Smart Meter Data: Privacy and Cybersecurity
Brandon J. Murrill
Legislative Attorney
Edward C. Liu
Legislative Attorney
Richard M. Thompson II
Legislative Attorney
February 3, 2012

Congressional Research Service
7-5700www.crs.gov
R42338CRS Report for Congress
Prepared for Members and Committees of CongressSmart Meter Data: Privacy and Cybersecurity

Summary
Fueled by stimulus funding in the American Recovery and Reinvestment Act of 2009 (ARRA),
electric utilities have accelerated their deployment of smart meters to millions of homes acrossthe United States with help from the Department of Energy’s Smart Grid Investment Grant
program. As the meters multiply, so do issues concerning the privacy and security of the datacollected by the new technology. This Advanced Metering Infrastructure (AMI) promises toincrease energy efficiency, bolster electric power grid reliability, and facilitate demand response,among other benefits. However, to fulfill these ends, smart meters must record near-real time dataon consumer electricity usage and transmit the data to utilities over great distances via
communications networks that serve the smart grid. Detailed electricity usage data offers awindow into the lives of people inside of a home by revealing what individual appliances they areusing, and the transmission of the data potentially subjects this information to interception or theftby unauthorized third parties or hackers.
Unforeseen consequences under federal law may result from the installation of smart meters andthe communications technologies that accompany them. This report examines federal privacy andcybersecurity laws that may apply to consumer data collected by residential smart meters. It
begins with an examination of the constitutional provisions in the Fourth Amendment that may
apply to the data. As we progress into the 21st century, access to personal data, including
information generated from smart meters, is a new frontier for police investigations. The Fourth
Amendment generally requires police to have probable cause to search an area in which a person
has a reasonable expectation of privacy. However, courts have used the third-party doctrine todeny protection to information a customer gives to a business as part of their commercial
relationship. This rule is used by police to access bank records, telephone records, and traditional
utility records. Nevertheless, there are several core differences between smart meters and thegeneral third-party cases that may cause concerns about its application. These include concerns
expressed by the courts and Congress about the ability of technology to potentially erode
individuals’ privacy.
If smart meter data and transmissions fall outside of the protection of the Fourth Amendment,
they may still be protected from unauthorized disclosure or access under the Stored
Communications Act (SCA), the Computer Fraud and Abuse Act (CFAA), and the Electronic
Communications Privacy Act (ECPA). These statutes, however, would appear to permit law
enforcement to access smart meter data for investigative purposes under procedures provided in
the SCA, ECPA, and the Foreign Intelligence Surveillance Act (FISA), subject to certain
conditions. Additionally, an electric utility’s privacy and security practices with regard to
consumer data may be subject to Section 5 of the Federal Trade Commission Act (FTC Act). The
Federal Trade Commission (FTC) has recently focused its consumer protection enforcement on
entities that violate their privacy policies or fail to protect data from unauthorized access. Thisauthority could apply to electric utilities in possession of smart meter data, provided that the FTC
has statutory jurisdiction over them. General federal privacy safeguards provided under theFederal Privacy Act of 1974 (FPA) protect smart meter data maintained by federal agencies,
including data held by federally owned electric utilities.
A companion report from CRS focusing on policy issues associated with smart grid cybersecurity,
CRS Report R41886, The Smart Grid and Cybersecurity—Regulatory Policy and Issues, by
Richard J. Campbell, is also available.

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Contents
Overview.......................................................................................................................................... 1
Smart Meter Data: Privacy and Security Concerns ......................................................................... 3
Detailed Information on Household Activities.......................................................................... 3
Increased Potential for Theft or Breach of Data........................................................................ 6
Smart Meters and the Fourth Amendment ....................................................................................... 7
State Action: Privately Versus Publicly Owned Utilities........................................................... 8
Privately Owned and Operated Utilities.............................................................................. 8
Publicly Owned and Operated Utilities............................................................................. 10
Reasonable Expectation of Privacy in Smart Meter Data ....................................................... 13
Third-Party Doctrine ......................................................................................................... 14
Privacy in the Home.......................................................................................................... 16
Mosaic and Dragnet Theories............................................................................................ 19
Assumption of the Risk—Consent .................................................................................... 21
Statutory Protection of Smart Meter Data ..................................................................................... 22
The Electronic Communications Privacy Act (ECPA) ............................................................ 23
The Stored Communications Act (SCA) ................................................................................. 24
Electronic Communication Services ................................................................................. 25
Remote Computing Services............................................................................................. 27
The Computer Fraud and Abuse Act (CFAA) ......................................................................... 28
The Federal Trade Commission Act (FTC Act)............................................................................. 29
Covered Electric Utilities ........................................................................................................ 29
Investor-Owned Utilities ................................................................................................... 30
Publicly Owned Utilities ................................................................................................... 30
Federally Owned Utilities ................................................................................................. 34
Cooperatively Owned Utilities.......................................................................................... 35
Enforcement of Data Privacy and Security ............................................................................. 40“Deceptive” Privacy Statements ....................................................................................... 40“Unfair” Failure to Secure Consumer Data....................................................................... 41
Penalties ............................................................................................................................ 42
The Federal Privacy Act of 1974 (FPA)......................................................................................... 43
Federally Owned Utilities as “Agencies”................................................................................ 43
Smart Meter Data as a Protected “Record” ............................................................................. 44
Requirements........................................................................................................................... 44

FiguresFigure 1. Identification of Household Activities from Electricity Usage Data................................ 5Contacts
Author Contact Information........................................................................................................... 45

