Smart Grid Legal News - High Voltage Insight on Smart Grid Issues

FERC recently proposed to approve the Version 5 Critical Infrastructure Protection (CIP) Reliability Standards, CIP-002-5 through CIP-011-1, submitted by the North American Electric Reliability Corporation (NERC). FERC believes the proposed CIP Version 5 Standards, which pertain to the cybersecurity of the bulk electric system, represent an improvement over the current Commission-approved CIP Reliability Standards because they adopt new cybersecurity controls and extend the scope of the systems that are protected by the CIP Reliability Standards.

Despite the benefits, the Commission has concerns regarding the potential ambiguity and, ultimately, enforceability of the CIP Version 5 Standards. Specifically, 17 of the requirements of the suite of CIP Version 5 Standards include language that requires the responsible entity to implement the requirement in a manner to “identify, assess and correct” deficiencies. The issue is that this language may be unclear with respect to the compliance obligations it places on regulated entities making it too vague to audit and enforce compliance. The NOPR seeks comments on this and several other concerns. Moving at the speed of technology, some parts of CIP 4 may never become enforceable; it is expected some utilities may go from CIP 3 to CIP 5 for some standards.

Smart meters are capable of delivering a wealth of information regarding a customer's energy usage. This data holds the promise of current and future benefits, the most basic being that knowledge will affect change. The theory is the more customers understand the correlation between their behavior and energy spending, the more likely they will make adjustments that yield an overall positive impact on their wallets and the environment. (I have all kinds of information that does not always translate into action...like, um, my diet, but OK. That's the theory.) Additionally, this data offers greater opportunities for optimizing energy efficiency programs. The inability for energy efficiency service providers ("EESPs") to gain access to customers' data because of legitimate privacy concerns creates a barrier to realizing many of the benefits from these services. Often, regulatory commissions confront two competing issues: (1) the need to facilitate access to customer data for energy efficiency purposes while (2) safeguarding customer privacy. The State and Local Energy Efficiency Action Network's Customer Information and Behavior (CIB) Working Group has created a Regulator’s Privacy Guide to Third-Party Data Access for Energy Efficiency. Utilities and state regulators will find the report helpful. It discusses the issues and policy considerations related to providing access to customer information while supporting energy efficiency services and protecting customers' privacy.

The report is filled with helpful information, like Figure ES-1 shown below. It provides an overview of some states’ approaches to standards for customer consent and identifies the types of non-utility entities that may want access to a customer’s energy usage data.

The State and Local Energy Efficiency Action Network (SEE Action) is a state and local-led effort facilitated by the U.S. Department of Energy and the U.S. Environmental Protection Agency to take energy efficiency to scale and achieve all cost-effective energy efficiency by 2020. Many will want to bookmark its website, as it offers a wealth of research, data sheets and policy papers that Utilities, Regulators, EESPs, Customer Advocates and Customers will find helpful.

Most people in the industry agree the electric infrastructure is outdated and requires extensive upgrades. It’s when you get to the “How?” and “Who pays for it?” that the war begins in many jurisdictions. And if you think that having a law that supports the upgrades and implementation of the smart grid settles the matter, think again. Last year, Illinois passed the Energy Infrastructure Modernization Act ("EIMA"), yet implementation has been anything but routine. In a show of force between regulators and law makers, electric utilities in Illinois found themselves holding the cost recovery bag. Last May the Illinois Commerce Commission (“ICC”) found that Ameren’s Smart Grid Plan failed the customer cost benefit test. The ICC also disallowed key costs in ComEd's first formula rate case under EIMA. According to ComEd, it will now face a reduction in funding of nearly $100 million per year in 2014 and beyond. These are dollars that cannot be recovered and subsequently reinvested into the system, jeopardizing the grid modernization programs and related customer benefits. ComEd has appealed the ruling in court, but that decision may take up to two years.

