(November 2009)Regulators are in the unenviable position of determining an allowance for ROE that’s fair to consumers and investors in a volatile economy. The cases that stand out this year...
Transforming DR and smart-grid policies into reality.
action. Between 2005 and 2008:
• 35 states engaged in regulatory policy making on DR;
• 22 states engaged in legislative policy making on DR;
• 18 states engaged in regulatory policy making on smart grid and advanced metering;
• 10 states engaged in legislative policy making on smart grid and advanced metering;
• 38 states initiated action to consider implementation of time-based metering and rates in compliance with EPACT; and
• 32 states completed action. 5
The FERC’s most recent assessment found that 26 utilities in 19 states have announced, or are pursuing, advanced meter pilots or full-deployment programs. Significantly, the FERC also found that nearly every retail regulatory filing for advanced metering in the past year also included a request to approve dynamic pricing. 6
Smart Grid Infrastructure
Even before the Obama Administration and Congress committed to inject more than $4 billion in matching grants to promote smart-grid investment and pilot program grants under the ARRA, 7 state commissions, investor-owned utilities, and municipal utilities had taken bold steps to fund large-scale implementation of smart-grid infrastructure. For example, in September 2008, the California Public Utilities Commission approved $1.63 billion in ratepayer funding for installation of 5.3 million new smart meters for Southern California Edison’s residential and small-business customers. 8 By late 2008, Austin Energy was well on its way toward 100-percent coverage of its customer base with smart-grid meters and thermostats—close to 500,000 devices. 9 In 2008, the Public Utility Commission of Texas approved installation of more than 3 million advanced meters in Oncor’s service territory by 2012, and 127,000 advanced meters in CenterPoint Energy’s Houston service territory.
However, the $4 billion in ARRA federal matching grant money earmarked for DR and smart-grid investments and development—part of $11 billion in stimulus funds committed for smart-grid development—appears to be the accelerant causing the congressional policy to catch fire. With matching funds approved by state regulators, utilities have proposed to invest many hundreds of millions of dollars in the smart grid. In response to the initial August 2009 deadline for matching grant proposals, DOE reported a total of 431 applications, with a project value of $26.4 billion—almost six times the authorized amount. From these, DOE in late October selected 100 applicants to receive $3.4 billion in investment grants—for projects with a total value of $8.1 billion. For example, San Diego Gas & Electric will receive $28 million to deploy 1.4 million smart meters; NV Energy will receive $138 million to link 1.35 million smart meters and other smart-grid technologies in its territory; CenterPoint Energy’s award of $200 million will fund installation of 2.2 million smart meters and advanced system protection devices; Consolidated Edison was awarded $136 million to fund a variety of smart-grid deployments in New York City; and Florida Power & Light will receive $200 million to implement a comprehensive smart-grid program that includes installing 2.6 million meters by 2014. Since these are requests for matching funds, state commissions will be called upon to authorize at least the same order of ratepayer funding. Indeed, some state regulators instituted rate recovery proceedings for