Tuesday, August 23, 2011

Post # 79 - New York PSC Smart Grid Policy Statement Highlights the Need for Consumer "Engagement"

Last week, the New York State Public Service Commission issued its “Smart Grid Policy Statement," intended to establish regulatory policies and guidelines for utilities to following regarding the development of smart electric grid systems and associated efforts to modernize the electric grid. The NYPSC hopes that its guidelines will “creat[e] the conditions that will allow optimal technology solutions to flourish.” The policy statement also emphasizes the importance of consumer acceptance.

The NYPSC guidelines themselves, which include customer acceptance but of course cover a much broader area, provide as follows:
* In the short term, utilities are to pursue established and reliable technologies that can provide a relatively certain return on investment. In the longer term, the billions of dollars the federal government has provided for smart grid projects nationwide will generate a significant base of knowledge and experience which, along with further development of smart grid standards, will help identify those technologies that are most effective and efficient.

* Smart grid technologies will utilize a hybrid of both public and private networks. Utilities and communication providers should work together to ensure appropriate use of commercial facilities, and to limit utility capital investments in dedicated communications infrastructure.

* Utilities must provide basic information on smart grid to customers who are largely unaware of this technology. Utilities further must provide a thoughtful and comprehensive customer education plan before commencing with implementation of technologies that require extensive customer engagement.

* Smart grid projects must be able to show demonstrable benefits in excess of costs.

* For most smart grid projects, rate recovery will be addressed through traditional means. The Commission will consider risk-sharing mechanisms for novel or unproven technology.

* Utilities can start to develop smart grid plans and projects using the existing industry standards as building blocks.

* Utilities must develop the capability to build and maintain cyber security standards. Utilities will bear the responsibility to ensure that cost-effective protection and preparedness measures are employed to deter, detect, and respond to cyber attacks, and to mitigate and recover from their effects.

* Utilities and third-party providers must protect customer privacy when projects involve the collection and use of customer data.

With specific reference to customer education and “engagement,” the NYPSC policy statement notes that “a large number of customers do not know how the smart grid works.” Thus, the PSC concludes, one benefit of early customer education may be “to refocus the public dialogue about smart grid, which seems to be centered on smart meters. Some customer concerns may be alleviated if they understand that the smart grid is not just about meters.” The PSC calls on utilities to make customers more aware of the steps they have already taken to develop the smart grid in their transmission and distribution networks.
Before commencing with large customer-centered smart grid programs, utilities must lay the groundwork with comprehensive customer education programs. Such educational efforts can increase acceptance, improve utilization, and ease implementation issues, as well as allowing utilities an opportunity to learn more about the services their customers want and are likely to utilize.

The NYPSC adds that customers participating in such programs need to understand their roles and responsibilities, as well as the role of the utility and any third parties. “An important aspect of smart metering is its ability to enable active participation by customers, but customers must be equipped with the knowledge required to participate in a meaningful way.” Customers will need to be actively supported in getting the right information to make informed decisions on their participation, and in acquiring the necessary knowledge and skills to take advantage of smart meter-enabled programs.

The Policy Statement notes customer education programs must also deal candidly with the rate consequences of smart grid capital investments. The PSC believes that if implemented properly, the smart grid can mitigate cost increases, as well as offer customers more reliable and more environmentally responsible service. “[B]ut customers are wary of further rate increases and will have to be educated to have reasonable expectations regarding the potential of smart grid to lower electric bills.”
Ultimately, the PSC holds, the success of demand response depends on convincing people to change how and when they use electricity:
Clear, concise, and relevant information in advance of a project involving new customer tools, information or interfaces is required to ease customer concerns and improve adoption. Influencing customer behavior requires that utilities and third party providers explain and demonstrate to customers the benefits of a proposed smart grid program.

Thus, the statement concludes, “if a smart grid technology relies on customer involvement in order to provide all or some of the anticipated benefits, any utility proposal to deploy such technology must include a plan for how customers will be engaged and should include an analysis on the expected level of customer participation.”

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