2. Federal Legislation - Energy Independence and
Security Act of 2007
On December 19, 2007, the President signed EISA into law. Title XIII of EISA is titled "Smart Grid," with § 1301 commencing with a statement that,
It is the policy of the United States 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...
Since "smart grid" is a new concept, EISA describes what constitutes a smart grid and what it can do. Section 1301 goes on to state:
...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 cyber-security.
(3) Deployment and integration of distributed resources and generation, including renewable resources.
(4) Development 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 peak-shaving 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 connected to the electric grid, including the infrastructure serving the grid.
(10) Identification and lowering of unreasonable or unnecessary barriers to adoption of smart grid technologies, practices, and services.
And § 1306(d) of 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 cyber-security 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.
In addition to these statutory characterizations of a smart grid and its functions, other definitions of a "smart grid" have been developed by various governmental and industry groups. For example, the Congressional Research Service ("CRS") Report to Congress uses the term "smart grid" to refer to a distribution system that, among other things, allows for flow of information from a customer's meter in two directions: both into the house to thermostats and appliances and other devices, and back to the utility.3 The smart grid system will also allow integration of "smart" appliances, the provision to consumers of timely information and control options, and the further development and incorporation of demand-side and energy-efficiency resources.
Section 1307 of EISA amended § 111(d)4 of the Public Utility Regulatory Policies Act ("PURPA") by adding paragraphs regarding the smart grid. The PURPA provisions added by EISA complement the PURPA standards established in the Energy Policy Act of 2005 ("EPAct 2005"). EPAct 2005 added five new federal standards to PURPA § 111(d) for state commissions and utilities to consider: (11) Net metering, (12) Fuel sources, (13) Fossil fuel generation efficiency,5 (14) Time-based metering and communications,6 or "Smart Metering," and (15) Interconnection.7
Continuing the effort of EPAct 2005, EISA § 1307(a) added paragraphs (16) Consideration of smart grid investments and (17) Smart grid information to PURPA § 111(d).8
With the new statute, PURPA § 111(d)(16) now requires states to consider imposing certain requirements and authorizing certain expenditures. Specifically:
(16) Consideration of smart grid investments
(A) In general.-Each State shall consider requiring that, prior to undertaking investments in nonadvanced grid technologies, an electric utility of the State demonstrate to the State that the electric utility considered an investment in a qualified smart grid system based on appropriate factors, including-
(i) total costs;
(ii) cost-effectiveness;
(iii) improved reliability;
(iv) security;
(v) system performance; and
(vi) societal benefit.
(B) Rate recovery. - Each State shall consider authorizing each electric utility of the State to recover from ratepayers any capital, operating expenditure, or other costs of the electric utility relating to the deployment of a qualified smart grid system, including a reasonable rate of return on the capital expenditures of the electric utility for the deployment of the qualified smart grid system.
(C) Obsolete equipment. - Each State shall consider authorizing any electric utility or other party of the State to deploy a qualified smart grid system to recover in a timely manner the remaining book-value costs of any equipment rendered obsolete by the deployment of the qualified smart grid system, based on the remaining depreciable life of the obsolete equipment.9
EISA § 1307(a) also added PURPA § 111(d)(17) establishing federal standards on smart grid information provided to electricity purchasers and other interested persons:
(17) Smart grid information.
(A) Standard.-All electricity purchasers shall be provided direct access, in written or electronic machine-readable form as appropriate, to information from their electricity provider as provided in subparagraph (B).
(B) Information.-Information provided under this section, to the extent practicable, shall include:
(i) Prices.-Purchasers and other interested persons shall be provided with information on-
(I) time-based electricity prices in the wholesale electricity market; and
(II) time-based electricity retail prices or rates that are available to the purchasers.
(ii) Usage.-Purchasers shall be provided with the number of electricity units, expressed in kWh, purchased by them.
(iii) Intervals and projections.-Updates of information on prices and usage shall be offered on not less than a daily basis, shall include hourly price and use information, where available, and shall include a day-ahead projection of such price information to the extent available.
(iv) Sources.-Purchasers and other interested persons shall be provided annually with written information on the sources of the power provided by the utility, to the extent it can be determined, by type of generation, including greenhouse gas emissions associated with each type of generation, for intervals during which such information is available on a cost-effective basis.
(C) Access.-Purchasers shall be able to access their own information at any time through the Internet and on other means of communication elected by that utility for Smart Grid applications. Other interested persons shall be able to access information not specific to any purchaser through the Internet. Information specific to any purchaser shall be provided solely to that purchaser.
PURPA §§ 111 and 11210 are specific about the obligations imposed on the states to consider the standards contained in PURPA § 111(d). EISA § 1307(b)(1) added the following paragraph to PURPA § 112(b):
(6)(A) Not later than 1 year after the enactment of this paragraph, each State regulatory authority (with respect to each electric utility for which it has ratemaking authority) and each nonregulated utility shall commence the consideration referred to in section 111, or set a hearing date for consideration, with respect to the standards established by paragraphs (17) through (18) of section 111(d).
(B) Not later than 2 years after the date of the enactment of this paragraph, each State regulatory authority (with respect to each electric utility for which it has ratemaking authority), and each nonregulated electric utility, shall complete the consideration, and shall make the determination, referred to in section 111 with respect to each standard established by paragraphs (17) through (18) of section 111(d).11
EISA provides broad guidelines and imposes no specific facilities investment requirements, and therefore leaves it up to each state to identify its relative needs. Furthermore, EISA neither contemplates specific "one-size fits all" technological solutions, nor mandates the actual deployment of smart grid upgrades over specific timelines. However, we intend to address the provisions of EISA related to smart grid investments and information in this proceeding.
3 CRS Report for Congress, "Smart Grid Provisions in H.R. 6, 11th Congress," updated December 20, 2007.
4 16 U.S.C. 2621(d).
5 EPAct 2005 § 1251(a), adding §§ 111(d)(11), (12), and (13) of PURPA, respectively.
6 EPAct 2005 § 1252, adding PURPA § 111(d)(14).
7 EPAct 2005 § 1254, adding PURPA § 111(d)(15).
8 There is an apparent numbering error in EISA. EISA § 532 added different paragraphs (16) and (17) to the same subsection of PURPA, which address integrated resource planning and rate design modifications to promote energy efficiency investments.
9 EISA § 1307(a). With adoption, the cited material became § 111(d)(16) of PURPA.
10 16 U.S.C. 2621 and 2622.
11 EISA § 1307(b)(1) adding paragraph (6) to PURPA § 112(b). As noted in a previous footnote, there is an apparent numbering error in EISA. While this paragraph references paragraphs (17) and (18) of PURPA § 111(d), no such paragraphs were added to PURPA § 111(d). Based on the context and also considering EISA § 1306(c)(3), which references "the final date for State consideration of the Smart Grid Information Standard under section 1307 (paragraph (17) of section 111(d) of [PURPA]," we believe that it is reasonable to infer that PURPA § 112(b)(6) applies to paragraphs (16) and (17) added to PURPA § 111(d) by EISA § 1307(a).
