Post # 75 - FERC Holds Off on Smart Grid Rulemaking

In an action with some long-term significance for overall smart grid development, the Federal Energy Regulatory Commission (FERC) last week decided to suspend a rulemaking proceeding on the first group of proposed smart grid technical standards developed by the Commerce Department’s National Institute of Standards and Technology (NIST). FERC took this action based on what it saw as a lack of consensus among electric utilities, telecommunications companies, and equipment manufacturers. FERC thus sends the matter back to NIST), which is the lead federal agency for developing technical standards for the smart grid.

As I have previously discussed, the Energy Independence and Security Act of 2007 (EISA) directs NIST to coordinate the development of a framework to achieve interoperability of smart grid devices and systems, including protocols and model standards for information management. In turn, EISA directs FERC to conduct a rulemaking that would apply to the electricity industry and other stakeholders if it is satisfied that the NIST product has led to “sufficient consensus” on smart grid interoperability standards for the electricity grid.

In August 2009, NIST launched a plan to expedite the development of smart grid interoperability standards. NIST led smart grid stakeholders in a participatory public process to identify applicable standards, as well as priorities for additional standardization activities. In January 2010, NIST released its Framework and Roadmap for Smart Grid Interoperability Standards, Release 1.0, identifying a number of standards that are applicable to the ongoing development of the smart grid. NIST also oversaw the establishment of the Smart Grid Interoperability Panel (SGIP), a public-private partnership providing an ongoing process to support the evolution of the NIST interoperability framework process.

On October 6, 2010, NIST notified FERC that it had identified five “families” of standards as ready for FERC's consideration. FERC then opened a public docket for a possible rulemaking proceeding -- noting, however, that it had not yet made any determination regarding whether there is “sufficient consensus” for the standards. FERC then held a series of technical conferences in late 2010 and early 2011 and soliciting written comments from stakeholders.

FERC now believes that “there is insufficient consensus for the five families of standards under consideration.” In an order issued on July 19, 2011, FERC notes that the commenters were “nearly unanimous” that the agency should not adopt the NIST proposals at this time, citing concerns with cyber security efficiencies and potential unintended consequences from premature adoption of individual standards. FERC thus concludes that “the best vehicle for developing smart grid interoperability standards is the NIST interoperability framework process, including the work of the SGIP and its committees and working groups."

Post # 14 -- FERC Commissioner Moeller Cautions Against "Overpromising."

As previously discussed, in 2007 Congress directed the Federal Energy Regulatory Commission, in coordination with the National Institute of Standards and Technology, to develop standards and protocols necessary to insure interstate Smart Grid functionality (see Post # 2 and my paper, “Smart Grid: The Devil Is In the Details.”

Last week, FERC Commissioner Philip Moeller, recently nominated by President Obama for a second term, emphasized that regulators need to be realistic and restrained in their discussions of the Smart Grid.

Testifying on April 27, 2010, before the Senate Committee on Energy and Natural Resources, Moeller said that the Smart Grid has “revolutionary and transformative potential” to enhance efficiency in the Nation’s electric grid. At the same time, however, Moeller underscored that this potential “will not be immediate and will occur at varying paces throughout the nation.” In particular, Moeller cautioned that FERC itself must be careful “not to overpromise the benefits of the smart grid to consumers lest there be a backlash that slows the pace of its implementation.”

I think that last point is crucial, and not just for FERC and other regulators, but for all Smart Grid proponents. Ultimately, the bill for Smart Grid will be picked up by consumers, taxpayers, and utility ratepayers. And before they will accept that burden, consumers, taxpayers, and utility ratepayers must be convinced that there is something in it for them. These days, too much Smart Grid discussion takes place among “true believers.” Getting the public on board will require down-to-earth advocacy that identifies clearly articulated and truly likely benefits, free from “pie-in-the-sky” promotion.

The full text of Commissioner Moeller’s recent testimony can be viewed here.