BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION. Smart Grid Policy ) Docket No. PL

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1 BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION Smart Grid Policy ) Docket No. PL COMMENTS OF THE NATIONAL ENERGY MARKETERS ASSOCIATION AND INTELLIGENT ENERGY The National Energy Marketers Association (NEM) 1 and Intelligent Energy hereby submit comments on the Commission s Proposed Policy Statement and Action Plan [hereinafter Proposed Plan ] issued March 19, 2009, in the above-referenced proceeding. We submit these comments on the Commission s Proposed Plan to offer recommendations that will allow the Commission to effectuate the legislative provisions requiring it to ensure the development of a Smart Grid in a cost-effective, technologically-advanced manner that concomitantly avoids the creation of new information and/or demand or demand response-related monopolies. We urge the Commission to ensure that all authorized market participants have secure, reliable, nondiscriminatory (non-proprietary), open access to the information pipeline(s) (IT infrastructures) that will be created to facilitate the Smart Grid, providing the nation with open standards to implement new generations of smart meters and smart IT infrastructures needed to interoperably handle a virtual tsunami of near real-time usage 1 NEM is a non-profit trade association representing both leading suppliers and major consumers of natural gas and electricity as well as energy-related products, services, information and advanced technologies throughout the United States, Canada and the European Union. NEM's membership includes independent power producers, suppliers of distributed generation, energy brokers, power traders, global commodity exchanges and clearing solutions, demand side and load management firms, direct marketing organizations, billing, back office, customer service and related information technology providers. NEM members also include inventors, patent holders, systems integrators, and developers of advanced metering, solar, fuel cell, lighting and power line technologies. 1

2 and pricing data necessary to effectuate the new national efficiency, demand response and environmental impact-related energy policies and legislative intent of the Energy Independence and Security Act of NEM s membership is comprised of a diverse group of energy industry participants, including wholesale and retail energy marketers as well as energy technologists. As such, NEM can offer a unique perspective for the record in this proceeding. Our recommendations herein are intended to aid the Commission in developing and implementing policies, open standards and information protocols that minimize duplicative, non-interoperable, closed or proprietary infrastructure investments so as to permit or incent all stakeholders and especially consumers to conserve and implement cost-effective demand response purchasing decisions. In addition, FERC leadership to develop and implement truly open (open standards) non discriminatory (nonproprietary) access to the new data pipelines (IT infrastructures) of the future will also incent a new critically-needed generation of services, application developers and information technologies, to securely, reliably and interoperably collect (meters), process (analyze), store and provide secure access to the substantial increase of data needed to develop new demand response-related products, services, information technologies and price offerings. Moreover, by the FERC ensuring secure, reliable, non-discriminatory (non-proprietary), open access (open standards) to new near real-time data will also protect against the pancaking of (proprietary, closed and/or non-interoperable) IT-related infrastructure costs. Ensuring open standards on the front end of the Smart Grid/Smart Metering infrastructure boom will also help guard against demand and informationrelated monopolies or market power abuses and billions of dollars in potentially soon-to- 2

3 be obsolete future legacy infrastructures that could represent potential future stranded costs all at the ultimate expense of the consuming public, and all of which would also undermine the Nation s new demand-related energy policy objectives as well. I. Legislative History The legislative history is clear that FERC has a major role to play in implementing the Nations Smart Grid and the new generation of demand-related and information-related infrastructure investments needed to implement same. In the Energy Independence and Security Act of 2007 (EISA) 2 the U.S. Congress set forth our national Smart Grid policy, to support the modernization of the Nation s electricity transmission and distribution system to maintain a reliable and secure electricity infrastructure that can meet future demand growth and to achieve each of the following, which together characterize a Smart Grid: (1) Increased use of digital information and controls technology to improve reliability, security, and efficiency of the electric grid. (2) Dynamic optimization of grid operations and resources, with full cybersecurity. (3) Deployment and integration of distributed resources and generation, including renewable resources. (4) Deployment and incorporation of demand response, demand-side resources, and energy-efficiency resources. (5) Deployment of smart technologies (real-time, automated, interactive technologies that optimize the physical operation of appliances and consumer devices) for metering, communications concerning grid operations and status, and distribution automation. (6) Integration of smart appliances and consumer devices. (7) Deployment and integration of advanced electricity storage and peakshaving technologies, including plug-in electric and hybrid electric vehicles, and thermal-storage air conditioning. (8) Provision to consumers of timely information and control options. (9) Development of standards for communication and interoperability of appliances and equipment connected to the electric grid, including the infrastructure serving the grid. 2 Energy Independence and Security Act of 2007, Pub. L. No , 121 Stat (2007) (EISA). 3

