(August 2011) Economic consultant Michael Rosenzweig challenges Constantine Gonatas’s proposal for ensuring FERC’s demand response rulemaking achieves its objectives. Also, Juliet Shavit...
Technology for the Masses
The consumer-centric smart grid and its challenge for regulators.
design standards and control the energy-use space as they do now. The full implications for traditional utility companies are unclear. However, waiting in the wings doesn’t seem like a strong or viable economic survival strategy given the size and past track record of the technology innovators that are poised to enter this market.
Securing the privacy of consumer data and energy use information is an essential regulatory goal. Security and reliability are also paramount regulatory and legislative concerns. Attachments to a particular utility’s meter will require regulators to authorize and approve the terms and standards of any such access. Questions, however, remain. For example, will regulators require an open access technology or will they lock meters and attachments to a single source, much like the way cellular devices work on only one provider’s network? To what extent will third parties be able to enter the customer’s premises with the customer’s approval? One option would be to require that these third party entities be utility contractors or even affiliates. Another regulatory choice is for the utility to sell data access directly, or to provide energy use data after the utility initially processes the consumer information. The regulatory details and choices are plentiful. No state is likely to proceed in exactly the same manner as another. Sharing results and learning from others is the likely path that state regulators will take if they drive the change.
This issue often becomes a jurisdictional question: what types of businesses are and aren’t subject to the jurisdiction of a state regulatory authority? Many unregulated parties are reluctant to submit to such jurisdiction in any respect, and this reluctance is understandable. On the other hand, if privacy and other issues that could result in tort liability are held to be subject to the jurisdiction of a state regulatory authority, then it’s at least possible that lengthy and expensive court disputes could be obviated by asserting the “primary jurisdiction” doctrine. Another potential concern is the degree to which standardization will be deemed important enough to restrict what can be offered to consumers and attached to the utility meters. Standards will be a challenge, as the FERC is finding as it attempts to establish consensus for protocols and model standards that Congress, with little clarity, proposed in Section 1305 in the 2007 EISA. 11
Technology is difficult to control or regulate away from a growing number of customers who are technology savvy, or at least not technology phobic. Equipment can now be added to existing traditional analog meters that will provide the same on-premise use and management functions that a utility smart meter would provide. This raises particular regulatory and competitive challenges for the utility industry, third-party potential competitors, and their regulators. Electricity revenues in the U.S. exceed $350 billion, and natural gas revenues, after removing electricity generation, are more than half that amount. The potential market for energy efficiency to curb these expenditures could easily approach $50 to $150 billion of annual savings, assuming a conservative energy efficiency technology could achieve 10 to 30 percent savings. Keeping the technology