Closer coordination between FERC and CFTC (and perhaps also with DOJ) will increase enforcement risk for energy industry traders.
The smart grid and the slippery business of setting industry standards.
By the time the curtain fell on the technical conference on smart grid interoperability standards January 31 at the Federal Energy Regulatory Commission (FERC), it was clear that the first five of those standards—a group of standards “families” proposed by the National Institute of Standards and Technology (NIST) and submitted to FERC for review the previous October—were dead in the water.
Beyond that, all was a muddle.
And confusion remained, after utilities, regulators, trade groups, and smart grid contractors and vendors had weighed in on the dozen or more questions that FERC had posed to follow up on problems discovered at the January session. For example, what did Congress intend in section 1305 of the Energy Independence and Security Act of 2007 (EISA), in which it tabbed NIST to develop a framework of protocols and model standards for smart grid devices and systems, and instructed FERC (upon finding a “sufficient consensus”) to adopt those standards, but only “as may be necessary” to assure functionality and interoperability of the smart grid?
At the conference, and again in follow-up comments, utilities and vendors alike urged the commission to go back to square one and define exactly what it would mean for FERC to “adopt” a smart grid standard in a formal rulemaking case.
As was stated by no less an authority than John McDonald, chair of NIST’s Smart Grid Interoperability Panel (SGIP)—the group that now heads the process to develop more standards—and more than 20 of his fellow board members and SGIP leaders, the relationship between NIST and FERC “is confusing.
“Compounding this situation,” wrote McDonald and his colleagues, “is a lack of a clear, actionable statement of interoperability. The current lack of clarity on purpose and process was brought to a head with the testimony presented at the … conference.” (See, Comments of Members of SGIP Governing Board and Plenary Leadership, FERC Docket RM11-2, filed April 8, 2011.)
There is some cause for optimism, however, in that virtually all agree that industry standard-setting isn’t amenable to point-in-time decisions and rulings. Rather, the process must be fluid and evolving, marked by collaboration and consensus-building, with no real end point. Regulators can’t set technical specifications in stone, but can only offer guidance, by approving a general framework and process calculated to lead eventually to workable standards. Think of the Internet, which has evolved without mandatory, government-approved technical standards. With the smart grid, utilities and vendors will have their choice of standards. They won’t “comply” with standards; they will elect to “use” them.
Smart grid technologies are developing at a furious pace: for equipment, devices, communications, data, and interfaces between the retail customer premises and power delivery systems—be they distribution, transmission, or wholesale market structures. As the SGIP leaders point out, national or regional smart grid standards efforts like the SGIP are underway in Australia, Brazil, Canada, China, European Union, India, Japan, Korea, and Russia.
“Regulators can help these processes,” they add, “by