4 (10) Identification and lowering of unreasonable or unnecessary barriers to adoption of smart grid technologies, practices, and services. 3 It is clear that each of these legislative goals support FERC s leadership role to implement open, non discriminatory access to the new data pipelines that will become the IT infrastructure for the Smart Grid.. The last item underscores the detriment of failing to develop and implement open standards that may create the very barriers and duplicate IT infrastructure costs, that can be avoided if FERC takes a leadership role in this critical area before such infrastructure investments are made. These comments are focused on the way this Commission can support Smart Grid interoperability standards that minimize barriers to the adoption of these technologies, thereby increasing its value and reducing costs for all users in the chain. A truly Smart Grid will have an enormous flood of new data flowing from source to sink and from wellhead to burner tip. Consequently, FERC leadership in opening standards to true technology and application competition in order to collect, manage, process, store, transmit and distribute this new flood of data to all authorized stakeholders in the most secure and reliable manner possible should be a policy priority. Not only will it create high-quality, high technology green jobs, but it will impact interstate, regional, intrastate, wholesale, retail and end-use operations, and, if successful, consumption decisions, as intended. In particular, the EISA charged FERC with instituting a rulemaking, to adopt such standards and protocols as may be necessary to insure smart-grid functionality and interoperability in interstate transmission of electric power, and regional and wholesale 3 EISA, Section

5 markets. 4 This will include issuing proposed rulemakings on consensus-based standards to be developed by the National Institute of Standards and Technology. The Commission issued its Proposed Plan for comment because of the sense of urgency of the stakeholders for Smart Grid deployment. We share this sense and urges the Commission to seize this opportunity to provide national leadership on the deployment of open, nondiscriminatory standards and protocols (i.e., non-proprietary) to ensure smart grid functionality, interoperability and to guard against the creation of barriers to access, use and competitive technology development. II. Non-Discriminatory, Open Access Information Pipeline We submit that it is now hard to imagine ATM cards that only worked at one bank instead of every bank. Each bank can have its own internal security and proprietary system in place, but absent the open standards developed by the banking industry no one could use one ATM card to withdraw or deposit funds from almost anywhere in the world, or for that matter to access accounts over the internet safely and securely. Similarly, it is hard to imagine cell phone customers who could not speak to any other cell phone company customer or land line. If each cell phone company prevented the free flow of the signals from one cell phone system to the other, the ultimate consumer would be rightfully upset, and the telecom technology boom of the last quarter century would have been seriously impaired. 4 EISA, Section 1305(d). 5

6 The Commission wisely enumerated the following purposes in issuing the Proposed Plan: prioritize the development of key interoperability standards, provide guidance to the electric industry regarding the need for full cybersecurity for Smart Grid projects, and provide an interim rate policy under which jurisdictional public utilities may seek to recover the costs of Smart Grid deployments before relevant standards are adopted through a Commission rulemaking. Specifically, development of interoperability standards for intersystem communication, system security, wide-area situational awareness, demand response, electric storage, and electric transportation should be prioritized and accelerated. The work done on certain standards will provide a foundation for development of many other standards. (Plan at Para. 2). We are heartened by and strongly support this Commission s efforts to expeditiously develop smart grid interoperability standards. There is no doubt that a Smart Grid will improve and upgrade the efficiency of our 20 th Century energy delivery infrastructure, and perhaps provide the U.S. with a state-of-the-art digital infrastructure to prosper with a highly competitive, interconnected, digital economy of the 21 st Century. In so doing, implementing a state-of-the-art Smart Grid infrastructure can also jump start or contribute to our economic recovery and incent or facilitate the creation of new green energy technologies for even the smallest consumer while at the same time secure against national security threats and cybersecurity challenges. We are also aware that the price tag for this digital infrastructure upgrade will far surpass the provisions made in the American Recovery and Reinvestment Act to fully build out a 21 st Century Smart Grid. Consequently, it is imperative that future legacy IT metering and information infrastructure standards and protocols be implemented as open standard and interoperable at the front end of this project or they otherwise could easily become the basis for future utility stranded cost claims. 6

