On Thursday, FERC issued a proposed policy statement and action plan to develop a smarter grid for the U.S. electric transmission system. The Commission’s intent is 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 Commission rulemaking.

According to the policy statement, smart grid advancements would use digital technologies on the grid to enable real-time coordination of information from both generating plants and demand-side resources. This will improve the efficiency of the transmission system, enable consumers to better control their electricity costs, and result in long-term consumer savings.

There are currently no industry-wide standards that would allow various grid technologies to interact. The Energy Independence and Security Act of 2007 required the National Institute of Standards and Technology (“NIST”), in cooperation with FERC and the U.S. Department of Energy, to develop interoperability standards and for FERC to authorize them. However, there has not yet been any consensus on the standards.

Smart Grid technology has been heralded by many as the key to U.S. energy security and a cornerstone to efforts to reduce emissions of greenhouse gases by promoting renewable energy sources. The economic stimulus legislation passed last month provided $11 billion for smart grid projects, and Senate Energy and Natural Resources Committee Chairman Jeff Bingaman (D-N.M.) has said he plans to add smart grid provisions in a comprehensive energy bill.

The Commission seeks public comment on standards for four priority issues critical to the smooth functioning and operation of the Smart Grid. After weighing public comments, FERC plans to adopt a final policy statement providing guidance to the electric power industry on standards for:

  • Cybersecurity;
  • Communications among regional market operators, utilities, service providers and consumers;
  • Ensuring that the bulk power system operators have “wide-area situational awareness” with equipment that allows them to monitor and operate their systems; and
  • Coordinating operation of the bulk power system with new and emerging technologies for renewable resources, demand resources, electricity storage and electric transportation systems.

FERC also proposes to allow utilities to recover the costs of Smart Grid deployments that demonstrate system security and compliance with Commission approved Reliability Standards, have the ability to be upgraded, and other specified criteria.

Comments on the proposed policy statement and action plan are due 45 days after publication in the Federal Register. The proposed policy statement is available at: http://www.ferc.gov/whats-new/comm-meet/2009/031909/E-22.pdf.