In a battle between regulators and law makers, on November 29, 2012 the Illinois Senate passed Senate Resolution 821 which states in part:

RESOLVED, BY THE SENATE OF THE NINETY-SEVENTH GENERAL ASSEMBLY OF THE STATE OF ILLINOIS, that we express serious concerns that the Illinois Commerce Commission Order, entered on May 29, 2012 in Commission Docket No. 11-0721, fails to reflect the statutory directives and the intent of the Illinois General Assembly by: (1) not allowing Commonwealth Edison Company to earn a return on what is commonly referred to as, identified in the FERC Form 1 as, and what the General Assembly referred to as a pension asset in subparagraph (D) of paragraph (4) of subsection (c) of Section 16-108.5; (2) assessing interest on those amounts to be credited or charged to customers as set forth in subsection (d) of Section 16-108.5 of the Public Utilities Act at an amount that is not based on the utility's weighted average cost of capital; and (3) determining rate base and capital structure using an average, rather than  the year-end amounts as reflected in FERC Form 1…

Not sure if the resolution swayed regulators, but in true Chicago-style politics, the ICC issued an order on December 5, that allows ComEd to proceed with its revised smart grid deployment plan in 2015 but makes it clear it is not happy about the delay:

Allowing the Revised Plan to go forward is accepting, at least for now, that meters will not be installed until 2015. This is regrettable, because the benefits to ratepayers are greatly reduced with the delayed deployment. But because of the impossibility of implementing the Original AMI Plan and the shortcomings of the proposed Revised Plan, the Commission is left with only bad options. - ICC Order page 32

One thing is clear, the battle in Illinois will continue. The order requires ComEd to describe in detail their efforts accelerate implementation when the company files its April 2013 AMI Plan Progress Report.

On June 29, 2012, a major storm system known as a derecho (“deh-REY-cho”) formed and moved across Illinois through the Ohio Valley and Mid-Atlantic States. The 2012 Derecho traveled about 600 miles in about 10 hours. Approximately 4.2 million customers were without power across 11 States and the District of Columbia and restoration in some cases took 7 to 10 days. The U.S. Department of Energy, Office of Electricity Delivery and Energy Reliability (OE), Infrastructure Security and Energy Restoration Division (ISER) publishes situation reports during energy emergencies and analyses of past energy emergency events to provide information to Federal, State, and local governments as well as the public. Due to the unique nature of this storm compared to traditional summer seasonal storms and the extent of physical damage caused, ISER developed a handy report to assess whether the restoration period from the 2012 Derecho was consistent with other major storms and, if not, what caused the differences in restoration times.

Released in August, the report is full of useful data. Exhibit 3 below highlights the impact of the 2012 Derecho storm.

Ultimately the ISER report concludes the 2012 Derecho was a unique storm due to its unforeseen intensity, area of impact, and post-storm conditions. As a result power restoration lagged compared to other major storms, including Hurricanes Ike and Irene.

After careful review of the available literature and studies, the Staff of the Michigan Public Service Commission believes that the health risk from the installation and operation of metering systems using radio transmitters is insignificant and the appropriate federal health and safety regulations provide assurance that smart meters represent a safe technology. The report discusses the fact that there are multiple sources of RF exposure in our everyday environment, including cellular phones, wireless devices – such as laptops and routers – microwave ovens, baby monitors, garage door openers, walkie talkies, computer monitors, fluorescent lighting, and electrical wires within the home, and that smart meters are a small contributor to the total environmental RF emissions to which the general public is exposed. Eliminating smart meters would result in a minimal reduction of total emissions.

The Staff also recommends regulators include the following fundamental concepts when addressing a smart grid privacy policy:

• Definitions of various types of data collected (usage/billing, aggregate, customer identifiable)

• Permitted usage of data types by utility (sales, contractor work, emergency)

• Customer consent and third-party disclosure rules (notice, time frame, records)

• Availability of usage information to customer (web portal, direct mail, email)

• Privacy breach requirements (notification to customer/commission)

The report addresses additional safety concerns unrelated to RF emissions such as overheating of meters and cyber security. With links to excellent resources, it is a must read for utilities and regulators.

