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2. Smart Grid Regulators
4. Business Case
7. Success Criteria
- Electric power industry policy is a hodge podge, rooted in the federalism of 50 state laboratories. There is no coherent national vision and policy. Industry structure: There are overlapping federal and state authorities. Federal legislation (Energy Policy ACT, 1992) sanctions independent power producers (IPPs) and requires transmission owners to provide IPPs open, nondiscriminatory access to their transmission facilities and wholesale power markets. Some states have required IOUs to divest their generation assets and procure additional power supplies from IPPs. Other states, primarily in the northwest and southeast, have not required such IOU restructuring.
- Reliability standards: Federal legislation (Energy Policy Act, 2005) mandates reliability standards for the entire American electric power industry.
- Wholesale rates: Federal Energy Regulatory Commission (FERC) approves wholesale market designs of RTO/ISOs. FERC also determines whether wholesale market prices are “just and reasonable.
- Three decades ago, one phone company was the monopoly provider of services across much of the United States, and it was illegal to plug other companies’ telephones and devices into that company’s network. Today, telecommunications choices and services are much greater thanks to legislation and technological advances that broke up the monopoly and later opened the door to competition in the telecommunications industry.
- The FCC, regulating communications (AT&T), and the Justice Department, regulating computers (IBM), held years of hearings about the exact distinctions between communications and computers, so they could harden their categories. The Internet showed communications and computers to be inextricably linked.
- The voice, video, and data monopolies and their regulators were surprised when voice became more than telephone service, video became more than television, and both became data on the Internet..
- There is growing attention to demand response measurement and verification, with many entities such as the FERC, RTOs and ISOs, NAESB, state electric regulatory commissions, and several regional research entities all examining how to develop measurement and verification protocols or standards that accurately measure load reductions.
2. Smart Grid Regulators
- CEC – California Energy Commission - (Wikipedia) - Sacramento, CA - The state's primary energy policy and planning agency. Responsibilities include:
- Forecasting future energy needs and keeping historical energy data.
- Licensing thermal power plants 50 megawatts or larger.
- Promoting energy efficiency by setting the state's appliance and building efficiency standards and working with local government to enforce those standards.
- Supporting public interest energy research that advances energy science and technology through research, development, and demonstration programs.
- Supporting renewable energy by providing market support to existing, new, and emerging renewable technologies; providing incentives for small wind and fuel cell electricity systems; and providing incentives for solar electricity systems in new home construction.
- Implementing the state's Alternative and Renewable Fuel and Vehicle Technology Program.
- Planning for and directing state response to energy emergencies
The CPUC Regulates: Five commissioners each serve staggered six-year terms as the governing body of the agency. Commissioners are appointed by the governor and must be confirmed by the California State Senate. The Commission meets publicly twice a month to carry out the business of the agency, which may include the adoption of utility rate changes, rules on safety and service standards, implementation of conservation programs, investigation into unlawful or anticompetitive practices by regulated utilities and intervention into federal proceedings which affect California ratepayers.
- Privately-owned utilities in the state of California, including electric power, telecommunications, natural gas and water companies.
- Common carriers including household goods movers, passenger transportation companies (like limousine services)
- Adoption of utility rate changes,
- Implementation of conservation programs
- Rules on safety and service standards
- Investigation into unlawful or anticompetitive practices by regulated utilities and intervention into federal proceedings which affect California ratepayers.
- Establish service standards and safety rules
- Authorize utility rate changes
- Oversee markets to inhibit anti-competitive activity
- Prosecute unlawful utility marketing and billing activities
- Govern business relationships between utilities and their affiliates
- Resolve complaints by customers against utilities
- Implement energy efficiency and conservation programs
- Implement programs for the low-income and disabled
- Oversee the merger and restructure of utility corporations
- Enforce the California Environmental Quality Act for utility construction
The goals of the EAC are to:
- Advise on electricity policy issues pertaining to the Department of Energy.
- Review and make recommendations concerning DOE electricity programs and initiatives.
- Advise DOE on issues related to current and future capacity of the electricity system (generation, transmission and distribution, regionally and nationally).
