In the next few weeks, the relationship between the Federal Energy Regulatory Commission (FERC) and National Association of Regulatory Utility Commissioners (NARUC) is likely to change. At NARUC’s Sacramento meeting in June, regulators spoke about FERC and the states, through NARUC, “acting in parallel on the adoption of interoperability standards,” Ohio PUC commissioner Paul Centolella told us recently.
Though the National Institute of Standards and Technology (NIST) will release those standards to FERC, FERC’s jurisdiction is limited to interstate transmission and the operation of regional and wholesale markets, he noted. “Clearly there are many smart grid standards that are directly related to utilities’ distribution and retail operations” — so FERC and NARUC should work more closely together.
The June discussions led to talk of a joint FERC-NARUC technical conference on the forthcoming NIST interoperability standards. That conference could produce a model code of standards, usable by states with appropriate modification as they come to incorporate the standards into their smart grid initiatives. Details on the conference may well emerge over the next few weeks, said Centolella.
“You’re going to see more and more interaction at both the staff and commissioner level among states going forward” with the FERC-NARUC Smart Response Collaborative, he predicted, noting he has had conversations with FERC Chairman Jon Wellinghoff about the matter. At NARUC’s June meeting, the governing board of the Smart Grid Interoperability Panel (SGIP) gave a presentation to the collaborative and to four NARUC committees, and “that kind of interaction will be increasingly important as the standards effort advances.”
Meanwhile, the state commissions are becoming increasingly sophisticated in their knowledge of smart grid and its importance, Centolella said. “I see the level of smart grid knowledge among commissions as having stepped up a lot over the past three years. There’s been a lot of progress made.”
The smart grid is a puzzle with many pieces, some complex in themselves. But in the three years since he joined the PUC, “we’ve come much further than I would have imagined we could,” he said. “We’re talking about a fundamental transformation in the electric-power industry, so it’s not going to happen overnight, but we’ve really come quite far.”
Centolella has emerged as one of the smart grid industry’s most active regulators in the US, as the GridWise Architecture Council recognized this summer when it honored him for advancing the cause of openness in the power system (SGT, Jun-07). In addition to his regulatory duties, he sits on the governing board of the SGIP. And he is helping bring the panel, FERC and NARUC closer together through the FERC-NARUC Smart Response Collaborative, to foster federal-state interaction in the standards-refinement effort.
Ron Melton, an administrator for the GridWise Architecture Council, in June characterized Centolella as “an advocate [for openness] at the regulatory level.” But Centolella — a lawyer who chooses words carefully — objected to that description.
“As a commissioner, I sit in a quasi-judicial position, so I’d rather not be called an advocate,” he said. “You can talk about my policy preferences. I’ve tried to bring regulatory input to interoperability, both from our commission and from folks on other state commissions, to be sure they’re involved in that process.”
One of the toughest-fitting pieces of the smart grid puzzle is consumer engagement, said Centolella. “This is something utilities are just learning how to do. What we really need, and are beginning to undertake, is a set of experiments with good designs and evaluation methodologies to help us understand the different segments of the consumer market and the best combinations of rates and technology.”
Even tougher is integrating the wholesale and retail power markets, he added. Forecasts used by RTOs to set load-serving entities’ generation or DR capacity requirements need to reflect dynamic retail pricing. Instead, they tend to be based on historical data from periods when such pricing was not in use.
“This could become extremely expensive for consumers,” he warned, especially as coal-fired generators are retired over the next decade in response to clean-air and coal ash regulations. But he acknowledged that “this is a complicated piece, because you’re dealing with changing RTO tariffs.”
Ohio embraces surcharges
Putting the pieces together is important in Ohio since that state, which gets about 90% of its power from coal-fired plants, is looking to the smart grid to reach its ambitious environmental goals. A 2008 state law requires a 22.5% cut in kWh use through utility programs by 2025 and a 7% reduction in peak generation by 2018, with annual benchmarks. By 2025, 25% of Ohio’s energy must come from renewable sources.
All the state’s utilities can use line-item surcharges rather than going through rate cases to implement smart grid improvements, and state policy officially encourages the deployment of AMI and TOU pricing.
“These provisions all reflect that this industry is facing significant challenges and uncertainties,” Centolella said. “So state policy says this is a time to use aggressive energy efficiency, smart grid and renewable standards to defer some [build-out] decisions until the options look better than they do today.”
This story has been reproduced from the August 18, 2010 issue of Smart Grid Today with the permission of the publisher, MMI Inc.