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Overview
Smart meter technology is a key component of the Advanced Metering Infrastructure (AMI)1 thatwill help the smart grid2 link the “two-way flow of electricity with the two-way flow of
information.”3 Privacy and security concerns surrounding smart meter technology arise from themeters’ essential functions, which include (1) recording near-real time data on consumer
electricity usage; (2) transmitting this data to the smart grid using a variety of communications
technologies;4 and (3) receiving communications from the smart grid, such as real-time energy
prices or remote commands that can alter a consumer’s electricity usage to facilitate demand
response.5
Beneficial uses of AMI are developing rapidly, and like the early Internet, many applications
remain unforeseen.6 At a basic level, smart meters will permit utilities to “collect, measure, andanalyze energy consumption data for grid management, outage notification, and billing
purposes.”7 The meters may increase energy efficiency by giving consumers greater control overtheir use of electricity,8 as well as permitting better integration of plug-in electric vehicles andrenewable energy sources.9 They may also aid in the development of a more reliable electricity
grid that is better equipped to withstand cyber attacks and natural disasters, and help to decrease
peak demand for electricity.10 To be useful for these purposes, and many others, data recorded by
1
AMI includes the meters at the consumer’s residence or business, the communications networks that send data
between the consumer and utility, and the data management systems that store and process data for the utility.
ELECTRIC POWER RESEARCH INST., ADVANCED METERING INFRASTRUCTURE (AMI) (2007), available at
http://www.ferc.gov/eventcalendar/Files/20070423091846-EPRI%20-%20Advanced%20Metering.pdf. The primaryfunction of AMI is to “combine interval data measurement with continuously available remote communications” toincrease energy efficiency and grid reliability, and decrease expenses borne by the utility and consumer. Id.
2
The Energy Independence and Security Act of 2007 (EISA) lists ten characteristics of a smart grid. These include“[i]ncreased use of digital information and controls technology to improve reliability, security, and efficiency of theelectric grid”; “[d]evelopment and incorporation of demand response, demand-side resources, and energy-efficiency
resources”; and “[d]eployment of “smart” technologies (real-time, automated, interactive technologies that optimize thephysical operation of appliances and consumer devices) for metering, communications concerning grid operations andstatus, and distribution automation.” EISA, P.L. 110-140, §1301, 121 Stat. 1492, 1783-84 (2007) (to be codified at 42
U.S.C. §17381).
3
DEP’T OF ENERGY, COMMUNICATIONS REQUIREMENTS OF SMART GRID TECHNOLOGIES 1 (2010) [hereinafter DEP’T OF
ENERGY COMMUNICATIONS REPORT], available at http://energy.gov/sites/prod/files/gcprod/documents/
Smart_Grid_Communications_Requirements_Report_10-05-2010.pdf.
4
Id. at 3, 5. These technologies include fiber optics, wireless networks, satellite, and broadband over power line. Id.
5
Id. at 20. “Demand response is the reduction of the consumption of electric energy by customers in response to anincrease in the price of electricity or heavy burdens on the system.” Id.
6
DEP’T OF ENERGY, DATA ACCESS AND PRIVACY ISSUES RELATED TO SMART GRID TECHNOLOGIES 5, 9 (2010)[hereinafter DEP’T OF ENERGY PRIVACY REPORT], available at http://energy.gov/sites/prod/files/gcprod/documents/
Broadband_Report_Data_Privacy_10_5.pdf; see also ELIAS LEAKE QUINN, SMART METERING & PRIVACY: EXISTINGLAW AND COMPETING POLICIES: A REPORT FOR THE COLORADO PUBLIC UTILITIES COMMISSION 1, 12 (2009) [hereinafter
COLORADO PRIVACY REPORT], available at http://www.dora.state.co.us/puc/docketsdecisions/DocketFilings/09I593EG/09I-593EG_Spring2009Report-SmartGridPrivacy.pdf.
7
DEP’T OF ENERGY COMMUNICATIONS REPORT, supra note 3, at 12.
8Companies are developing several new applications that use smart meter data to offer consumers and utilities better
control over energy usage, for example by determining the energy efficiency of specific appliances within thehousehold. DEP’T OF ENERGY PRIVACY REPORT, supra note 6, at 5, 9; see also COLORADO PRIVACY REPORT, supra note
6, at 1, 12.
9
DEP’T OF ENERGY COMMUNICATIONS REPORT, supra note 3, at 1.
10
Id. at 3.

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smart meters must be highly detailed, and, consequently, it may show what individual appliances
a consumer is using.11 The data must also be transmitted to electric utilities—and possibly to third
parties outside of the smart grid—subjecting it to potential interception or theft as it travels overcommunications networks and is stored in a variety of physical locations.12
These characteristics of smart meter data present privacy and security concerns that are likely to
become more prevalent as government-backed initiatives expand deployment of the meters tomillions of homes across the country. In the American Recovery and Reinvestment Act of 2009
(ARRA), Congress appropriated funds for the implementation of the Smart Grid Investment
Grant (SGIG) program administered by the Department of Energy.13 This program now permits
the federal government to reimburse up to 50% of eligible smart grid investments, which include
the cost to electric utilities of buying and installing smart meters.14 In its annual report on smart
meter deployment, the Federal Energy Regulatory Commission cited statistics showing that the
SGIG program has helped fund the deployment of about 7.2 million meters as of September
2011.15 At completion, the program will have partially funded the installation of 15.5 million
meters.16 By 2015, the Institute for Electric Efficiency expects that a total of 65 million smart
meters will be in operation throughout the United States.17
Installation of smart meters and the communications technologies that accompany them may have
unforeseen legal consequences for those who generate, seek, or use the data recorded by themeters. These consequences may arise under existing federal laws or constitutional provisions
governing the privacy of electronic communications, data retention, computer misuse, foreign
surveillance, and consumer protection. This report examines federal privacy and cybersecurity
laws that may apply to consumer data collected by residential smart meters. It examines the legal
implications of smart meter technology for consumers who generate the data, law enforcement
officers who seek smart meter data from utilities, utilities that store the data, and hackers who
access smart grid technology to steal consumer data or interfere with it. This report looks atfederal laws that may pertain to the data when it is (1) stored in a utility-owned smart meter at aconsumer’s residence; (2) in transit between the meter and the smart grid by way of various
communications technologies; and (3) stored on computers in the grid. This report does notaddress state or local laws, such as regulations by state Public Utilities Commissions, that may
establish additional responsibilities for some electric utilities with regard to smart meter data. It
also does not discuss the mandatory cybersecurity and reliability standards enforced by the North
11

