Smart Grid Update. Christopher J. Eisenbrey. Director, Business Information Edison Electric Institute (EEI)

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2 Smart Grid Update Christopher J. Eisenbrey Director, Business Information Edison Electric Institute (EEI) The Council of State Governments (CSG) April 26, 2012

3 Edison Electric Institute (EEI) The Edison Electric Institute (EEI) is the association of U.S. Shareholder Owned Electric Companies. Our members serve 95 percent of the ultimate customers in the shareholder owned segment of the industry, and represent approximately 70 percent of the U.S. electric power industry. EEI provides public policy leadership, critical industry data, market opportunities, strategic business intelligence, one of a kind conferences and forums, and top notch products and services. 3

4 Why Is The Existing Grid Intellectually Challenged? Limited situational awareness Outage monitoring relies on customers calling Inability to remotely identify developing T&D problems Limited system self healing capabilities Limited communications ability With customers to share information on price and energy usage With the supply system to effectively manage increasingly decentralized power sources (e.g., wind, solar, distributed generation)

5 Why Do We Need A Smarter Grid? It will offset new infrastructure investment needs, while increasing the productivity of existing infrastructure It will support environmental policy objectives through demand response and the easier integration of renewable sources of energy Component of all of the above energy strategy SOTU, 1/24/12 It will enable utilities to: Empower customers to control and optimize their energy usage Rely on greater amounts of distributed generation, including wind, solar, etc. Use electricity as a fuel for vehicles Enhance the reliability and efficiency of the power grid Provide the framework and foundation 5 for future economic growth

6 Electric Utilities are Leading the Way

7 The Changing Nature of the Grid Deployment of smart technology, particularly distributed generation and energy storage, will have a profound impact on the structure, design and operation of the T&D system Customers will progressively pursue alternative power supply options that have the potential to supplement and/or replace power from the traditional utility: DOD initiatives Colleges and universities Commercial applications Individual residential customers The electric utility industry is developing a strategy to deal with this and other potentially disruptive smart technologies

8 Industry Smart Grid Focus To Date Initial industry smart grid focus has been driven by Administration goals and mandated state policies Stimulus Awards White House SG Subcommittee Policy Framework development NIST/Smart Grid Interoperability Panel (SGIP) Federal agencies DOE, FCC, FERC Early smart meter adopter states such as California and Texas Two key federal activities that will continue in 2012 are: The NIST/SGIP process for the development of interoperability standards Federal funding for this activity will expire in Some EEI member companies (in CA, TX, and MD) are actively engaging the Administration on the "Green Button" Initiative to provide standardized energy usage information to customers.

9 A Change In Direction In 2012 Industry smart grid focus is shifting to state level issues Customer acceptance/operational issues Identification of business opportunities arising from the deployment of smart technology Implementation of regulatory changes necessitated by the deployment of smart technology

10 Smart Grid Acceptance Challenges Accuracy of meters Radio Frequency Opt out initiatives Cost of Installation Privacy concerns Impact on At Risk customers Dynamic pricing concerns Over promising by vendors and others Immediate benefits not being seen by customers

11 Regulator Pushback

12 Communications Campaign Sequenced, coordinated campaign with four phases guided by member company advisory working group Research Message Development Toolkit External Advocacy

13 New Public Website: SmartGrid.eei.org Get the Basics Follow the News Explore the Research Join Our Community EEI Member Company Communications Toolkit

14 Cyber Security: Federal and State Policy Overview April 2012

15 Electric Utilities Support Cyber Legislation Any legislation should embrace these principles: Limit scope of any new emergency authority to imminent cyber threats against truly critical assets Include all critical infrastructure sectors in a cyber security regime given their interdependence Encourage more information sharing between government and industry stakeholders Build on existing Federal Power Act process; we re the only industry with mandatory and enforceable cyber standards

16 House of Representatives Asks:

17 Cyber Legislation: House The House this week is considering 4 bills to: Improve public private information sharing; Expand federal R&D on tech and human resources; and, To strengthen protection for government networks. Two bills that didn't make the cut for Cyber Week: the utilityspecific GRID Act and a bill giving regulatory authority to DHS for protection of critical cyber infrastructure

18 H.R. 2096: Cybersecurity Enhancement Act (House Science, Space and Technology Committee) Improves Coordination in government: Gives National Institute of Standards and Technology the authority to set security standards for federal computer systems and develop checklists for agencies to follow. Improves Coordination outside of government: Creates a federal university private sector task force to coordinate research and development. Improves R&D: Establishes Cybersecurity research and development grant programs. Improves quality of cyber professionals: Creates scholarship programs at NSF that can be repaid with federal service. Assessment of cybersecurity workforce needs across Govt.

