget request. I am accompanied by Mr. William G. McDonald, the Commission's Executive Director, on my left; and Mr. William H. Satterfield, the Commission's General Counsel, here on my right; and by other directors of the Commission's program offices who will be available to assist me in answering all of your questions.

Mr. BEVILL. Alabama is proud of Mr. Satterfield. For the record, he's making an appearance, and we're glad to have you, Bill.

Mr. SATTERFIELD. Thank you, sir.
Mr. SOUSA. That's why I brought him here, sir. (Laughter.]
Mr. BEVILL. You're sure off to a good start.

BUDGET OVERVIEW Mr. SOUSA. The Commission's fiscal year 1987 budget request, which meets the deficit reduction targets under the Balanced Budget and Emergency Deficit Control Act of 1985, known as Gramm-Rudman-Hollings, is $99,079,000, and we have allowed 1,659 full-time employees. Of this, $78,754,000 would be offset by revenues from fees and charges.

For fiscal year 1986, the Commission received an appropriation, including transfer from DOE, of $98,852,000. So, the 1987 budget request represents an increase of only $227,000 over fiscal year 1986. However, our fiscal year 1986 appropriation was reduced by $4,109,000 effective March 1, 1986 pursuant to Gramm-RudmanHollings. The Commission has reduced staffing levels and associated expenses in fiscal year 1986 to accommodate this $4,109,000 reduction.

MANAGING CHANGE IN A REGULATION ENVIRONMENT The Commission is in the midst of a vastly changing energy environment and is using two approaches to manage this change. First, we are adapting the regulatory framework to changing energy markets to ensure the public the continuation of an adequate and reliable supply of energy at the lowest reasonable rates; and second, we are improving the internal operations of the Commission to be more responsive and timely.

NATURAL GAS REGULATION Over the past two years, the Commission has been confronted with an evolving competitive market in the commodity of natural gas. Most natural gas supplies, as a result of the Natural Gas Policy Act, are no longer subject to Federal regulation as to market entry, exit, and price. However, the integrated transportation network, which is monopolistic in some markets and competitive in others, is still generally subject to Federal regulation.

Accordingly, in October 1985, the Commission issued Order No. 436 which retains and revises utility type regulation over the interstate transportation function, while allowing the commodity market for natural gas to continue to develop in a competitive fashion.

The Commission has also established a procedural schedule to receive comments on the Secretary of Energy's proposed revisions in the way old gas is regulated. In his proposal, the Secretary suggests that flowing old gas prices be set at a single level equal to the highest ceiling price available at the time. The Commission's schedule calls for initial comments by February 25th, at which time more than 200 comments were received, reply comments by March 27th, and a public conference scheduled for April 10 and 11.

The Commission has embarked on an ambitious natural gas program, and will require $45.2 million in fiscal year 1987 to stay abreast of the rapidly changing conditions and reduce pending workload by more than 33 percent from fiscal year 1985.

HYDROPOWER REGULATIONS Major changes have also occurred in the Commission's hydropower program. These changes, which are primarily the result of court decisions, have necessitated a complete reconsideration of many long-held principles underlying the program, especially in the area of environmental review. In response to what amounted to a judicial redefinition of our role, the Commission, after much study and voluminous public comments, implemented on a trial basis a new procedure, the Cluster Impact Assessment Procedure, known by its acronym CIAP, for evaluating environmental impacts on river basins with multiple proposed hydropower projects.

In April 1985, the Commission approved the commencement of the CIAP in the Salmon, Snohomish, and Owens River Basins. We have completed the first two phases of each of these studies and are proceeding on schedule. We're also currently evaluating the effectiveness of this approach.

As we look at future planning for the hydropower program, the Commission will be faced with a growing workload due in part to legislation that has stimulated development as well as the issue of relicensing. We will need $29.4 million for this program in fiscal Fear 1987 to

Mr. BEVILL. Mr. Chairman, I'm sorry to interrupt you, but would you pause right here for a minute or two until Mr. Fazio or some other Member gets back from voting so we can go and vote? We have about four or five minutes to get over there and vote.

Mr. SOUSA. Certainly.

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