7 We submit that in order for the Commission to effectuate the intent of EISA and support a national Smart Grid, that interoperable and open standards must permit reliable, secure non-discriminatory open access to the digital pipelines that will transport data in interstate commerce. In so doing, the Commission will prevent the huge cost inefficiencies attendant to non-interoperable interstate data pipelines that can easily create national, regional and utility-specific information and demand response-related monopolies. Clearly, the lack of interoperability (non-proprietary, non-discriminatory, open access to the interstate data pipelines of the future) could and would likely create another enormous seams issue for wholesale market participants as well as many stakeholders that seek to do business in interstate markets as well as across markets or jurisdictions. It could add unnecessary and duplicative non-interoperable metering and IT infrastructure costs, pancaked rates if you will, built into transmission and distribution-related rates to the detriment of the country and the consumer. At every level of national, regional and local commerce, this inefficiency is amplified by the millions of potentially non-interoperable data collection, processing storage and transmission infrastructure investments, from source to sink and from well-head to burnertip. 5 We submit that data collection, processing, storage, transmission and distribution in interstate 5 Today data formats and standards in the energy industry constantly change. It changes in the way it is transported and the way it looks. Every meter type has its own way to describe the data (this is proprietary to the meter manufacturer). Every utility has a data system that stores and validates the data (this is proprietary to the software vendor). Every market sector within a region (e.g. electricity, natural gas) has its own transport and data standard (this is usually owned by the party that issued the standard). Many utilities own data standards (usually proprietary) that others need to use when requiring information. Some transmission operators have their own transport standards and data format that others need to use when requiring information. Most system operators have their own transport protocol and data standard that others need to use when needing information. In essence many data islands within one national marketplace. To further compound this issue, retail energy marketers must build, purchase or outsource systems that work in every market setting for which they do business. There are differences in every market they enter. These differences increase the cost of doing business in each utility service territory and unnecessarily contribute to an increase in energy prices for end-use consumers. We hope the Smart Grid Initiative will stop and prevent this continual creation of islands. 7

8 commerce by information infrastructures may represent the creation of new information, efficiency and demand-related monopolies and should properly be subject to FERC jurisdiction, if open non-discriminatory access is not ensured. It should be noted that there are experts available and technology available to implement national open standards. It is critical in the development of such standards that the experts used are independent and the technology deployed is open to all IT technologists to develop new and innovative applications to turn raw data into new, innovative demand and price-related products, services and rate designs. We also note the Commission s discussion of metering specifications and the impact on the Smart Grid. We recommend that Smart Grid information transmission and related distribution standards should be developed on a national level. Again, there is nothing Smart about implementing multiple, proprietary, non-compatible metering standards across the country that raise the cost of doing business in different markets. FERC specifically framed the issue as follows, Specifications for customer meters are within the jurisdiction of the States, but it is clear that communication and coordination across the interfaces between the utility and its customers can have a significant impact on the bulk-power system, particularly as new renewable power and climate policy initiatives introduce the need for more flexibility in the electricity grid, which creates the need for increased reliance on demand response and electricity storage.... The Commission seeks comment from States and other parties on the optimal approach to develop standards in this area, and we will pursue direct communications with the States on this topic through the NARUC- FERC Smart Grid Collaborative and other NARUC Committees. (Plan at Para. 39). We agree, of course, that the States must have a role in prudency reviews of utility metering and IT infrastructure investments to ensure that utility investments are 8

9 consistent with national legislative policy imperatives as well as local prudency standards. On the other hand, if we allow vested interests (meaning both technology and utilities) to implement customized information requirements we will have created and institutionalized information monopolies and demand-side monopolies, with market power contrary to the efforts of FERC for so many years to limit the market power abuses of energy supply-side monopolies. We additionally recommend that national, open standards for "smart thermostats" be developed as part of the Smart Grid effort. This will permit monitoring of price signals at the ISO/RTO level so that it can immediately respond by reducing demand throughout the home or shifting it to off peak pricing signals from the ISO/RTO). This could support residential demand response behavior by permitting the implementation of a demand response rate design for homeowners as well as new load profiling at the homeowner level. Open standards for smart thermostats will also aid in the prevention of potential meter-based demand monopolies. III. Conclusion NEM and Intelligent Energy urge the Commission to develop and implement with the States a truly cost-effective, open standard, interoperable, non-discriminatory, open access to the digital interstate pipeline that will form the lifeblood of a 21 st century Smart Grid infrastructure. Given the huge influx of investment that will be necessary to implement this project, it is imperative that FERC exercise bold leadership to implement the correct first steps at creating an open, non-discriminatory, non-proprietary, universally accepted standard for access to the interstate information pipelines that will 9

10 begin the transformation of the U.S. grid into a digital platform for a 21 st Century economy. Respectfully submitted, Craig G. Goodman Vincent J. Vesuvio President Regulatory Affairs Manager Stacey L. Rantala Infinite Energy/Intelligent Energy Director, Regulatory Services 7001 SW 24th Avenue National Energy Marketers Association Gainesville, FL K Street, NW, Suite 110 Office: Washington, DC Fax: Tel: (202) Cell: Fax: (202) vjvesuvio@intelligentenergy.org cgoodman@energymarketers.com; srantala@energymarketers.com Dated: May 11,