See NAT’L INST. OF STANDARDS AND TECH., GUIDELINES FOR SMART GRID CYBER SECURITY: VOL. 2, PRIVACY AND
THE SMART GRID 14 (2010) [hereinafter NIST PRIVACY REPORT], available at http://csrc.nist.gov/publications/nistir/
ir7628/nistir-7628_vol2.pdf.
12
Id. at 3-4, 23-24, 29.
13
The act provides $4.5 billion for “electricity delivery and energy reliability,” which includes “activities to modernize
the electric grid, to include demand responsive equipment,” as well as “programs authorized under title XIII of theEnergy Independence and Security Act of 2007.” ARRA, P.L. 111-5, 123 Stat. 115, 138-39.
14
ARRA §405(5), (8), 123 Stat. 115, 143-44 (amendment to be codified at 42 U.S.C. §17386) (amending the Energy
Independence and Security Act of 2007 (EISA) to allow for the reimbursement of up to 50% of qualifying smart gridinvestments instead of only 20%); see also EISA, P.L. 110-140, §1306, 121 Stat. 1492, 1789-91 (to be codified as
amended at 42 U.S.C. §17386) (initially establishing the SGIG program).
15
FED. ENERGY REGULATORY COMM’N, ASSESSMENT OF DEMAND RESPONSE & ADVANCED METERING 3 (2011),
available at http://www.ferc.gov/legal/staff-reports/11-07-11-demand-response.pdf.
16
Id.
17
INST. FOR ELECTRIC EFFICIENCY, UTILITY-SCALE SMART METER DEPLOYMENTS, PLANS & PROPOSALS 1 (2011),
available at http://www.edisonfoundation.net/iee/issuebriefs/SmartMeter_Rollouts_0911.pdf.

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American Electric Reliability Corporation, which impose obligations on utilities that participate
in the generation or transmission of electricity.18
General federal privacy safeguards provided under the Federal Privacy Act of 1974 (FPA) protect
smart meter data maintained by federal agencies, including data held by federally owned electricutilities. Section 5 of the Federal Trade Commission Act (FTC Act) allows the Federal Trade
Commission (FTC) to bring enforcement proceedings against electric utilities that violate theirprivacy policies or fail to protect meter data from unauthorized access, provided that the FTC has
statutory jurisdiction over the utilities.
It is unclear how Fourth Amendment protection from unreasonable search and seizures would
apply to smart meter data, due to the lack of cases on this issue. However, depending upon themanner in which smart meter services are presented to consumers, smart meter data may beprotected from unauthorized disclosure or unauthorized access under the Stored Communications
Act (SCA), the Computer Fraud and Abuse Act (CFAA), and the Electronic Communications
Privacy Act (ECPA). If smart meter data is protected by these statutes, law enforcement would
still appear to have the ability to access it for investigative purposes under procedures provided in
the SCA, ECPA, and the Foreign Intelligence Surveillance Act (FISA).

Smart Meter Data: Privacy and Security Concerns
Residential smart meters present privacy and cybersecurity issues19 that are likely to evolve withthe technology.20 In 2010, the National Institute of Standards and Technology (NIST) published areport identifying some of these issues, which fall into two main categories: (1) privacy concernsthat smart meters will reveal the activities of people inside of a home by measuring theirelectricity usage frequently over time;21 and (2) fears that inadequate cybersecurity measuressurrounding the digital transmission of smart meter data will expose it to misuse by authorized
and unauthorized users of the data.22

Detailed Information on Household Activities
Smart meters offer a significantly more detailed illustration of a consumer’s energy usage thanregular meters. Traditional meters display data on a consumer’s total electricity usage and are
typically read manually once per month.23 In contrast, smart meters can provide near real-timeusage data by measuring usage electronically at a much greater frequency, such as once every 15
18
For additional information on the development of mandatory national smart grid privacy and cybersecurity standards
by federal agencies, see MASS. INST. OF TECH., THE FUTURE OF THE ELECTRIC GRID 197-234 (2011) [hereinafter MIT
GRID STUDY]; see also CRS Report R41886, The Smart Grid and Cybersecurity—Regulatory Policy and Issues, by
Richard J. Campbell.
19
According to the authors of the MIT study, cybersecurity “refers to all the approaches taken to protect data, systems,
and networks from deliberate attack as well as accidental compromise, ranging from preparedness to recovery.” MIT
GRID STUDY, supra note 18, at 208. Closely related is the concept of “information privacy,” which “deals with policy
issues ranging from identification and collection to storage, access, and use of information.” Id. at 219 n.viii.
20
See NIST PRIVACY REPORT, supra note 11, at 1.
21
Id. at 4, 11. Data that offers a high degree of detail is said to be “granular.” Id.
22
See id. at 4, 23-24, 29.
23
Id. at 2, 9.