Earlier this year, Commissioner Philip Moeller requested comments on a set of questions regarding the interdependence between the gas and electric industries. Both industries provide services that are critical to the health and safety of the nation and the interdependence of these industries merits careful attention. After receiving numerous comments from both industries, the Federal Energy Regulatory Commission (Commission) issued a notice scheduling a series of regional technical conferences on the issue of gas-electric coordination. The first conference will be held on August 6, 2012 in St. Louis, MO at the Hilton St. Louis at the Ballpark, 1 South Broadway, St. Louis, MO, 63102. Based on the agenda, it will be an informative day. Here are just a few of the questions the roundtable participants from both industries will discuss:

• What reforms, if any, need to be made to the organized electric markets’ rules to provide for rate recovery for any necessary gas infrastructure expansion?
• How does a gas-fired generator balance real-time electric market dispatch and compensation with pipeline scheduling, dispatch and balancing requirements? Is there a need for modifications to either electric market or pipeline requirements in these areas?
• Should natural gas and electric market schedules be harmonized on a national level? Are more targeted or region-specific solutions available? Recognizing that some pipelines offer additional nomination opportunities beyond the current standards, could regional solutions offer greater efficiency building upon the specific extra-flexible pipeline services available within a region?

In the event you can’t make the conference in St. Louis, there will be four others held throughout the month. Each conference will begin at 9:00 AM and end at approximately 5:30 PM. The dress code for the conferences will be business casual. Although free of charge and open to the public, advance registration is strongly encouraged.

The U.S. Department of Interior’s Bureau of Land Management (“BLM”), which manages over 245 million acres, recently published in the Federal Register an Advance Notice of Proposed Rulemaking to give the public background information about the BLM’s interest in establishing an efficient, competitive process for issuing right-of-way (ROW) leases for solar and wind energy development on public lands. BLM believes the existing regulations limit the competitive process to procedures for responding to overlapping right-of-way applications. The BLM is seeking input on how best to offer public lands through a nomination and competitive process instead of just by right-of-way application.

Some of the questions BLM would like addressed in comments are: 

• How should a competitive process be structured for leasing lands within designated solar and wind energy development leasing areas?
• Should a competitive leasing process be implemented for public lands outside of designated solar and wind energy development leasing areas? If so, how should such a competitive leasing process be structured?
• What competitive bidding procedures should the BLM adopt?
• What is the appropriate term for a competitive solar energy ROW lease?
• What is the appropriate term for a competitive wind energy ROW lease?
• How should the bidding process for competitive solar and wind energy ROW leases be structured to ensure receipt of fair market value?
• Should a standard performance bond be required for competitive solar and wind energy ROW leases and how should the bond amount be determined?  

Because this discussion is specifically focused on the development of the competitive process, comments are not being requested regarding solar and wind energy environmental issues. Comments are due by February 27, 2012.

On Thursday, October 13, 2011 Chairman Wellinghoff will testify on “The American Energy Initiative: Transmission Issues, Including Topics Related to the Sitting, Planning, and Allocation of Costs for Electricity Transmission Infrastructure”, before the House Energy and Commerce Subcommittee on Energy and Power. It will take place at 9:30 a.m. in room 2322 of the Rayburn House Office Building.

According to the Committee on Energy and Commerce’s internal memo, the following issues will be examined at the hearing: 

• The need for new electricity transmission infrastructure and the barriers and challenges to siting and constructing new transmission facilities.
• The statutory authority of DOE and FERC with respect to the siting, planning, and pricing of electricity transmission infrastructure.
• The roles and responsibilities of the following entities with respect to the siting, planning, and pricing of electricity transmission infrastructure:
  
  
  • DOE
  • FERC
  • State Public Utility Commissions
  • Regional Transmission Organizations
  • Electric utilities
• The difference between traditional planning and cost allocation principles and those set forth in FERC Order No. 1000.
• The scope, purpose, and implementation of Section 216 of the Federal Power Act, including its effect on jobs and the American economy.

