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Federal-State Partnership

Transforming DR and smart-grid policies into reality.

Fortnightly Magazine - January 2010

to address this concern. It proposed to adopt standards for business practices and communications protocols that will require the operators of the organized wholesale electric markets to provide access to information, including common definitions, operational criteria, and performance measurement techniques for quantifying the value of DR products, to all participants in these markets. The FERC notes that these standards will facilitate the greater participation of DR providers in the markets and an opportunity for more customers to participate in these programs.

However, these standards don’t require standardization of DR products and services. To its credit, the FERC notes that these are just “a starting place” for developing more comprehensive standards. There is, however, considerable push-back from the ISOs and from among their stakeholders to standardizing markets that they argue reflect legitimate regional differences. It remains unclear how hard the FERC is prepared to push the regional transmission organizations and independent system operators toward a common set of products, services, and quantification techniques that not only are simple to understand and access, but that also will allow DR and smart-grid service providers to replicate and deliver their technologies across the country. A more concerted push to real standardization is required to avoid stifling technical innovation, new services, and competition.

Second, FERC should consider the burden imposed on DR service providers by non-uniform distribution utility communications and telemetry requirements. While ordinarily DR resources already are interconnected to the electric grid, they nevertheless will be responsible for the communications and telemetry that distribution utilities require to provide the necessary metering and controls. Allowing hundreds of distribution utilities to have their own individual requirements and procedures will impede the development of readily available and low-cost devices that end-use customers will need, and will stifle technical innovation and the development of new products. FERC should pursue development of uniform requirements, through rules for FERC-jurisdictional utilities, whether or not in organized markets, and through the National Action Plan for state-jurisdictional situations.

Third, security and communications used to operate the electric grid, more than ever, are critical components of the electric system. Yet, responsibility for cyber security can be costly and burdensome for a start-up company considering providing technology or services for the smart grid. Numerous comments on FERC’s proposed Smart Grid Policy Statement and Action Plan raised concerns about the potential for the North American Electric Reliability Corporation’s (NERC) cyber-security rules to reach down to the retail level where impacts on system reliability are minimal, and to impose unnecessary compliance costs on service providers and would-be entrants. The FERC basically punted on this issue, deferring to the NIST stakeholder process and NERC critical infrastructure protection reliability standards development processes. While both NIST and NERC now are beginning to take up this issue, these processes remain obscure for many potentially affected parties. Due to the importance of this issue and the potential negative effect that liability for NERC compliance may have on product and service development, FERC may wish to reconsider its posture and hold a technical conference or other forum to air both the issues and concerns more