19 H.R.4257 Federal Information Security Amendments Act of 2012 This legislation enhances the Federal Information Security Management Act (FISMA) of 2002 by improving the framework for ensuring security over information technology systems that support the federal government. It establishes a mechanism for stronger oversight through a focus on automated and continuous monitoring of cybersecurity threats and the implementation of regular threat assessments.

20 H.R. 3523: Cyber Intelligence Sharing and Protection Act of 2011 The House Intelligence Committee Bipartisan Legislation: Private sector entities would be permitted to anonymize or restrict the information they provide to others, including the government. Threat information shared with the government would be exempt from disclosure under FOIA, treated as proprietary information, and would be prohibited from use by the government in regulatory proceedings. Liability protection, classified information, modeled after the DIB Pilot, Privacy and Civil Liberties Oversight Board, Annual report to Congress

21 What s NOT part of Cyber Week H.R. 3674, the House Homeland Committee s PRECISE Act E&C s Utility specific Grid Reliability and Infrastructure Defense (GRID) Act

22 Cyber Legislation: Senate Meantime the Senate is in a stalemate over 2 bills, neither of which can overcome the 60 vote threshold: The Homeland Security Committee bill known as Lieberman Collins, which would give regulatory power to DHS; and, The GOP Alternative which essentially encompasses the 4 bills the House is considering during Cyber Week.

23 Senate Committee on Homeland Security & Governmental Affairs Sector by Sector Cyber Risk Assessments Designation of Covered Critical Infrastructure Advisory Standards, Guidelines and Best Practices Sector by Sector Risk Based Cybersecurity Performance Requirements Voluntary Technical Assistance

24 Senate Committee on Homeland Security and Governmental Affairs

25 Senate Cybersecurity Act of 2012 S.2105 McCain disagreed, stating that if the legislation before us today were enacted into law, unelected bureaucrats at the DHS could promulgate prescriptive regulations on American businesses, which own roughly 90% of critical cyber infrastructure," he said. "The regulations that would be created under this new authority would stymie job creation, blur the definition of private property rights and divert resources from actual cybersecurity to compliance with government mandates."

26 Strengthening and Enhancing Cybersecurity by Using Research, Education, Information, and Technology Act (SECURE IT) Information sharing between the government and private sector, Federal Information Security Management Act (FISMA) Reform to protect government systems, Criminal penalties for cyber crimes, Research & development for cyber protection

27 Senate Cybersecurity Exercise The Senate Cybersecurity Exercise lays out a hypothetical scenario of a cyber attack against the electric power grid of the United States. The attack focuses on the New York City area during a heat wave in the middle of summer. It is perpetrated by an unknown adversary to cause as much damage and disruption to the power grid as possible. This adversary is able to take advantage of vulnerabilities that exist in critical infrastructure systems today in order to cause a several day power outage for 9 million Americans. The scenario also walks through the US governmental response to such a crisis using the authorities that exist today. The exercise will highlight where new legislative authorities could help prevent and respond to cyber incidents of this type.

28 Senate Cybersecurity Exercise While I think that could be a useful exercise, I find it stunning that DHS would set up a grid attack scenario and fail to include the grid s primary regulators our Electric Reliability Organization, called NERC, and the Federal Energy Regulatory Commission. Sen. L. Murkowski

29 Major Legislation passed in 2012?

30 In the absence of legislation We expect status quo for the next year, meantime Unlike other sectors, we already have mandatory and enforceable standards for cyber security. Our members are self assessing their systems and working proactively With government: DOE Cyber Security Maturity Model; On an industry wide basis: a Threat Scenario Project with The Chertoff Group; and, Myriad other pilots and initiatives that put national security information in the hands of grid operators.

31 State Perspectives Asked how states are dealing with cyber security at a House Energy and Commerce Hearing in October 2009, NY Public Service Commission Chairman Garry Brown responded: It s a mixed bag.

32 State Perspectives Transmission versus Distribution Cost versus Risk Economic regulators Deployment of the Smart Grid

33 Q&A QUESTIONS?