3. Technical Background

There are numerous public and private organizations working on developing a definition for the smart grid and developing the necessary standards and protocols. Within the California state government, the CEC, through its Public Interest Energy Research program ("PIER"), is actively investigating the dimensions of a smart grid system. Initial work is expected to be completed in early 2009 and, if so, can be considered in this proceeding. Additionally, the CEC PIER program is planning to complete other research efforts in 2009 on smart grid technologies and the implementation of those technologies, which may provide results or recommendations for consideration in this proceeding.

The Department of Energy (DOE), pursuant to § 1303(a) of EISA, has created a Smart Grid Task Force to ensure the successful implementation of EISA. The DOE through its Electric Advisory Committee has also recently created a smart grid subcommittee as required by EISA § 1303(b). The Smart Grid Task Force has adopted a working definition of smart grid to have the following characteristics:

· Anticipating and responding to system disturbances in a self-healing manner;

· Enabling active participation by consumers;

· Operating resiliently against physical and cyber attack;

· Accommodating all generation and storage options;

· Enabling new products, services, and markets;

· Optimizing asset utilization and operating efficiently; and

· Providing the power quality for the range of needs in a digital economy.

From this, we see that a smart grid can be defined broadly as an electric grid that is enhanced through the use of digital communication technologies and that allows customers, utilities, and society to make better choices in how energy is produced, delivered, and consumed.  In practical terms, the smart grid can include an AMI (including home area networks of appliances), dynamic pricing (pricing that changes in response to grid and supply conditions), energy efficiency mechanisms (including in-home displays), distributed generation (generation deployed at multiple points in the network), energy storage, and networked plug-in vehicles.

Despite this general characterization, we believe that the technology is moving too fast for a one-size-fits-all definition of a smart grid. In addition, each utility system is unique and, therefore, each system may require technology and devices that address unique challenges.

As an alternative, it may be beneficial to develop a set of characteristics and general principles allowing technology to take its course and create the most efficient and cost effective smart grid system. Thus, another question arises: how do we define a "smart grid" with the specificity needed to guide industry investments and to protect ratepayers, yet provide sufficient flexibility to allow those implementing a "smart grid" to adapt to and include new technologies?