- Advise on the coordination between DOE and state and regional officials and the private sector on matters affecting electricity supply, demand and reliability.
- Advise on the coordination between Federal, State and utility industry authorities required to cope with supply disruption or other emergencies related to electricity generation and distribution.
- POLICY QUESTIONS ON ENERGY STORAGE TECHNOLOGIES, APRIL 8 2011
Memo to Secretary of Energy Steven Chu and Assistant Secretary for Electricity Delivery and Energy Reliability Patricia Hoffman View PDF >
- RECOMMENDATIONS TO ADDRESS POWER RELIABILITY CONCERNS, MARCH 10 2011 - Memo to Secretary of Energy Steven Chu and Assistant Secretary for Electricity Delivery and Energy Reliability Patricia Hoffman View PDF >
- ENERGY STORAGE ACTIVITIES IN THE UNITED STATES ELECTRICITY GRID, MAY 2011 View PDF >
- FINAL ENERGY STORAGE REPORT, 2009 View PDF >
- FINAL SMART GRID REPORT, 2009 View PDF >
- FINAL ELECTRICITY SUPPLY ADEQUACY REPORT, 2008 View PDF >
At hearings relating to its broadband initiative, the FCC heard power executives say that utilities need a dedicated chunk of bandwidth to use for the Smart Grid. Among those arguing for Smart-Grid specific bandwidth were American Electric Power, a leading power producer; Trilliant, a Smart Grid hardware and wireless communications company; and GridPoint, a Smart Grid software company. Not everyone agreed, however. Expressing the minority view was SmartSynch (now Itron Cellular Solutions), a company that uses IP over existing wireless networks for its metering products. SmartSynch opined that utilities already have access to multiple Smart Grid broadband networks.
The development of a Smart Grid broadband policy was mandated by the American Reinvestment and Recovery Act (ARRA) passed earlier this year.
The mission of the Task Force is to ensure awareness, coordination and integration of the diverse activities of DOE's Office of Electricity Delivery and Energy Reliability and elsewhere in the Federal Government related to Smart Grid technologies, practices, and services.
The Commission also was given a new responsibility under the EISA, to issue a rulemaking to adopt standards and protocols to ensure Smart Grid functionality and interoperability in interstate transmission of electric power and in regional and wholesale electric markets
NERC sets adequacy and reliability standards for utility facility owners and operators. A non profit company formed by the electric utility industry in 1968 to promote the reliability of the electricity supply in North America. NERC includes ten Regional Reliability Councils. NERC establishes reliability standards for planning and operations in order to improve the reliability and security of the North American bulk power system. NEC is taking responsibility for setting security standards for some utility operations. And has developed Cyber Security Standards. NERC Standards CIP-002 through CIP-009 provides a cyber security framework for the identification and protection of Critical Cyber Assets to support reliable operation of the Bulk Electric System
- EISA 2007 - The Energy Independence and Security Act of 2007 - Deploying the Smart Grid became the policy of the United States with passage of the Energy Independence and Security Act of 2007 (Title 13). The stated purpose of the act is “to move the United States toward greater energy independence and security, to increase the production of clean renewable fuels, to protect consumers, to increase the efficiency of products, buildings, and vehicles, to promote research on and deploy greenhouse gas capture and storage options, and to improve the energy performance of the Federal Government. EISA requires FERC, once sufficient consensus has been achieved through a process managed by NIST, to adopt standards and protocols necessary to ensure Smart Grid functionality and interoperability in the interstate transmission of electric power and in regional and wholesale markets.
- EPACT - Energy Policy Act of 1992 - Enacted 14 years after PURPA, again in an era of concern about the nation’s dependence on imported fuels. It required that competitive generators or any utility be given access to the utilities’ transmission grid on rates and terms that were comparable to those that the utility would charge itself for access to the grid. This access to the transmission grid became indispensable to the growth of wholesale power markets, whereby power generators can use the transmission system to send power to one another at fair and predictable rates and terms.
