States Leading Smart Grid Efforts

The reality is that utilities are regulated by states so states and local governments have to make the decision and review the projects and frameworks, Andy Campbell, adviser for California PUC Commissioner Nancy Ryan, told us. There’s a critical mass of states that are moving to the same direction on smart grid, Campbell said. But there are also many states and utilities that are not moving very quickly, he said. Some regulators are still skeptical, he said. There are a handful of states that are involved in the Smart Grid Interoperability Standards Project by the National Institute of Standards and Technology, said Paul Boynton with NIST’s smart grid team. The SGIP is actively reaching out to state commissioners, he said.

Ten states -- California, Colorado, Florida, Massachusetts, New Jersey, New York, North Carolina, Ohio, Pennsylvania and Texas -- are “laying the groundwork for market development” of the smart grid, said Greentech Media Research analyst Steven Munro in a research report. California has a very ambitious advanced metering initiative goal - 21 million installations, Munron said. Together, these states have been awarded 42 percent, or $1.9 billion, of the $4.5 billion in stimulus funding for the smart grid.

Regulators in numerous states are active in smart grid initiatives, Ohio’s Public Utilities Commissioner Paul Centolella told us. A role for the federal agencies is to remove barriers for consumers, he said. There should also be ongoing discussions on how to come to broad agreement on policy principles, he said. Ohio is looking at encouraging utilities to develop experimental programs that look at ways to roll out dynamic pricing and information feedback, among others, he said. That way the regulators can determine what would work the best for consumers, he said. Initial deployment is going well and “we just started to engage consumers in rate designs,” he said.

Generally there are a handful of states stepping ahead on smart grid, said a spokesman with the National Association of Regulatory Utility Commissions (NARUC). The group is collaborating with the Federal Energy Regulatory Commission and other agencies on various smart grid issues. Smart grid should stay at states and states should be able to move at their own pace, he said. A federal mandate on smart grid is unnecessary, he said.

The communications service providers definitely play an important role, Centolella said. The Ohio Public Utilities Commission sees smart grid as the integration of the open architecture of the communications network with the grid, he said. It’s the communications network that really provides the platform for a range of applications, he said. There’s always the question of how commercial networks can meet the requirements for smart grid, he said. “We do see some existing telecom operators play in this space” while some operators might need to upgrade their networks, he said. “It’s a matter of what can meet the requirements,” he said.

One concern about dynamic electricity pricing is that it could disproportionately affect the poor who, while being highly price sensitive and likely to shift consumption when they could, would be less able to absorb price peaks, said Matthew Kahn, an economics and public policy professor at UCLA’s Institute of the Environment. But this shouldn’t be a road-block because while raising prices at certain times, the pricing system could reduce a household’s overall costs, he said. As consumers receive real-time information about the cost and consumption and utilities launch dynamic pricing linked to demand, the theory is that consumers will respond by reducing their use and shifting it to times of day when electricity is cheaper, he said.

As California rolls out its advanced metering infrastructures and additional smart grid applications, a challenge is to make sure what is being done in California is consistent with what other states are doing, California PUC’s Campbell said. “Standard is a big thing” and the states want to make sure it’s consistent with the national standards to ensure lower cost and compatibility, he said. It also helps if more states would move forward with the same path and direction, he said. “That would really help us with general market developments.” There’s no centralized best practice but there’s a lot of information sharing, he said. Another challenge is maintaining a focus on consumers and making sure the consumers understand the benefits, he said. Consumer education and consumer oriented planning should happen early in the deployment circle, he said. Many utilities think about the grid projects from an engineering side and that needs to change, he said.

Security and customer data privacy are critical for any smart grid project and such principles should be considered early in the deployment process, said Commissioner Rick Morgan of the District of Columbia Public Service Commission. In its study of privacy and the smart grid, NIST acknowledged that while some state commissions like California, have protected the data generated by the smart grid, the majority of the states have yet to do so, noted Sherry Lichtenberg, principal for telecom at the National Regulatory Research Institute. While some state commissions such as Maryland have required customer education programs as part of the smart grid implementation process, the rules vary depending on where the state is on the continuum of smart grid implementations, she said. States like Texas and California, where smart grid pilot programs are already under way, are farther along than Nevada, where a smart grid is just now being proposed, she said.

Unlike the telecom industry, which follows the customer privacy rules laid out by the FCC, no single body has the authority to develop and enforce a comprehensive scheme for the protection of consumer energy data, she noted. Rather, state regulators will have to assess how (or if) existing regulations apply to the smart grid and determine whether these regulations will have to be adjusted and/or new regulations will have to be developed, she said. Currently, only California has enacted customer information regulations designed specifically for the Smart Grid, although Texas has begun to address this issue and other states, like Colorado, are studying it in depth, she said. The FCC’s Customer Proprietary Network Information rules create a baseline for smart grid privacy regulation, she said.