2. Background
The Commission initiated this Order Instituting Rulemaking (OIR) to "consider setting policies, standards and protocols to guide the development of a smart grid system and facilitate integration of new technologies such as distributed generation, storage, demand-side technologies and electric vehicles."6
The OIR further noted that as a consequence of amendments to the Public Utilities Regulatory Policies Act (PURPA) contained in the Energy Independence and Security Act of 2007 (EISA), PURPA § 111(d)(16) now requires states "to consider imposing certain requirements and authorizing certain expenditures"7 pertaining to the Smart Grid.8
EISA defines "smart grid functions" as follows:
The term "smart grid functions" means any of the following:
(1) The ability to develop, store, send and receive digital information concerning electricity use, costs, prices, time of use, nature of use, storage, or other information relevant to device, grid, or utility operations, to or from or by means of the electric utility system, through one or a combination of devices and technologies.
(2) The ability to develop, store, send and receive digital information concerning electricity use, costs, prices, time of use, nature of use, storage, or other information relevant to device, grid, or utility operations to or from a computer or other control device.
(3) The ability to measure or monitor electricity use as a function of time of day, power quality characteristics such as voltage level, current, cycles per second, or source or type of generation and to store, synthesize or report that information by digital means.
(4) The ability to sense and localize disruptions or changes in power flows on the grid and communicate such information instantaneously and automatically for purposes of enabling automatic protective responses to sustain reliability and security of grid operations.
(5) The ability to detect, prevent, communicate with regard to, respond to, or recover from system security threats, including cybersecurity threats and terrorism, using digital information, media, and devices.
(6) The ability of any appliance or machine to respond to such signals, measurements, or communications automatically or in a manner programmed by its owner or operator without independent human intervention.
(7) The ability to use digital information to operate functionalities on the electric utility grid that were previously electro-mechanical or manual.
(8) The ability to use digital controls to manage and modify electricity demand, enable congestion management, assist in voltage control, provide operating reserves, and provide frequency regulation.
(9) Such other functions as the Secretary [of Energy] may identify as being necessary or useful to the operation of a Smart Grid.9
After the issuance of the OIR, the Recovery Act appropriated $4.5 billion "to modernize the electric grid" through activities including the Smart Grid programs authorized by EISA.10 The Recovery Act also amended several EISA provisions pertaining to the Smart Grid.11 For example, the Recovery Act increased the percentage of federal support for the EISA § 1306 program from 20% to up to 50%. The amendments broadened the potential recipients of EISA § 1304 funding to include electric utilities and "other parties." The Recovery Act also added a requirement that funded projects use "open protocols and standards (including Internet-based protocols and standards) if available and appropriate."12
Pursuant to the OIR, parties filed opening comments on February 9, 2009, with reply comments filed on March 9, 2009.
On March 3, 2009, the Administrative Law Judge (ALJ) issued a ruling scheduling a prehearing conference (PHC) and a workshop to address the Smart Grid funding available through the Recovery Act.
On March 19, 2009, the Federal Energy Regulatory Commission (FERC) issued a Proposed Policy Statement and Action Plan.13 FERC stated that:
The purpose of the policy statement [that FERC] ultimately adopts will be to 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 [FERC] rulemaking.14
On March 27, 2009, a PHC took place at the Commission offices in San Francisco to take appearances in the proceeding, to refine the scope of the proceeding, and to develop a procedural timetable for the management of this proceeding. At the PHC, the assigned Commissioner indicated her preferences for the management of the proceeding via two decisions, one addressing the issues raised by the Recovery Act, and one addressing the many other issues set forth in the OIR.
On the afternoon of March 27, 2009, a workshop took place to discuss opportunities created by the Recovery Act for California utilities and other companies to seek federal money for Smart Grid, review utilities' and other parties' plans to seek federal funding, and consider what the Commission should do to support the efforts of investor-owned utilities (IOUs) and other parties to seek Recovery Act funding related to Smart Grid in ways that promote the interests of the state.
On April 16, 2009, the Department of Energy (DOE), pursuant to the Recovery Act, issued a Draft FOA for the Smart Grid Demonstrations (#DE-FOA-0000036) and a Draft Notice of Intent (NOI) for the Smart Grid Investment Grant Program ( #DE-FOA-0000058A), two major programs to fund demonstration and investments in the Smart Grid.