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minutes.24 Current smart meter technology allows utilities to measure usage as frequently as once
every minute.25 By examining smart meter data, it is possible to identify which appliances aconsumer is using and at what times of the day, because each type of appliance generates a uniqueelectric load “signature.”26 NIST wrote in 2010 that “research shows that analyzing 15-minuteinterval aggregate household energy consumption data can by itself pinpoint the use of mostmajor home appliances.”27 A report for the Colorado Public Utilities Commission discussed an
Italian study that used “artificial neural networks” to identify individual “heavy-load applianceuses” with 90% accuracy using 15-minute interval data from a smart meter.28 Similarly, softwarebased algorithms would likely allow a person to extract the unique signatures of individual
appliances from meter data that has been collected less frequently and is therefore less detailed.29
By combining appliance usage patterns, an observer could discern the behavior of occupants in ahome over a period of time.30 For example, the data could show whether a residence is occupied,
how many people live in it, and whether it is “occupied by more people than usual.”31 According
to the Department of Energy, smart meters may be able to reveal occupants’ “daily schedules(including times when they are at or away from home or asleep), whether their homes areequipped with alarm systems, whether they own expensive electronic equipment such as plasmaTVs, and whether they use certain types of medical equipment.”32 Figure 1, which appears in
NIST’s report on smart grid cybersecurity, shows how smart meter data could be used to decipher
the activities of a home’s occupants by matching data on their electricity usage with known
appliance load signatures.

24

Id. at 13.
COLORADO PRIVACY REPORT, supra note 6, at 2. Some utilities may elect to receive data at less frequent intervals
because “backhauling real-time or near real-time data from the billions of devices that may eventually be connected to
the Smart Grid would require not only tremendous bandwidth” but also greater data storage capacities that could makethe effort “economically infeasible.” DEP’T OF ENERGY COMMUNICATIONS REPORT, supra note 3, at 20. However, the“trend” is for utilities to collect data more frequently. See COLORADO PRIVACY REPORT, supra note 6, at A-1 n.111.
26
NIST PRIVACY REPORT, supra note 11, at 2, 14.
27
Id. at 14. But see DEP’T OF ENERGY PRIVACY REPORT, supra note 6, at 9 (claiming, in 2010, that smart meter
technology “cannot yet identify individual appliances and devices in the home in detail, but this will certainly be within
the capabilities of subsequent generations of Smart Grid technologies”).
28
COLORADO PRIVACY REPORT, supra note 6, at 3 n.7, A-8.
29
Id. at A-9.
30
NIST PRIVACY REPORT, supra note 11, at 6 & n.9.
31
Id. at 11.
32
DEP’T OF ENERGY PRIVACY REPORT, supra note 6, at 2.
25

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Figure 1. Identification of Household Activities from Electricity Usage Data
Unique Electric Load Signatures of Common Household Appliances

Source: NATIONAL INSTITUTE OF STANDARDS AND TECHNOLOGY (NIST), GUIDELINES FOR SMART GRID CYBERSECURITY: VOL. 2, PRIVACY AND THE SMART GRID 13 (2010), available at http://csrc.nist.gov/publications/nistir/ir7628/
nistir-7628_vol2.pdf.
Note: Researchers constructed this picture from electricity usage data collected at one-minute intervals using anonintrusive appliance load monitoring (NALM) device, which is similar to a smart meter in the way that itrecords usage data. For a comparison of the technologies, see COLORADO PRIVACY REPORT, supra note 6, at A-1
to A-9.

Smart meter data that reveals which appliances a consumer is using has potential value for third
parties, including the government. In the past, law enforcement agents have examined monthly
electricity usage data from traditional meters in investigations of people they suspected ofillegally growing marijuana.33 For example, in United States v. Kyllo, a federal agent subpoenaed
the suspect’s electricity usage records from the utility and “compared the records to a spreadsheet
for estimating average electrical use and concluded that Kyllo’s electrical usage was abnormallyhigh, indicating a possible indoor marijuana grow operation.”34 If law enforcement officers
obtained near-real time data on a consumer’s electricity usage from the utility company, theirability to monitor household activities would be amplified significantly.35 For example, byobserving when occupants use the most electricity, it may be possible to discern their dailyschedules.36
33
NIST PRIVACY REPORT, supra note 11, at 11, 29; see also United States v. Kyllo, 190 F.3d 1041, 1043 (9th Cir.
1999), rev’d on other grounds, 533 U.S. 27 (2001).
34
Kyllo, 190 F.3d at 1043.
35
See supra notes 26-32 and accompanying text.
36
See supra note 32 and accompanying text.

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As smart meter technology develops and usage data grows more detailed, it could also become
more valuable to private third parties outside of the grid.37 Data that reveals which appliances aperson is using could permit health insurance companies to determine whether a household uses
certain medical devices, and appliance manufacturers to establish whether a warranty has been
violated.38 Marketers could use it to make targeted advertisements.39 Criminals could use it totime a burglary and figure out which appliances they would like to steal.40 If a consumer owned aplug-in electric vehicle, data about where the vehicle has been charged could permit someone toidentify a person’s location and travel history.41
Even privacy safeguards, such as “anonymizing” data so that it does not reflect identity, are not
foolproof.42 By comparing anonymous data with information available in the public domain, it issometimes possible to identify an individual—or, in the context of smart meter data, a particularhousehold.43 Moreover, a smart grid will collect more than just electricity usage data. It will also
store data on the account holder’s name, service address, billing information, networked
appliances in the home, and meter IP address, among other information.44 Many smart meters will
also provide transactional records as they send data to the grid, which would show the time thatthe meter transmitted the data and the location or identity of the transmitter.45

