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Techno-Regulation

The smart grid and the slippery business of setting industry standards.

Fortnightly Magazine - June 2011

“someone who decides to open a one-person business has the same vote as a utility that is responsible for … serving millions of customers.”

The Edison Electric Institute, in comments filed April 8, argued that stakeholder voting wasn’t balanced, and suggested that the SGIP process should adopt sector-weighted voting, as is commonly used in RTOs and ISOs. Comments from FP&L and PJM advocated sector-weighted voting as well. However, the EEI comments also recommended two key important ideas.

First, EEI recommended the SGIP form two new working groups within its process—a Reliability Working Group (RWG) and an Implementation Review Group (IRG)—to heighten awareness of problems related to electric system reliability and smart grid implementation, including impacts on retail customers and especially the problem of still-serviceable but outdated legacy software at regulated utilities that might be left stranded by new smart grid standards (See Figure 1) .

Second, EEI advocated a novel interpretation of FERC’s statutory obligation under EISA to institute a rulemaking and “adopt” standards developed by NIST “as necessary.”

Under EEI’s interpretation, FERC’s adoption of standards should come in the form of guidance—not an enforceable mandate. EEI argues that FERC may adopt only those standards that pertain directly to its traditional jurisdiction over interstate transmission, the bulk electric system, and wholesale power market structures. And even then, EEI urges that FERC should adopt only those standards that aren’t already catching on in the industry.

As EEI explains, FERC should “take regulatory action to encourage or promote the adoption of a standard needed for interoperability that, for whatever reason, is not otherwise being implemented by the industry.”

But EEI never really explains how an adoption by FERC rule without any enforceable mandate will spur implementation that was lacking previously under a voluntary standard that was never adopted.

Some agree with EEI that FERC’s powers of smart grid oversight must emerge, if at all, out if the commission’s traditional turf under the Federal Power Act. Others disagree, such as Jordan Doria, manager of stakeholder engagement for the Ingersoll Rand Center for Energy Efficiency and Sustainability:

One of the smart grid’s main goals, writes Doria, “is more efficient use of energy, both upstream and down.

“Facilitating interoperability only in interstate transmission and wholesale markets ignores the downstream entirely, but also, more importantly, ignores the notion of increased connectivity between the two.”

Cleveland from Xanthus agrees that FERC’s smart grid interest is far more extensive than interstate transmission and wholesale markets, as does FERC itself, which claimed authority in its July 2009 policy statement to adopt smart grid standards that affect all facilities, including meters and communications protocols at the distribution level.

But the last word belongs to PJM, which took a distinctly minority position in reply comments filed April 22 by vice president Craig Glazer and Counsel Robert Eckenrod:

“Congress” they wrote, “clearly intended the final standards to be adopted by FERC to have a legally binding effect.”

Otherwise, they explained, RTOs and other grid operators would be “powerless” and required to interact with “nonconforming entities” who can’t respond to grid operator reliability and market