Given the concerns over FERC Order No. 1000, this should be an interesting hearing. In addition to Chairman Wellinghoff, other panelists include: Ms. Lauren Azar, Senior Advisor, Office of the Secretary, U.S. Department of Energy, Commissioner Greg White, Michigan Public Service Commission, Commissioner Philip B. Jones, Washington Utilities & Transportation Commission, Mr. John DiStasio, General Manager & CEO, Sacramento Municipal Utility District, Mr. Steven A. Transeth, Principal, Transeth & Associates, PLLC,  Mr. Nicholas Brown, President & CEO, Southwest Power Pool, Inc. and Mr. Joseph Welch, Chairman, President & CEO, ITC Holdings Corp.

Ever thought an existing regulation is out of date and is a waste of time because it does not make sense in today's environment? Well now at DOE you can have your say.  As part of  President Obama's  issued Executive Order 13563, Improving Regulation and Regulatory Review, DOE is reviewing  existing regulations to determine whether they are still necessary and crafted effectively to solve current problems. Back in January, DOE issued a Request for Information (RFI) seeking public comment on how best to review its existing regulations and to identify whether any of its existing regulations should be modified, streamlined, expanded, or repealed. Surprisingly, only 16 comments and 9 reply comments were filed. DOE considered these comments in the development of its preliminary plan. However, when you consider the number of entities affected by DOE's rules, there was a low turnout for comments. As if to say, "work with me people," DOE is providing yet another opportunity to suggest improvements. The Department issued a notice seeking comments on its Preliminary Plan to implement Executive Order 13563. The plan describes how the Department intends to conduct retrospective review of its regulations. The Department developed its Preliminary Plan based on public input received in response to an RFI and is now interested in receiving further comment to refine and improve the plan. For additional information and to review the comments and reply comments filed in response to the RFI, please see the Office of the General Counsel website: Retrospective Review of Regulations.

August 1, 2011 is the deadline to file comments. Don't miss out on the opportunity to have your say. After all, when was the last time a regulator asked for your opinion regarding which regulations should be repealed?

Chairman Wellinghoff stressed that ancillary services are broader than energy storage and he made it clear the development of a vibrant ancillary services market is an important element of the Commission’s Notice of Inquiry (NOI). Commissioner Norris issued a statement highlighting the need to make sure regulatory policies and practices do not stunt the growth of energy storage technologies. Citing an EPRI study, Commissioner Norris points out energy storage systems “can move energy through time, providing it when and where it is needed.” This feature carries greater significance as we seek to connect variable renewable energy resources to the electric grid.

Energy storage presents numerous challenges for regulators because electric energy storage is the chameleon of the smart grid. It blends in where needed, able to resemble many smart grid components. It’s generation, it’s transmission, it’s a storage device (just to name a few). So how does the jack-of-all-trades get fairly compensated? Will it be forced to declare a major? Or will it be allowed to hop around the grid, providing assistance as necessary to stabilize the grid, hopefully providing lower prices to customers because of its flexible nature?

The NOI is 44 pages long and there are many questions to be answered as FERC seeks to encourage the development of a robust ancillary services market, as well as electric storage technologies. Below are a few random samples:

• If the Commission retains the requirement of a formal market power study as described in Order No. 888 and Ocean Vista for third party provision of ancillary services to transmission providers, what specific information and tools would be useful to the development of these studies?

• Should the Commission establish a capacity threshold to determine whether an entity has market power so that an entity that owns or controls less than a threshold amount of capacity would be presumed to lack market power in the market for provision of ancillary services? If so, what would be an appropriate level for this threshold?

• Should the cost of new energy storage plant and equipment be recorded within existing utility plant functional classifications (i.e., transmission, distribution, and production) or should a new functional classification be created for energy storage? What are the benefits of one approach over the other? If the Commission were to create a new classification(s), please comment on the specific plant accounts and account instructions that would be created or modified for inclusion in the new asset class.