Increased Potential for Theft or Breach of Data
Smart grid technology relies heavily on two-way communication to increase energy efficiency
and reliability, including communication between smart meters and the utility (or other entity)that stores data for the grid.46 Many different technologies will transmit data to the grid, including“traditional twisted-copper phone lines, cable lines, fiber optic cable, cellular, satellite,
microwave, WiMAX, power line carrier, and broadband over power line.”47 Of thesecommunications platforms, wireless technologies are likely to play a “prominent role” because
they present fewer safety concerns and cost less to implement than wireline technologies.48
According to the Department of Energy, a typical utility network has four “tiers” that collect andtransmit data from the consumer to the utility.49 These include “(1) the core backbone—theprimary path to the utility data center; (2) backhaul distribution—the aggregation point for
37

NIST PRIVACY REPORT, supra note 11, at 14, 35-36.
Id. at 27-28.
39
Id. at 28.
40
Id. at 31.
41
Id.
42
Id. at 13.
43
See id. at 13, 25.
44
Id. at 26-27.
45
Id. at 12 (drawing a comparison to telecommunications providers’ “call detail records”).
46
Id. at 3; DEP’T OF ENERGY COMMUNICATIONS REPORT, supra note 3, at 3 (stating that “integrated two-way
communications ... allows for dynamic monitoring of electricity use as well as the potential for automated electricity
use scheduling.”). As more consumers become generators of electricity through the use of “fuel cells, wind turbines,
solar roofs, and the like,” the importance of two-way communication will increase. MIT GRID STUDY, supra note 18, at
201.
47
DEP’T OF ENERGY COMMUNICATIONS REPORT, supra note 3, at 3.
48
Id. at 5, 51 n.215.
49
Id. at 16.
38

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neighborhood data; (3) the access point—typically the smart meter; and, (4) the HAN—the home
network.”50 Energy usage data moves from the smart meter,51 and then to an “aggregation point”
outside of the residence such as “a substation, a utility pole-mounted device, or a communications
tower.”52 The aggregation points gather data from multiple meters and “backhaul” it to the utility
using fiber, T1, microwave, or wireless technology.53 Utilities typically rely on their own private
networks to communicate with smart meters because they have found these networks to be morereliable and less expensive than commercial networks.54
As NIST explains, consumer data moving through a smart grid becomes stored in many locations
both within the grid and within the physical world.55 Thus, because it is widely dispersed, it
becomes more vulnerable to interception by unauthorized parties56 and to accidental breach.57 The
movement of data also increases the potential for it to be stolen by unauthorized third parties
while it is in transit, particularly when it travels over a wireless network58—or throughcommunications components that may be incompatible with one another or possess outdated
security protections.59

Smart Meters and the Fourth Amendment
The use of smart meters presents the recurring conflict between law enforcement’s need toeffectively investigate and combat crime and our desire for privacy while in our homes. With
smart meters, police will have access to data that might be used to track residents’ daily lives androutines while in their homes, including their eating, sleeping, and showering habits, what
appliances they use and when, and whether they prefer the television to the treadmill, among ahost of other details.60 Though a potential boon to police, access to this data is not limitless. The
Fourth Amendment, which establishes the constitutional parameters for government
investigations, may restrict access to smart meter data or establish rules by which it can beobtained.61 The Fourth Amendment ensures that the “right of the people to be secure in theirpersons, houses, papers, and effects, against unreasonable searches and seizures, shall not be
violated....”62 This section discusses whether the collection and use of smart meter data may
50

Id.
The home network will be used to provide consumers with near real-time data on their energy usage. Id. at 13-15.
52
Id. Many urban installations use wireless mesh networks to carry data from the meters to the aggregation point.
These networks are more reliable because each smart meter can serve as a router in the network, providing redundantnetwork coverage. Id. at 18.
53
Id. at 16, 19.
54
Id. at 4, 19, 44.
55
NIST PRIVACY REPORT, supra note 11, at 23.
56
Id. at 23-24.
57
Id. at 29.
58
See id. at 9, 12, 33, and 36.
59
MIT GRID STUDY, supra note 18, at 209, 213-16.
60
Jack I. Lerner & Deirdre K. Mulligan, Taking the “Long View” on the Fourth Amendment: Stored Records and theSanctity of the Home, 2008 STAN. TECH. L. REV. 3, ¶ 3 (2008).
61
Additionally, as described below, there are federal statutory protections that may pertain to this data. State
constitutional and statutory safeguards may also apply, but these are beyond the scope of this report.
62
U.S. CONST. amend IV.
51

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contravene this protection. Although there is no Fourth Amendment case on point, analogous
cases may provide guidance.63
To assess whether there has been a Fourth Amendment violation, two primary questions must be
asked: (1) whether there was state action; that is, was there sufficient government involvement in
the alleged wrongdoing to trigger the Fourth Amendment; and (2) whether the person had an
expectation of privacy that society is prepared to deem reasonable.64 If the first question is
answered in the affirmative, then the analysis moves to the second question. But if no state action
is found, the analysis ends there and the Fourth Amendment does not apply. This subpart will first
determine whether access to smart meter data by police, or by privately and publicly owned
utilities, satisfies the state action doctrine, thereby warranting further Fourth Amendment review.

State Action: Privately Versus Publicly Owned Utilities
Most of the safeguards for civil liberties and individual rights contained in the U.S. Constitution
apply only to actions by state and federal governments.65 This rule, known as the state action
doctrine, arises when a victim claims his constitutional rights have been violated, and therefore
must prove the wrongdoer had sufficient connections with the government to warrant a remedy.66
Applying the state action test is intended to determine whether a utility’s collection anddissemination of smart meter data is governed by the Fourth Amendment, and if so, to what
extent. Although there are many variations in the governance and ownership of utilities—someare privately owned, others publicly owned, some federally operated, and still others nonprofit
cooperatives—they generally fall into two broad categories: public and private.67 This section will
analyze the constitutional differences between privately and publicly owned utilities under thestate action doctrine and a public records theory.

