2. Background

Since this proceeding commenced in 2008, new legislation at both the federal and state level have affected policies concerning the Smart Grid and the management of this proceeding.

2.1. Recent Procedural History

This decision is a result of Governor Arnold Schwarzenegger signing into law Senate Bill (SB) 17 (Padilla),² which became effective January 1, 2010. SB 17 directs the Commission "to determine the requirements for a Smart Grid Deployment Plan consistent with the policies set forth in the bill and federal law" by July 1, 2010.

The older procedural history leading to this phase of this proceeding can be found in Decision (D.) 09-12-046 and the Assigned Commissioner and Administrative Law Judge's Joint Ruling of September 28, 2009.³

The more recent procedural history of direct relevance to this proceeding begins in 2010. On February 6, 2010, a ruling amended the scoping memo to ensure that this proceeding solicits the information needed to implement the regulatory provisions adopted in SB 17.⁴ In particular, this ruling sought the information the Commission needs to provide policy guidance to allow electric utilities to develop Smart Grid Deployment Plans by July 1, 2011, as required by SB 17.

The Commission's adoption of D.09-12-046 on December 17, 2009, in addition to fulfilling the state obligations adopted by the Energy Independence and Security Act of 2007 (EISA),⁵ also set forth policies to promote access to electricity usage and price information by consumers and authorized third parties. These policies, however, require implementation and the Ruling Amending Scope solicited comments to develop the rules needed to effectuate these policies, consistent with EISA, the public interest, and state privacy rules. Finally, the Ruling Amending Scope also solicited comments in order to develop policies that advance the goals set forth in the Order Instituting Rulemaking that initiated this proceeding and which were not previously addressed.

Opening Comments on the Ruling Amending Scope were due on March 9, 2010. The Alliance for Retail Energy Markets, the Black Economic Council (BEC), the California Cable and Telecommunications Association (CCTA), the California Energy Storage Alliance (CESA), the California Independent System Operator Corporation (ISO), California Large Energy Consumers Association (CLECA), the Center for Democracy and Technology (CDT) and the Electronic Frontier Foundation (EFF) (filing jointly), Center for Energy Efficiency and Renewable Technologies (CEERT), Cisco Systems, Inc. (Cisco), Consumer Federation of California (CFC), the Division of Ratepayer Advocates (DRA), Electronic Privacy Information Center (EPIC), EnergyHub, Inc. (EnergyHub), Environmental Defense Fund (EDF), Google, Inc. (Google), the Greenlining Institute (Greenlining), the Green Power Institute (GPI), Interstate Renewable Energy Council (IREC), Latino Business Chamber of Greater Los Angeles (Latino Chamber), MegaWatt Storage Farms, Inc. (MegaWatt), Pacific Gas and Electric Company (PG&E), Pacific Telephone Company, d/b/a AT&T California (AT&T), Privacy and Cyber Security Law and Policy Researchers (Researchers), QUALCOMM Incorporated (Qualcomm), San Diego Gas & Electric Company (SDG&E), Southern California Edison Company (SCE), Tendril Networks, Inc. (Tendril), The Utility Reform Network (TURN), the Utility Consumers' Action Network (UCAN), Verizon California, Inc., MCI Communications Services, Inc. d/b/a Verizon Business Services, and Verizon Wireless (collectively "Verizon"), and Wal-Mart Stores, Inc. and Sam's West, Inc. (Wal-Mart) submitted comments.

On March 17-19, 2010, public workshops on Smart Grid technologies took place in San Francisco at the Commission offices. On March 17 and March 18, the workshop sessions considered what requirements deployment plans submitted pursuant to SB 17 must meet. On March 19, the workshop considered how to provide customers with timely access to their usage and price data, as required by D.09-12-046.

Reply comments were due on April 7, 2010. AT&T, CDT and EFF (filing jointly), CESA, CEERT, CFC, DRA, EDF, EPIC, GPI, Greenlining, GroundedPower, Inc. (GroundedPower), HomeGrid Forum (HomeGrid), Lantiq Inc. (Lantiq), PG&E, SCE, SDG&E, Sigma Designs, Inc. (Sigma), the Telecommunications Industry Association (TIA), To-the-Point, and TURN filed reply comments.

2.2. Pursuant to SB 17, This Decision Adopts Policies Pertaining to Smart Grid Deployment Plans with the Input of the CEC and the ISO

SB 17 requires that "By July 1, 2010, the commission, in consultation with the Energy Commission, the ISO, and other key stakeholders shall determine the requirements for a smart grid consistent with Section 8360 and federal law, including the provisions of Title XIII (commencing with Section 1301) of the EISA (Public Law 110-140)."⁶ Complying with this statutory deadline is a major priority of this proceeding.

To date, this proceeding has benefited from the participation of the ISO, both as an active party to the proceeding and as presenters and panelists at the workshops held pursuant to SB 17. In addition, the California Energy Commission (CEC) has interacted with the Commission, both through staff-to-staff discussions and by the participation of CEC Commissioners and high-level CEC staff as workshop leaders. The participation of the ISO and the CEC has not only enabled the Commission to comply with the requirements of SB 17, but it has also added greatly to this Commission's understanding of the complex nuances and challenges confronting California energy policy today.