On May 1, 2009, a Scoping Memo and Ruling of Assigned Commissioner (Scoping Memo) set the scope and procedural schedule for resolving the issues set out in the OIR. In addition, the Scoping Memo stated:
The scope of this proceeding shall also include those issues pertaining to Smart Grid affected by the Recovery Act legislation. A separate ruling will propose a reporting process and will address how this Commission will fulfill its responsibilities concerning an investor-owned utility's contributions of ratepayer-backed funds to Recovery Act activities.15
On May 29, 2009, the assigned Commissioner issued an Assigned Commissioner's Ruling (ACR) amending the scope of the proceeding.16 The ACR notes that "[t]he Smart Grid funding provided by the Recovery Act creates a unique opportunity for California to expand and accelerate its activities to modernize the state's electric infrastructure, using some federal dollars."17 To take advantage of this opportunity, the ACR amended the scope of the rulemaking and solicited comments on a proposal that would:
· Require a reporting process by those IOUs participating in Recovery Act funded activities;
· Grant all projects that receive Recovery Act funds a rebuttable presumption of reasonableness in any subsequent review by this Commission; and
· Establish an advice letter or expedited application process for authorizing the utility to recover the non-federal portion of the costs through traditional ratemaking avenues, such as the recovery of expenditures and the ratebasing of investments.18
On June 8, 2009, the Division of Ratepayer Advocates (DRA) filed an Appeal of Categorization, arguing that because of the amended scope, the proceeding should be recategorized as "ratemaking." Responses to DRA's appeal were submitted by the Consumer Federation of California (CFC), Pacific Gas and Electric Company (PG&E), the CAISO and Southern California Edison Company (SCE) by June 12, 2009. On June 18, 2009, the Commission adopted Decision (D.) 09-06-043, which denied the appeal of categorization.
Comments on the proposals contained in the ACR were filed by PG&E, CFC, San Diego Gas & Electric Company (SDG&E), the California Large Energy Consumers Association (CLECA), SCE, The Utility Reform Network (TURN), and DRA, by the June 15, 2009 deadline.
On June 25, 2009, DOE issued a final FOA pertaining to the Smart Grid Investment Grant Program and a final FOA pertaining to the Smart Grid Demonstrations Program. On June 26, 2009, DOE issued "Frequently Asked Questions" documents pertaining to the two programs.19
PG&E, SCE, TURN, SDG&E, DRA, and CFC filed reply comments, which were due on June 29, 2009.
On July 8, 2009, an ALJ Ruling took official notice of the DOE documents and attached them as reference for the parties in this proceeding.20 These included the final FOA for Smart Grid Demonstrations and the final FOA for the Smart Grid Investment Grant Program.
On July 16, 2009 FERC adopted a Smart Grid Policy Statement.21
6 OIR at 2.
7 OIR at 8.
8 The Recovery Act at Division A, Title IV, Sec. 408 redesignated PURPA § 111(d)(16) as § 111(d)(18).
9 EISA § 1306(d). We note that in workshops associated with this proceeding, we have learned that the integration of distributed renewable energy such as solar roofs and wind turbines will be greatly enhanced by Smart Grid upgrades that allow two-way flows of information. Two-way information flows can also help to integrate electric vehicles. In addition, the Smart Gird can include the widespread use of synchrophasers and the introduction of micro-grid projects that will increase the reliability of the electricity delivery system.
10 The Recovery Act, Section 2, Division A, Title IV, Energy and Water Development states: "For an additional amount for `Electricity Delivery and Energy Reliability,' $4,500,000,000: Provided, That funds shall be available for expenses necessary for electricity delivery and energy reliability activities to modernize the electric grid, to include demand responsive equipment, enhance security and reliability of the energy infrastructure, energy storage research, development, demonstration and deployment, and facilitate recovery from disruptions to the energy supply, and for implementation of programs authorized under title XIII of the Energy Independence and Security Act of 2007 (EISA) (42 U.S.C. 17381 et seq.) ... "
11 Recovery Act at Division A, Title IV.
12 The Recovery Act § 405.
13 Federal Energy Regulatory Commission, Smart Grid Policy, Proposed Policy Statement and Action Plan (March 19, 1009), PL09-4-000.
14 Id. at ¶ 3.
15 Scoping Memo at 7-8.
16 Assigned Commissioner's Ruling Amending the Scope and Schedule of Proceeding to Address Policy Issues Pertaining to Smart Grid Funding Appropriated n the American Recovery and Reinvestment Act of 2009 (ACR), May 29, 2009.
17 Id. at 2.
18 Id.
19 U.S. Department of Energy, Financial Assistance Funding Opportunity Announcement: Smart Grid Investment Grant Program (DE-FOA-0000058) Frequently Asked Questions, June 26, 2009; and U.S. Department of Energy, Financial Assistance Funding Opportunity Announcement: Smart Grid Demonstration Program (DE-FOA-0000036), Frequently Asked Questions, June 26, 2009.
20 Administrative Law Judge's Ruling Taking Official Notice of Certain Department of Energy Publications Associated with the Recovery Act, July 8, 2009.
21 128 FERC ¶ 61, 060, US Federal Energy Regulatory Commission, 18 CFR Chapter 1, Smart Grid Policy, July 16, 2009.