EPACT92 effectively deregulated wholesale generation by creating a class of generators that were able to locate beyond a typical service territory with open access to the existing transmission system. EPACT requires that competitive generators or any utility be given access to the utilities’ transmission grid on rates and terms that were comparable to those that the utility would charge itself for access to the grid. The resulting competitive market encouraged wholesale, interstate power transfers across a system that was designed to protect local reliability, not bulk power transfers.
- EPACT05 - Energy Policy Act of 2005 (P.L. 109-58) set in place government activities intended to relieve congestion on the transmission system. The law creates an electric reliability organization that is to enforce mandatory reliability standards for the bulk-power system. In addition, processes are established to streamline the sitingof transmission facilities.
- ISO - Independent System Operator - An independent entity that controls a power grid to coordinate the generation and transmission of electricity, provide open transmission access to all market participants on a nondiscriminatory basis, and ensure a reliable power supply. Each ISO coordinates controls and monitors the operations of the electrical power system. An ISO is usually not for profit and can advise utilities within its territory on transmission expansion and maintenance, but does not have the responsibility to carry out the functions/ There are currently eight ISOs including Alberta, California, Florida, New England, New York, Ontario, and Texas plus four RTO’s. Cal-ISO regulates the transmission system within the State of California including Approval authority over Transmission Expansion Projects.
- NERC – CIP - Cyber Security Standards - NERC Standards CIP-002 through CIP-009 provides a cyber security framework for the identification and protection of Critical Cyber Assets to support reliable operation of the Bulk Electric System. These standards recognize the differing roles of each entity in the operation of the Bulk Electric System, the criticality and vulnerability of the assets needed to manage Bulk Electric System reliability, and the risks to which they are exposed.
- PURPA - 1978 Public Utility Regulatory Policies Act - Required that utilities buy power from companies that were not utilities. PURPA created a new industry of nonutility power generators. It was important to transmission policy because it required that the nonutility generators be given access to the transmission system in order to deliver their power onto the grid.
- RTO – Regional Transmission Organization - Similar to an ISO though controls the operation of electric power transmission system over wider areas. An independent organization that coordinates, controls, and monitors the operation of the electrical power system and supply in a particular geographic area; similar to Independent System Operator. Where RTOs exist, the RTO and the transmission owners in the area decide which one (or both) prepares and submits transmission rates to FERC for approval.
- SB 17 - California law requiring utility regulators plus every major utility in the state to develop a smart grid deployment plan. SB 17 was signed into law in October 2009 as Chapter 4 of California’s Public Utilities Code.
It is the first smart-grid-only bill of its type that puts in place a precise timetable, both for the state to coordinate and produce some specificity about what it wants in a smart grid plan and for the utilities to respond.
The new law requires California’s PUC to create a statewide smart grid deployment plan by July 1. The PUC has to work with the State Energy Resources Conservation and Development Commission, the state’s ISO “and other key stakeholders” to create that plan, says the law.
The law requires every electric utility in the state with over 100,000 customers to develop its own a smart grid deployment plan by July 1, 2011. It allows, but does not require, other organizations to submit such plans. Every utility’s plan has to conform to the plan created by the PUC (DECISION ADOPTING REQUIREMENTS FOR SMART GRID DEPLOYMENT PLANS PURSUANT TO SENATE BILL 17 (PADILLA), CHAPTER 327, STATUTES OF 2009) -- and ensuring conformity and the compatibility of the utilities’ varied plans will fall to the California Energy Commission.
4. Business Case
- One of the Federal Government’s top smart grid priorities is the work of NIST and FERC on a framework for interoperability standards. (See my Blog Article Standards Development Process) EISA requires FERC, once sufficient consensus has been achieved through a process managed by the National Institute of Standards and Technology (NIST), to adopt standards and protocols necessary to ensure Smart Grid functionality and interoperability in the interstate transmission of electric power and in regional and wholesale markets. This effort is focused on an accelerated timetable. The key balancing point is to develop standards that enable interoperability without being so prescriptive that prevents innovation.