The continuing participation of the CEC and the ISO in our Smart Grid efforts is not only consistent with SB 17, but also remains critical to the success of Smart Grid deployment in California. This Commission understands that the CEC will soon complete research on "Defining the Pathway to the Smart Grid of 2020" and hold a workshop. The staff of this Commission, if requested by the CEC, will gladly participate in this CEC workshop. In addition, approximately three months before the filing of the first Smart Grid Deployment Plans by SDG&E, SCE and PG&E, this Commission will hold a workshop. Commission staff will work with CEC and ISO staff to structure this workshop to assist the CEC and ISO in providing timely input to the utilities preparing their Smart Grid Deployment Plans. These workshops will enable the Commission to continue its consultation with CEC and ISO on Smart Grid matters.

Pursuant to SB 17, this decision adopts policies to guide the development of Smart Grid Deployment Plans and sets procedures for the review of the initial plans by the Commission. This decision also requires annual reports from utilities on Smart Grid activities to facilitate the preparation of annual reports to the legislature required by SB 17.

2.3. Access to Information and Privacy Protections

Based on a review of the comments, replies, and the information provided at the workshop, it is clear that issues concerning access to information and privacy protections contain subtleties and complexities that prevent their resolution without further deliberation and comments. Although there is a widespread consensus that consumer privacy is important and requires protection and there are numerous principles on which there is major agreement, developing a full host of regulatory requirements and protections cannot be done in this decision. There are, however, some elements of security and privacy that should be addressed in deployment plans, and this decision will provide guidance on these matters.

After the adoption of this decision, this proceeding will focus on information access and privacy protections needed to implement access to price and consumption data. Our goal remains the development of a subsequent decision that resolves these matters in time to meet the policy objectives adopted in D.09-12-046 of providing consumers with access to data, namely a policy objective of providing retail and wholesale price information by the "end of 2010,"⁷ a policy objective of providing access to usage data through an agreement with a third party by the "end of 2010,"⁸ and policy objective of providing access to usage information on a near real-time basis for customers with an Advanced Metering Infrastructure (AMI) meter by the "end of 2011."⁹ The Commission will not order utilities to provide an authorized third party with access to the customer's electricity usage information that is collected by the utility without adopting rules that are consistent with Energy Information and Security Act of 2007 standards, the general public interest, and state privacy rules.¹⁰

2.4. Policies Pertaining to Functionality and Interoperability Standards Await Action by Standard Setting Bodies

SB 17 requires that:

The commission shall institute a rulemaking or expand the scope of an existing rulemaking to adopt standards and protocols to ensure functionality and interoperability developed by public and private entities, including, but not limited to, the National Institute of Standards and Technology, Gridwise Architecture Council, the International Electrical and Electronics Engineers, and the National Electric Reliability Organization recognized by the Federal Energy Regulatory Commission. An adopted smart grid deployment plan may provide for deployment of cost-effective smart grid products, technologies, and services by entities other than electrical corporations. The smart grid technologies and services shall improve overall efficiency, reliability, and cost-effectiveness of electrical system operations, planning, and maintenance.¹¹

The Ruling Amending Scope sought comments from parties over whether the Commission should proceed by:

1) deferring Commission consideration in this proceeding until a number of the listed agencies have adopted standards or protocols; 2) deferring Commission consideration of protocols to another proceeding that will commence after a number of the listed agencies have adopted standards or protocols; or 3) adopting a "performance standard" in this proceeding requiring that those implementing a Smart Grid technology take steps to ensure that it has the capability to function and operate with devices developed pursuant to standards adopted by major standard setting agencies, including the National Institute of Standards and Technology, Gridwise Architecture Council, the International Electrical and Electronics Engineers, and the National Electric Reliability Organization recognized by the Federal Energy Regulatory Commission.¹²

We review and discuss the responses of parties to these questions.

2.4.1. Positions of Parties

Concerning the approach the Commission should adopt to comply with the SB 17 requirements to adopt standards and/or protocols to ensure functionality and interoperability of the different parts of the Smart Grid, few parties provided comments.

SCE recommended that:

... the Commission act in parallel with FERC [Federal Energy Regulatory Commission] to adopt Smart Grid standards as NIST [National Institute of Standards and Technology] achieves consensus. SCE further recommends that Smart Grid standards adoption be taken up as a part of this Rulemaking, rather than opening another proceeding to deal specifically with this issue.

The Commission should also consider, as part of this proceeding, mechanisms adopting those specific standards for which NIST has achieved consensus. We respectfully recommend that the Commission incorporate these standards by reference in its final decision in an appropriate proceeding.¹³

SCE, however, provides little information on how this process would work, or how this Commission could "act in parallel" with FERC.