Privately Owned and Operated Utilities
It is broadly said that the Fourth Amendment applies only to acts by the government.68 But there
are at least two exceptions to this rule. First, if a utility performs a function traditionally exercisedby the government, it may be considered a state actor under the public function exception.
Second, the Fourth Amendment may apply when a private utility acts as an instrument or agent of
the police.69
63

For additional analyses of smart meters under the Fourth Amendment, see Cheryl Dancey Balough, Privacy
Implications of Smart Meters, 86 CHI.-KENT L. REV. 161 (2011); see also QUINN, supra note 6, at 28 (“[I]nterval dataof electricity consumption appears to be in something of a no-man’s-land under Supreme Court Fourth Amendment
jurisprudence.”).
64
California v. Ciraolo, 476 U.S. 207, 211 (1986) (citing Katz v. United States, 389 U.S. 347, 360 (1967) (Harlan, J.,
concurring)).
65
Civil Rights Cases, 109 U.S. 3, 11 (1883) (“It is State action of a particular character that is prohibited. Individualinvasion of individual rights is not the subject-matter of the [Fourteenth] amendment.”); see JOHN E. NOWAK &RONALD D. ROTUNDA, CONSTITUTIONAL LAW §12.1(a)(i) (8th ed. 2010).
66
NOWAK & ROTUNDA, supra note 65.
67
Determining whether a private actor is sufficiently “public” is not clear-cut. Then Justice Rehnquist noted, “[t]he true
nature of the State’s involvement may not be immediately obvious, and detailed inquiry may be required in order todetermine whether the test is met.” Jackson v. Metropolitan Edison Co., 419 U.S. 345, 351 (1974).
68
Burdeau v. McDowell, 256 U.S. 465, 475 (1921).
69
See United States v. Jacobsen, 466 U.S. 109, 113 (1984).

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Under the public function exception, a nominally private entity is treated as a state actor when it
assumes a role traditionally played by the government.70 Determining when this exception applies
has not proved easy,71 but it is reasonably clear that private utilities do not, in most instances,satisfy it. In Jackson v. Metropolitan Edison Co., a customer sued a privately owned utility under
the Civil Rights Act of 1871 for improperly shutting off her service without providing her noticeor a hearing.72 The Supreme Court asked whether there was a close enough nexus between thestate and the utility for the acts of the latter to be treated as those of the former.73 Although theutility was heavily regulated by the state, it was held not to be a state actor.74 The Court reasoned
that the provision of utility service is not generally an “exclusive prerogative of the State.”75 Alsoabsent was the symbiotic relationship between the utility and the state found in previous cases.76
Though its holding was broad, the Court did not foreclose the possibility that a privately owned
utility could be a state actor under different circumstances.77 This possibility, however, appears
narrow.
The Fourth Amendment may also apply to a private utility if its acts were directed by thegovernment. Generally, searches performed by private actors without police participation or
encouragement are not governed by the Fourth Amendment.78 A search by a private insurance
investigator, for instance, was not a “search” in the constitutional sense, though the evidence wasultimately used by the government at trial.79 This result differs, however, if there is sufficient
government involvement. If the search has been ordered or requested by the government, theprivate actor will become an “instrument or agent of the state” and must abide by Fourth
Amendment strictures.80 For example, the Fourth Amendment does not apply when a telephonecompany installs a pen register on its own initiative.81 The same action constitutes a search,however, if requested by the government.82
This theory applies not only to direct instigation, but also on a broad, programmatic level. In the
1960s and 1970s the federal government required privately owned and operated airlines toinstitute new security measures to combat airline hijacking.83 In United States v. Davis, the airline

70
Marsh v. Alabama, 326 U.S. 501 (1946) (holding that privately owned property was equivalent to “community
shopping center” thus private party was subject to the First and Fourteenth Amendments).
71
See NOWAK & ROTUNDA, supra note 65, §12.2.
72
Jackson, 419 U.S. at 347; see also Mays v. Buckeye Rural Elec. Coop., Inc., 277 F.3d 873, 880-81 (6th Cir. 2002)(holding that nonprofit cooperative utility was not a state actor under the federal constitution); Spickler v. Lee, No. 021954, 2003 U.S. App. LEXIS 6227, at *2 (1st Cir. March 31, 2003) (holding that private electric utility company was
not a state actor).
73
Jackson, 419 U.S. at 351.
74
Id. at 358-59.
75
Id. at 353.
76
Id. at 357.
77
Id. at 351.
78
1 WAYNE R. LAFAVE, SEARCH AND SEIZURE §1.8, at 255 (4th ed. 2004).
79
United States v. Howard, 752 F.2d 220, 227-28 (6th Cir. 1985).
80
Coolidge v. New Hampshire, 403 U.S. 443, 487 (1971) (internal quotation marks omitted); see LAFAVE, supra note78, §1.8(b).
81
United States v. Manning, 542 F.2d 685, 686 (6th Cir. 1976).
82
People of Dearborn Heights v. Hayes, 82 Mich. App. 253, 258 (1978).
83
United States v. Davis, 482 F.2d 893, 897-903 (9th Cir. 1973).

