Federal Power Act

Smart Grid in America and Europe (Part II)

Past accomplishments and future plans.

Policy makers in the E.U. and the United States are taking different approaches to facilitating smart grid development. While both regions are setting standards that the rest of the world likely will follow, they also face difficult challenges in resolving issues around cost recovery, customer engagement and workforce preparedness.

Capacity Contest

Raising the stakes in RTO markets.

Generators and demand-response providers are reaping rewards in forward capacity auctions, causing suppliers to go shopping for the most lucrative markets. Now the Midwest ISO is trying to catch up, by proposing its own auction for years-ahead resource bids. But does RTO shopping serve the interests of customers, who are legally entitled to rates that are just and reasonable? Why are some state policy makers advocating a return to old-school RFPs for long-term contracts?

Smart Grid in America and Europe (Part I)

Similar desires, different approaches.

Smart grid is a global phenomenon, but different countries are taking different approaches—for different reasons. For instance, utilities in Europe are more focused on laying the foundation for distributed generation and microgrids, while the United States is more concerned about creating standards for interoperability and security. Understanding the differences can help decision makers deploy smart grid technology effectively and economically.

Too Much Reliability

NERC confronts a case backlog now numbering in the thousands.

The case backlog of unprocessed electric reliability violations is growing out of control, threatening to “swamp” the industry — a sign, perhaps, that when Congress and FERC modernized the electric reliability regime to serve a more market-based industry structure, and for the first time gave enforcement authority to North American Reliability Corp. (NERC) as the nation’s official electric reliability czar, no one gave much thought, apparently, as to whether NERC’s very idea of what constitutes reliability might have needed modernizing as well.

Transmission Preemption

Federal policy trumps state siting authority.

In some states, transmission projects have slowed to a halt as regulators attempt to substitute their own need determinations for those of RTOs. The federal framework encourages cooperation, but Congress and the courts have given FERC clear authority over interstate transmission systems.

Penalty Predictability Enhanced

FERC modifies its enforcement guidelines.

FERC’s revised policy provides greater predictability and transparency in the commission’s approach to determining civil and criminal penalties under its statutory authority. Despite a more systematic framework, however, FERC retains discretion to assess penalties based on the facts of individual cases.

Extreme Efficiency

Performance standards are a valid idea—if targets are achievable.

Performance standards are a valid and necessary idea to drive conservation, but only if targets are realistic and achievable. So far, success has been determined by program rationality. A uniform, market-based approach would give retailers flexibility to spur innovation.

Guidelines in Practice

FERC owns more than one enforcement tool. Besides civil penalties, it can require compliance plans or disgorgement of unjust profits, or condition, suspend, or revoke market-based rate authority, NGA certificate authority, or NGA blanket certificate authority. And lacking criminal penalty authority itself, FERC can refer matters to the U.S. Department of Justice for criminal prosecution. Moreover, while defining an organization as any entity other than a natural person, FERC nevertheless will continue to determine civil penalties for natural person violators, looking to the guidelines for guidance in setting such penalties.

Tres Amigas Tie Up

Synchronizing networks to bring green power to market.

In order to fully integrate wind and other dispersed sources of energy into the system, America’s patchwork transmission networks need to be more closely interconnected and synchronized. An advocate for the Tres Amigas merchant transmission project explains how the proposed facility will integrate the grid.

Penalty Predictability

Bringing fairness to FERC enforcement.

FERC’s proposed penalty guidelines provide the opportunity for improved regulation. More practical and consistent characteristics for determining penalty fine ranges will increase penalty predictability for industry violations of federal regulations—and will make FERC’s enforcement more fair and transparent.