SDG&E argues for a similar approach, stating:

SDG&E believes development of interoperability standards and protocols is a complicated process which exceeds the scope and opportunity of these proceedings, whereby the Commission should wait for the adoption of uniform standards by recognized standards bodies.¹⁴

PG&E also supports national standards and recommends that this Commission await national developments:

PG&E recommends that the Commission continue to defer to the national and international standard-setting bodies, such as NIST, and not attempt to set California only standards for interoperability or functionality at this early stage. National standards will help drive costs down and broaden the availability of new products in the marketplace, while also ensuring the necessary degree of backward systems compatibility. It will be these national standards that determine the capabilities and performance of the Smart Grid.¹⁵

The ISO states that:

... development of national standards and open communication protocols will encourage the maximum participation by technology vendors and should encourage greater acceptance by energy service providers and consumers.¹⁶

Thus, an implication of the comments of the ISO is that California policy would benefit from the adoption of national standards.

Communications companies and equipment providers also support national standards. AT&T recommends that the Commission defer the adoption of standards until NIST acts:

In light of the substantial activity and progress of the NIST proceedings and the significant comments and participation of both public and private stakeholders, AT&T respectfully suggests that the best way to ensure that the resulting standards contemplated by §8362(a) promote the public interest is to defer Commission consideration of adopting state specific protocols and rules until these agencies have completed their review and adopted national standards and protocols.¹⁷

CCTA similarly states a preference that California standards track national standards, arguing:

Promoting open interoperability standards now will help ensure that competitors are not materially disadvantaged vis-a-vis the IOUs in offering competitive energy management and other Smart Grid services to consumers.¹⁸

Cisco states:

Cisco believes that the CPUC should defer its consideration of standards and protocols to another proceeding that will commence after a number of the listed agencies have adopted standards or protocols.¹⁹

Consumer groups and retailers also endorse waiting for standards bodies to act. DRA calls for the Commission to await national action, arguing:

The Commission should defer consideration of standards and protocols until the listed agencies - which are in a better position to analyze the technical aspects of interoperability - have adopted appropriate standards or protocols.²⁰

The retailer Wal-Mart supports interoperability, stating that "smart grid technology installed by utilities should interoperate seamlessly with equipment developed and installed proactively by any entity using their own resources."²¹ Wal-Mart, however, does not opine on how best to achieve interoperability.

Only Tendril supports action now. Tendril states that:

[W]e favor a phased approach that is consistent with approach #3 ("adopting a "performance standard" in this proceeding...") articulated in the Joint Ruling [Ruling Amending Scope].²²

We note that even though this approach permits the Commission to act now to adopt a performance standard requiring a device to function with devices built to national standards, this course of action will still likely require participants in the Smart Grid to await the adoption of standards by national bodies to ensure that their devices meet the "performance standard."

2.4.2. Discussion: Interoperability Standards Should be Informed by National Actions

SB 17, in adding § 8360 to the Public Utilities Code, directs that California, among other things, achieve an "[i]dentification and lowering of unreasonable or unnecessary barriers to adoption of smart grid technologies, practices, and services."²³

Clearly, one way to lower unnecessary barriers is for California's Smart Grid deployment to follow national standards and guidelines for interoperability and incorporate national communication protocols. As the review of the positions of parties makes clear, there is a general consensus that California should follow national standards and guidelines for interoperability and should use communication protocols that Smart Grid operations share throughout the nation.

In EISA, the United States Congress charged NIST with the responsibility "to coordinate the development of a framework that includes protocols and model standards for information management to achieve interoperability of smart grid devices and systems."²⁴ EISA further requires that once NIST's work has led to sufficient consensus, FERC is required "to institute a rulemaking proceeding 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 electricity markets."²⁵

We agree with SCE that the Commission should act in parallel with FERC to adopt Smart Grid standards as NIST achieves consensus. We will defer until that time to adopt Smart Grid standards and protocols.

² Chapter 327, Statutes of 2009.

³ Assigned Commissioner and Administrative Law Judge's Joint Ruling Inviting Comments on Proposed Policies and Findings Pertaining to the Smart Grid Policies Established by the Energy Information and Security Act of 2007, September 28, 2009 (Joint Ruling of September 28, 2009).

⁴ Assigned Commissioner and Administrative Law Judge's Joint Ruling Amending Scoping Memo and Inviting Comments on Proposed Policies and Findings Pertaining to the Smart Grid (Ruling Amending Scope) (February 8, 2010). ( http://docs.cpuc.ca.gov/efile/RULINGS/113482.pdf.)

⁵ 16 U.S.C. § 2621(d).

⁶ § 8362(a). Unless stated otherwise, citations are to the Public Utilities Code.

⁷ D.09-12-046 at 54.

⁸ Id. at 65.

⁹ Id.

¹⁰ Id. at 78.

¹¹ Id.

¹² Ruling Amending Scope at 19.

¹³ SCE Opening Comments at 10.

¹⁴ SDG&E Opening Comments at 26.

¹⁵ PG&E Opening Comments at 11.

¹⁶ ISO Opening Comments at 5-6.