Comments are due by August 22, 2011.

This chart demonstrates the long journey of smart grid legislation in Illinois … or at least rounds one and two. Having passed in the House on May 30, 2011, amendments to the Illinois Power Agency Act cleared the Senate on May 31, 2011, paving the way for a showdown between Governor Quinn, Ameren and Com-Ed. Gov. Quinn has promised to veto the bill. However, there is some speculation the Governor will negotiate with the two utilities over the summer rather than completely squash all hopes of a smarter electrical grid in Illinois. 

If the bill is not vetoed, a Smart Grid Advisory Council, the Illinois Science and Innovation Trust, as well as Smart Grid Test Beds will be created. Smart Grid Test Bed? It appears to be an interesting way of saying pilot:

Sec. 16-108.8. Illinois Smart Grid test bed

(a) Within 180 days after the effective date of this amendatory Act of the 97th General Assembly, each participating utility, as defined by Section 16-108.5 of this Act, shall create or otherwise designate a Smart Grid test bed, which may be located at one or more places within the utility's system, for the purposes of allowing for the testing of Smart Grid technologies. The objectives of this test bed shall be to:

1. provide an open, unbiased opportunity for testing programs, technologies, business models, and other Smart Grid-related activities;
2. provide on-grid locations for the testing of potentially innovative Smart Grid-related technologies and services, including but not limited to those funded by the trust or foundation established pursuant to Section 16-108.7 of this Act;
3. facilitate testing of business models or services that help integrate Smart Grid-related technologies into the electric grid, especially those business models that may help promote new products and services for retail customers;
4. offer opportunities to test and showcase Smart Grid technologies and services, especially those likely to support the economic development goals of the State of Illinois.

Com-Ed issued a press release yesterday, hailing the General Assembly’s passage of SB 1652, also known as the Energy Infrastructure Modernization Bill. 

At the time of posting, a motion to reconsider the vote was filed by Sen. John Cullerton.

The staff of the MPSC filed a report that details the results of a staff investigation regarding utility smart grid vendor selection. The report provides recommendations to minimize the cost of smart grid technology deployment by exploring different methods of vendor selection, as well as the lessons learned from early adopters. Case studies were provided on:

• Consumers Energy
• Xcel Energy
• Pepco Holdings, Inc.
• Detroit Edison
• Oklahoma Gas & Electric

Not surprisingly, best practices include starting with a pilot and selecting vendors via the RFP process. Additionally, utilities should negotiate vendor contracts to address product failure and business failure. 

Entergy Corporation announced that two of its subsidiaries, Entergy Nuclear Vermont Yankee, LLC (“ENVY”) and Entergy Nuclear Operations, Inc. (“ENOI”) have filed a complaint in U.S. District Court for the District of Vermont seeking a judgment to prevent the state of Vermont from forcing the Vermont Yankee Nuclear Power Plant to cease operation on March 21, 2012.

The April 18, 2011 request for declaratory and injunctive relief follows the federal Nuclear Regulatory Commission’s (“NRC”) March 21, 2011, renewal of Vermont Yankee’s operating license authorizing the plant’s operation through March 21, 2032. The NRC’s action came after a thorough and exhaustive five-year safety and environmental review of the plant.

The lawsuit is primarily based on the following legal principles:

• “Atomic Energy Act Preemption. Under the Supremacy Clause of the U.S Constitution, the U.S. Supreme Court held in 1983 in a case involving Pacific Gas & Electric that a state has no authority over (1) nuclear power plant licensing and operations or (2) the radiological safety of a nuclear power plant. In violation of these legal principles, Vermont has asserted that it can shut down a federally licensed and operating nuclear power plant and that it can regulate the plant based upon Vermont’s safety concerns.
• Federal Power Act Preemption and the Commerce Clause of the U.S. Constitution. Vermont is prohibited from conditioning post-March 2012 operation of the Vermont Yankee Station on the plant’s agreement to provide power to Vermont utilities at preferential wholesale rates. The Federal Power Act preempts any state interference with the Federal Energy Regulatory Commission’s exclusive regulation of rates in the wholesale power market. The Commerce Clause of the U.S. Constitution bars a state from discriminatory regulation of private markets that favors in-state over out-of-state residents.“ Entergy Press Release