- The task is akin to developing standards for the next-generation telecommunications network. This effort has spanned many years, continues to evolve, and involves dozens of standards development organizations. Also, like the telecom network, the Smart Grid is almost entirely owned and operated by industry. Therefore, Smart Grid interoperability and cyber-security standards must reflect industry consensus, with active participation, and where required, leadership and coordination by government.
- Other Initiatives Government initiatives impacting the Smart Grid include:
- Federal Stimulus (See My Blog Article Smart Grid Stimulus)
- Renewable Energy Standard
- Energy Efficiency Resource Standard
- Climate Legislation
- Transmission Legislation
- Cyber Security Legislation
- Prevent Market Gaming - Enron On-Line gave traders access to game the market
- Secure Information Privacy - There is no statewide rule on how third parties may obtain access to customer usage information and how such rule will guide smart grid development. The CPUC should set data privacy and security rules for third party providers to obtain access to AMI data. The terms and conditions of any third party agreement must be transparent, accessible and easy to understand.
- Ensure Customer Access to Meter Data - Making information retrieval for customers and their independent aggregators of retail customer is time consuming and expensive. Timely access to customer meter data allows aggregators to assess the demand reductions achieved by their customers.
- Reliability Standards - Defined, written, measurable electric system practices and protocols created by NERC that have a material effect on reliability and enable operators to see when a standard is compromised. NERC has agreements with all electric utilities that call for them to comply with the standards, and sanctions exist for violations. For example, one reliability standard governs how facilities such as transmission lines are rated for power-carrying capability in order to avoid cascading outages and other problems. Another standard guides planners as to the types of system events to protect against. In July 2006, FERC designated NERC as the electric reliability organization under section 215 of the Federal Power Act, a new provision added by the Energy Policy Act of 2005 to establish a system of mandatory, enforceable reliability standards under FERC’s oversight.
- Consumer Opt Out - Prompted by health concerns from some activists about smart grid RF transmissions, some states are considering Smart Meter opt out plans. On May 19, 2011, after taking into consideration all public correspondence and filings, the Maine Public Utilities Commission issued a Part 1 Order requiring Central Maine Power to implement an opt out program. What is interesting about the order is that it seems to go beyond addressing the RF issues and requires more than what is necessary to comfort those customers with smart meter health concerns. As stated in its press release, CMP will provide residential and small commercial customers with four choices:
the default smart meter which will become the standard meter in CMP territory;
the ability to select a smart meter with the transmitter-off;
the ability to keep the customer’s existing analog meter; or,
the ability to move the new smart meters elsewhere on their property at the customer’s expense.
- Health Concerns - At the request of Assembly Member Jared Huffman (Marin) and Assembly Member Bill Monning (Santa Cruz), CCST (California Council on Science and Technology) agreed to compile and assess the evidence available to address the following two issues
- Whether FCC standards for SmartMeters are sufficiently protective of public health taking into account current exposure levels to radiofrequency and electromagnetic fields.
- Whether additional technology specific standards are needed for SmartMeters and other devices that are commonly found in and around homes, to ensure adequate protection from adverse health effects.
- Wireless smart meters, when installed and properly maintained, result in much smaller levels of radio frequency (RF) exposure than many existing common household electronic devices, particularly cell phones and microwave ovens.
- The current FCC standard provides an adequate factor of safety against known thermally induced health impacts of existing common household electronic devices and smart meters.
- To date, scientific studies have not identified or confirmed negative health effects from potential non‐thermal impacts of RF emissions such as those produced by existing common household electronic devices and smart meters.
Thus the utility naturally wants to maximize its operating flexibility by seeking to install the hardware with the broadest functionality, regardless of whether or not the economic return is necessarily well understood, and then wants to be able to use those assets to sell more electricity when the cost to generate the energy is lowest. This, in theory, will protect the utilities’ rate of return while reducing the absolute size of the rate increase required to pay for smart grid hardware.
It has also incentivized utilities to make large and potentially speculative investments. Choosing the costlier solution that promises a broad range of performance enhancements i.e. automation based on meter infrastructure (AMI) rather than a previously proven (and cheap) use of technology to automate the reading of meters (AMR).