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Smart Meter Data: Privacy and Cybersecurity

searched a passenger based on these requirements and found a loaded gun.84 The Ninth Circuit
held that it made no difference whether the search was conducted by a private or public official:“the search was part of the overall, nation-wide anti-hijacking effort, and constituted ‘state action’for purposes of the Fourth Amendment.”85 Thus, if a private party is required to perform a searchor collect data under federal or state laws or regulations, there will be sufficient state action for
the Fourth Amendment to apply. Or, put another way, the government cannot circumvent the
Fourth Amendment by requiring a private party to initiate a search or implement an investigative
program.
This agency theory might apply to the collection of smart meter data. If the utility is accessing
this information “independent of the government’s intent to collect evidence for use in a criminal
prosecution,”86 the utility will not be considered an agent of the government for Fourth
Amendment purposes. But there might be instances when government instigation will trigger
further analysis. If, for example, the government requested the utility to record larger quantities ofdata than was customary (e.g., increasing the intervals from sub-15 minute intervals to sub-fiveminute or sub-one minute intervals), this would likely warrant Fourth Amendment scrutiny. Also,
if the police requested the utility to hand over customer data, say, for spikes in energy
commensurate with a marijuana growing operation, this would likely be a sufficient instigation to
trigger further constitutional review. Other situations may arise where the government establishes
a dragnet-type law enforcement scheme in which all smart meter data is filtered through police
computers. This could also implicate the agency theory and warrant a finding of state action.

Publicly Owned and Operated Utilities
Although the Fourth Amendment (with its warrant and probable cause requirement) typicallyapplies to public actors, in certain instances their collection of information may not fall under the
Fourth Amendment or may prompt a lower evidentiary standard. The Supreme Court has
infrequently considered the scope of the Fourth Amendment “on the conduct of government
officials in noncriminal investigations,”87 and even less frequently as to “noncriminal
noninvestigatory governmental conduct.”88 Nonetheless, there are two lines of cases that may
apply to smart meters in which the Fourth Amendment may not apply at all (noncriminal
noninvestigatory conduct) or may be reduced (noncriminal investigations). The key to thisanalysis is the government’s purpose in collecting the data.
The Supreme Court has developed a line of cases dubbed the “special needs” doctrine that
permits the government to perform suspicionless searches if the special needs supporting the
program outweigh the intrusion on the individual’s privacy.89 It is premised on the notion that“‘special needs,’ beyond the normal need for law enforcement, make the warrant and probablecause requirement impracticable.”90 If, on the one hand, the objective of the search is not for law
84

Id. at 895.
Id. at 904.
86
United States v. Howard, 752 F.2d 220, 228 (6th Cir. 1985).
87
The Supreme Court, 1986-Term—Leading Cases, 101 HARV. L. REV. 119, 230 (1987).
88
United States v. Attson, 900 F.2d 1427, 1430 (9th Cir. 1990) (emphasis in original).
89
Ferguson v. City of Charleston, 532 U.S. 67, 77-78 (2001).
90
Skinner v. Ry. Labor Executives’ Ass’n, 489 U.S. 602, 620 (1989) (quoting Griffin v. Wisconsin, 483 U.S. 868, 873(1987)).
85

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enforcement purposes but for other reasons such as public safety91 or ensuring the integrity ofsensitive government positions,92 then the doctrine will apply. If, however, the “primary purpose”
or “immediate objective” was “to generate evidence for law enforcement purposes,” thenapplication of the special needs doctrine is not appropriate, and the government must adhere to
general Fourth Amendment principles.93 Again, the primary inquiry is the purpose of the search.
Some circuit courts of appeal have extended the special needs theory, holding that the Fourth
Amendment does not apply (in contrast to a reduced standard of suspicion as with the special
needs cases) unless the “conduct has as its purpose the intention to elicit a benefit for thegovernment in either its investigative or administrative capacities.”94 In United States v. Attson,
the Ninth Circuit held that the collection of blood by a government-employed physician, which
was subsequently used by the police in a drunk driving prosecution, was not within the scope of
Fourth Amendment protection.95 The panel reasoned that the doctor drew the blood for medical
purposes, not to further a governmental purpose in obtaining evidence against the defendant in its
criminal investigation, so the Fourth Amendment did not apply.96
Applying these two theories to smart meters, a court would focus on the publicly owned utility’s
purpose in collecting the data. If it were for ordinary business purposes such as billing, informing
the customer of its usage patterns, or aiding the utility in making the grid more energy-efficient,then it would not violate the Fourth Amendment. If, however, the public utility began aggregating
data at the request of a law enforcement agency, with the purpose of aiding a criminal
investigation or other administrative purpose, the Fourth Amendment would seemingly apply. As
with private utilities, if the government requested that the public utility report any suspicious
electricity usage, or created a program where certain data was regularly transmitted to the police,
this might become investigatory and warrant Fourth Amendment protections. It appears law
enforcement cannot evade Fourth Amendment restrictions by requesting a publicly owned utility
to collect data for it.
Law enforcement might also request smart meter data under a public records theory. It is
generally accepted that public records are not accorded Fourth Amendment protection.97 Unlessthere is a state or federal statute prohibiting disclosure, “law enforcement access to state publicrecords is unrestricted.”98 Thus the inquiry hinges on whether a document is a public record.

91

Id.
Nat’l Treasury Employees Union v. Von Raab, 489 U.S. 656, 670 (1989).
93
Ferguson, 532 U.S. at 83 (emphasis in original).
94
See United States v. Attson, 900 F.2d 1427, 1431 (9th Cir. 1990); Poe v. Leonard, 282 F.3d 123, 137 (2d Cir. 2002);
United States v. Elliot, 676 F. Supp. 2d 431, 435-36 (D. Md. 2009).
95
Attson, 900 F.2d at 1433.
96
Id.
97
See Nilson v. Layton City, 45 F.3d 369, 372 (10th Cir. 1995) (“Information readily available to the public is notprotected by the constitutional right to privacy.”); Doe v. City of New York, 15 F.3d 264, 268 (2d Cir. 1994)(“Certainly, there is no question that an individual cannot expect to have a constitutionally protected privacy interest in
matters of public record.”); United States v. Ellison, 462 F.3d 557, 562 (6th Cir. 2006) (accessing license plate number
from computer database held not an intrusion of a constitutionally protected area, thus not a Fourth Amendment“search”); United States v. Baxter, 492 F.2d 150, 167 (9th Cir. 1973) (holding that Fourth Amendment protections do
not extend to telephone company toll and billing records); see also Christopher Slobogin, The Search and Seizure ofComputers and Electronic Evidence: Transaction Surveillance by the Government, 75 MISS. L. J. 139, 156 (2005).
98
Slobogin, supra note 97.
92