This battle between Entergy and the State of Vermont can be traced back to the 2002 Memorandum of Understanding (“MOU”) that settled the litigation related to Entergy’s purchase of Vermont Yankee from Vermont Yankee Nuclear Power Corporation. Paragraph 12 of the MOU will no doubt be analyzed at least a hundred times before this litigation is resolved. Part of it states the parties, “expressly and irrevocably agree[s]: (a) that the Board has jurisdiction under current law to grant or deny approval of operation of the VYNPS beyond March 21, 2012 and (b) to waive any claim each may have that federal law preempts the jurisdiction of the Board to take the actions and impose the conditions agreed upon in this paragraph to renew, amend or extend the ENVY CPG and ENO CPG to allow operation of the VYNPS after March 21, 2012, or to decline to so renew, amend or extend.”

The world has changed since the 2002 agreement and Entergy believes political maneuvers by the state legislature has now voided the provision Entergy agreed to in good faith. For starters, in 2006, a law was passed prohibiting the Public Service Board from issuing a Certificate of Public Good without express approval from the General Assembly. In an open letter to Vermonters, Entergy provides further details. Given the NRC's approval, which addresses the safety issue, Vermonters stand to lose 650 jobs and $16,484,000 in state and local taxes based on a 2008 benefits statement.

On March 8, 2011, ComEd’s president, Anne Pramaggiore, testified before Illinois lawmakers on the urgent need to enact The Infrastructure Modernization Act. “We live our lives and conduct our business on the grid,” said Pramaggiore, as she describes a customer’s experience during a winter storm. “A few days after the blizzard of February 2011, a customer related to me his family’s blizzard preparation. Hours before the blizzard hit, he and his three children plugged in all their technology – iPhones, iPads, BlackBerries – to charge them fully in case they lost power. Their preparations did not involve flashlights, candles or canned goods but iPhones, iPads and BlackBerry charging. This is a big change.”

This vivid description underscores the digital and technological advancements that our economy and our teens depend on. Yet as Pramaggiore points out, the electric grid and related policies have not advanced in 100 years. I agree with Pramaggiore regarding the need for urgent action and regulatory certainty. Alexander Graham Bell would be amazed that you can now buy movie tickets, check the weather and have a videoconference from a wireless device called a cell phone. Unfortunately, Thomas Edison would be bored with today’s electric grid because most of it would look familiar to him.

With investments required to update the grid well into the billions, stable regulatory policies and clear cost recovery models are essential. Pramaggiore testified about the swings in ComEd's rate case results in previous years, one as low as 17 percent of the requested increase. Such regulatory uncertainty is bound to have a chilling effect on smart grid investments. HOUSE BILL 14, also known as the Infrastructure Modernization Act, is a policy-based approach that:

• Identifies and directs appropriate investment.
• Reforms the traditional regulatory structure to better enable the investment while preserving essential consumer safeguards
• Creates a regulatory framework that includes performance requirements designed to ensure that utility investments deliver on the benefits they promise to consumers

I will be following this one closely as I grew up in suburban Chicago and most of my family still lives there. (HB 14 was amended the day after Pramaggiore testified.)

Pecan Street Project has kicked off the first phase of its smart grid demonstration project in the Mueller community of Austin, Texas. One hundred residences volunteered to have Incenergy’s Home Smart Grid System installed. This system will capture electric and gas usage data for the home and six major appliances on a minute-by-minute basis. It will also gather data from the 10 homes that have solar PV rooftops. 