A smart grid will require service providers to operate in new ways and be willing to take reasonable risks for reasonable rewards. Regulators will need to design rules such that customers who do not change are not worse off, but that businesses can pursue advantageous arrangements between participating suppliers and consumers.
- Federal legislation attempting to deal with this issue emerged in progressively stronger language, culminating in the Energy Policy Act of 2005 (EPACT 2005), which requires all state and non-state utilities to consider adopting interconnection standards based on Standard IEEE 1547. IEEE 1547, which was published in 2003, looks strictly at the technical aspects of distributed generation interconnection, providing a standard that limits the negative impact of these resources on the grid. In part to address some of the permitting aspects of interconnection, the FERC issued FERC Order 2006, which mandated that all public utilities that own transmission assets provide a standard connection agreement for small generators under 20 MW.
- While compliance with the FERC 2006 order is mandatory for public utilities that own transmission assets, other utilities have come under similar legislation at the state level. The progress in developing these laws, however, has been fairly slow. Even states complying with the mandatory FERC order have taken over two years to enact these relatively simple rules. States that have taken aggressive action on distributed generation have tended to do so for other reasons, such as meeting renewable-portfolio standard requirements.
- In 2008, the EPA did a study of the 50 states and the District of Columbia, assessing their standards for interconnection. The EPA’s study based its criteria for favorability on whether or not standard forms were in place, time frames for application approval, insurance requirements, distributed resource sizes allowable, and interconnection study fees. With these factors considered, only 15 states were classified as having “favorable” interconnection standards, with 27 states either being “favorable” or “neutral.” The fact that there are five states with unfavorable policies towards distributed generation is also cause for concern, although it is worth noting that that these states are all in the southeast region of the United States perhaps indicating a regional issue.
- California’s progressive distributed-generation interconnection policies place no limits on the size of the resource. This is coupled with strong incentives for renewable sources of energy, such as photovoltaic solar panels, primarily for the purpose of promoting cleaner alternative power sources and reducing transmission congestion. California’s policies have had a strong impact along the west coast.
7. Success Criteria
- Competitive Markets - The creation of viable state retail electricity markets
- Standardized Interconnection Rules
- Coordinated State and Federal Framework - Develop a regulatory framework that is harmonious on the federal and state level, encourages investment, and provides regulatory certainty on how costs are going to be recovered.
- CEC, CPUC, California Legislature, U.S. Congress, U.S. Dept. of Energy and the Dept of Commerce (NIST)
- Crucial that these various efforts proceed on an informed and coordinated basis, to avoid duplicative or contrary standards and policies
- Participate and agree to national standards
- Transparency - Transparency in decision making is a key factor in garnering support. Transparency includes both the identification of the decision makers and how decisions are made
- Smart Grid Legal News - Blog provides timely information and legal commentary on issues related to the smart grid, including activities at state regulatory commissions, the Department of Energy (DOE) and the Federal Energy Regulatory Commission (FERC).
- DOE Smart Grid System Report, July 2009 (PDF 6.21 MB) – Annex A and B (PDF 5.15 MB)
- EPIC's Legislative Center provides a listing and summary of pending energy-related legislation.
- Center for Sustainable Energy - California Energy Legislation
- EPA - Interconnection Standards Includes FAQ’s, Research Reports, State by State Assessments, Presentations and Links
- DOE - Goals for Smart Grid
- FERC – 2010 Assessment of Demand Response and Advanced Metering Staff Report
- DOE and the Office of ElectricTransmission and Distribution - Grid 2030 vision (PDF 1.1 MB) - Calls for the construction of a 21st century electric system that connects everyone to abundant, affordable, clean, efficient, and reliable electric power anytime, anywhere. We can achieve this through a smart grid, which would integrate advanced functions into the nation's electric grid to enhance reliability, efficiency, and security, and would also contribute to the climate change strategic goal of reducing carbon emissions. These advancements will be achieved by modernizing the electric grid with information-age technologies, such as microprocessors, communications, advanced computing, and information technologies