Project researchers will use the data collected during the first phase, which will last a year, to design the second phase that aims to produce user-friendly ways to manage individual appliances, systems, electric vehicle charging and rooftop PV systems. The second phase will involve up to 1,000 homes and 75 businesses. 

Project team members include the UT Austin, Incenergy, Austin Energy, Texas Gas Service, Environmental Defense Fund, the City of Austin and the Greater Austin Chamber of Commerce. 

Austin Energy, a smart grid success story, has already deployed 400,000 meters with only 25 meters having to be replaced and only a little over 200 requesting meter accuracy tests. Austin Energy credits its success to understanding what customers really want and having an extensive communication and outreach effort.  

The Pecan Street Project seeks to continue the success that Austin Energy achieved by following the same customer-oriented approach: Two of the participants in the demonstration project serve on the executive committee, offering a valuable customer perspective. Imagine that! Customer involvement in the planning process! A great idea that should reap benefits as it will provide the project team with valuable insights on customer values and behavior.     

On January 18, 2011, I attended a breakfast sponsored by the Energy Bar Association and the Federal Communications Bar Association where DOE’s general counsel, Scott Blake Harris, discussed two DOE reports released on October 5, 2010, on Smart Grid policy issues: Data Access and Privacy Issues Related to Smart Grid Technologies (See my blog entry of January 7, 2011 for a summary) and Communications Requirements of Smart Grid Technologies. In highlighting the need for smart grid advancements, Scott pointed out that our current electric infrastructure was created before the micro-processor. DOE has supported the cause by investing $4.5 billion dollars in smart grid issues. Of this amount, $3.5 billion were in American Recovery and Reinvestment Act grants. After the breakfast, I sat down with Scott to further discuss the issues:

Linda Evers: We’ve heard a lot about the Home Area Network and the benefits the Smart Grid is going to bring to residential customers. Can you talk about the benefits it will bring to businesses?

Scott Blake Harris: You don’t get benefits for consumers without benefitting the economy more broadly. The idea is that some Smart Grid Technologies will enable consumers to control their costs and monitor their energy usage. In doing so, consumers will be buying new devices, such as advanced electronics, which in turn will allow companies to offer new services. You will find that consumers and businesses both benefit. In addition, I think it will help all consumers, including businesses, control their energy costs and their energy usage. And as the smart grid adds intelligence to the network, you will find that power generator, transmission and distribution companies will receive will benefits as well.

Evers: 2010 was a really, really rough year for Smart Meters. In his Public Utilities Blog – PUB, Michael Burr referred to it as a “Smart Grid Smackdown.” Many electric distribution companies were forced to do additional filings to justify their Smart Meter Deployment Plans and also to address health concerns. Are there any plans to further educate the state commissions on some of these issues to possibly alleviate some of this going forward?

Harris: I don’t think anybody should be surprised that, as you roll out new technologies, a variety of questions will be asked. I also think it’s appropriate. I also think the utility sector has not had as much experience as other regulated sectors in terms of rolling out new technologies and answering all the questions that are raised by consumers and advocacy groups. So I think what we saw over the summer was not a “smack down,” but was a normal response to the roll-out of new technologies.

Moreover, although questions were raised and utilities ended up having to file more information with the State PUCs, in the end most PUCs allowed utilities to go forward with their plans. I don’t see anything terrible about the utilities having to provide additional justification to the PUCs to win public approval.  

I do believe these technologies are valuable, safe and economically viable. And I don’t think anyone needs to educate PUCs or educate state decision makers. These are very bright, very capable people. They will evaluate the evidence themselves, they will find precedents and they will inform themselves about the information that is available.

Having said that, I do think there is a role for the Department of Energy and the federal government. We have just created a web portal (www.gc.energy.gov/1592.htm) where we hope to bring together states, federal agencies, utilities, telecom companies and other stakeholders. We hope this site will become a resource for decision makers to learn about “best practices” and to access information – technical and otherwise – that will be of assistance.

Evers: Finally, you and I could probably talk about the Smart Grid for several hours and still have many things left to say about it. But the general public still may have no idea what we’re talking about when we say “Smart Grid.” Even many business owners, where having real time data can certainly help them manage their expenses and perhaps even become more profitable are not as aware of the Smart Grid as they should be. Share with me your ideas on what you think can be done to better inform the public?

Harris: There are two answers to that. First of all, for a roll-out of Smart Grid technologies to take off, particularly if you are talking about from the meter into the home, consumers are going to have to be more engaged.

Second, I don’t think consumers need to fully understand the Smart Grid. For example, I will be willing to bet that right now as you interview me on your iPhone, you don’t know what portion of the spectrum you will be transmitting on when you text or make your next call. I’m reasonably sure you can’t tell me how your text messaging is different from your phone transmission, which is different from how you send or receive your e-mail. It doesn’t matter, right? You have an iPhone and use these services because they are functional and they are cool.

Evers: And I don't need to know. It works when I need it. That’s all I care about, right?

Harris: That’s right. It meets your needs, it’s fun and it can do all this great stuff. Consumers will get engaged with the Smart Grid when they get the devices and services they want and need. I believe that’s coming. I also believe regulators, and government officials like me, tend to underestimate what consumers will be interested in and how they will react. And my guess is as we look to the future of the Smart Grid and home area networks, we are underestimating what businesses will offer to consumers and how consumers will react. They will offer, I believe, the Smart Grid equivalent of an iPhone. That’s when it’ll take off in consumer consciousness.

New tools and models are required for the smart grid to reach its potenial while maintaining bulk power system reliability, says a North American Reliability Corporation (NERC) report released on December 2, 2010.

The report is a high-level, preliminary assessment of potential reliability considerations. “This preliminary assessment reviews how the evolving integration of the smart grid can support bulk power system reliability,” said Mark Lauby, Director of Reliability Assessment and Performance Analysis at NERC. “It will be vital that the system is planned, designed and operated to address the grid stability and cyber considerations.”

The report highlighted concerns about the number of new devices being connected to the grid. It states that a robust certification process is needed to ensure that new smart grid devices and systems are added to a grid function in the manner in which they were intended.

It is not sufficient that smart grid devices and systems be certified. Rather, there must also be a robust change control process that will allow entities to document changes made to devices and systems after they are purchased and installed. Page 82.

The report also addresses the need for NERC to enhance its standards as the smart grid evolves to address areas that have not previously been covered by NERC reliability standards.

NERC is the electric reliability organization (ERO) certified by the Federal Energy Regulatory Commission to establish and enforce reliability standards for the bulk-power system.

BGE took the political high road and decided to move forward with a modified version of its smart grid plan despite not receiving cost recovery via a surcharge tracker. In a news release the day it filed its modified proposal, BGE president and chief executive officer, Kenneth W. DeFontes expressed disappointment over the Commission’s June 21,2010 order but remained hopeful the revised plan would get approved; allowing the company to get on with the business of enhancing reliability, move toward meeting its EmPOWER Maryland goal to reduce energy consumption by 15 percent by 2015 and put to use the $200 million stimulus grant the company was in jeopardy of losing. 

Although the revised plan was approved and the Maryland PSC stressed its decision should not be viewed as a no confidence vote in smart grid technology, the Commission also remained unpersuaded from its original position on cost recovery.  The 51 page decision states:

...we will not authorize cost recovery for any approved 'smart grid' or AMI project through a surcharge." We reached that conclusion because the proposed AMI deployment "would represent a large, but classic investment in BGEs distribution infrastructure," precisely the kind of investment that BGE has recovered through traditional ratemaking for a century. We are not persuaded to deviate from these principles by BGEs arguments regarding the magnitude of the AMI investment or the possibility of negative reactions from credit rating agencies. Pg.32

When announcing its intent to proceed with smart grid implementation, BGE highlighted the Commission’s support of prudently incurred cost recovery rather than “unfair, post hoc nickling-and diming.”  This was no doubt a shout out to the victorious AARP and the OCP!