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Whether a person’s utility records are public records differs from state to state.99 Some states
deem records of a municipally owned and operated electric utility as public records open for
public inspection, while others have accorded these records statutory and constitutional
protections.
In Florida, for example, records kept in connection with the operation of a city-operated utility
are considered public records.100 A similar policy applies in Georgia, where all records of agovernment agency, including utility records, must be open for inspection.101 South Carolina, too,takes a similar approach.102 It is not clear, however, from the reported cases whether these statutes
permit access to personally identifiable information or simply operating records of the utility.
Oklahoma is more explicit, permitting access to “records of the address, rate paid for services,charges, consumption rates, adjustments to the bill, reasons for adjustment, the name of theperson that authorized the adjustment, and payment for each customer.”103 Oklahoma does protect
some confidentiality, including “credit information, credit card numbers, telephone numbers,social security numbers, [and] bank account information for individual customers.”104 Other
states, like Washington, specifically protect personally identifiable utility records. Washington
does not require a showing of probable cause, but instead “a reasonable belief” that the record
will help establish the customer committed a crime.105 North Carolina likewise states that any“[b]illing information compiled and maintained by a city or county or other public entity
providing utility services in connection with the ownership or operation of a public enterprise” isnot a public record.106
99
Because the focus of this report is federal law and the Fourth Amendment, a full treatment of state privacy law isbeyond its scope.
100
In re Public Records—Records of Municipally Operated Utility, Op. Att’y Gen. Fla. 74-35 (1974), available at
http://www.myfloridalegal.com/ago.nsf/Opinions/B4AED736C2272860852566B30067371A; see FLA. STAT.
§119.01(1) (2008) (“It is the policy of this state that all state, county, and municipal records are open for personal
inspection by any person.”).
101
See GA. CODE ANN. §50-18-70(b) (2011); Op. Att’y Gen. Ga. 2000-4 (2000) (requiring personal utility records ofcertain public employees to be disclosed under public records law). Georgia defines a “public record” as “alldocuments, papers, letters, maps, books, tapes, photographs, computer based or generated information, or similarmaterial prepared and maintained or received in the course of the operation of a public office or agency.” GA. CODE
ANN. §50-18-70(a).
102
In South Carolina, public records include “information in or taken from any account, voucher, or contract dealing
with the receipt or expenditure of public or other funds by public bodies.” S.C. CODE ANN. §30-4-50 (2011). See Kelsey
M. Swanson, The Right to Know: An Approach to Gun Licenses and Public Access to Government Records, 56 UCLA
L. REV. 1579, 1601 (2009).
103
OKLA. STAT. tit. 51, §24A.10 (2011).
104
Id.
105
WASH. REV. CODE §42.56.335 (2011). In Washington, the following rule applies to public utility districts andmunicipally owned electrical utilities:
A law enforcement authority may not request inspection or copying of records of any person who
belongs to a public utility district or a municipally owned electrical utility unless the authority
provides the public utility district or municipally owned electrical utility with a written statement inwhich the authority states that it suspects that the particular person to whom the records pertain has
committed a crime and the authority has a reasonable belief that the records could determine orhelp determine whether the suspicion might be true. Information obtained in violation of thissection is inadmissible in any criminal proceeding.
WASH. REV. CODE §42.56.335. The Washington Supreme Court has raised this protection to state constitutional status
in In re Personal Restraint of Maxfield, 133 Wash. 2d 332, 344 (1997).
106
However, the North Carolina public records law declares that “[n]othing contained herein is intended to limit public
disclosure by a city or county of bill information: ... that is necessary to assist law enforcement, public safety, fire(continued...)Congressional Research Service

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Determining whether a utility is a state actor or whether smart meter data is a public record are
merely threshold matters. A finding that an entity is a state actor or data is public does notforeclose law enforcement’s ability to retrieve customer smart meter data, but instead activates
the next step of Fourth Amendment analysis: whether the government invaded a reasonable
expectation of privacy.

Reasonable Expectation of Privacy in Smart Meter Data
Under the modern conception of the Fourth Amendment, the government may not intrude into anarea in which a person has an actual expectation of privacy that society would consider
reasonable.107 In the case of smart meter data, the government presumably seeks records in thecustody of third-party utilities on the energy use at a specific home. However, a significant bodyof cases has refused to recognize constitutionally protected privacy interests in information
provided by customers to businesses as part of their commercial relationships.108 This theory, thethird-party doctrine, permits police access to the telephone numbers a person dials109 and to aperson’s bank documents,110 free from Fourth Amendment constraints.
There are two relevant differences, however, between smart meters and the traditional third-party
cases that may warrant a shift in approach. First is the possible judicial unease with the notionthat advancement of technology threatens to erode further the constitutional protection ofprivacy.111 From that perspective, as technology progresses, society faces an ever-increasing riskthat an individual’s activities will be monitored by the government. This is coupled with theconcern that the breadth and granularity of personal information that new technology affords
provide a far more intimate picture of an individual than the more limited snapshots available
through prior technologies. Do the richness and scope of new information technologies warrant
increased constitutional scrutiny?
Second, smart meters can convey information about the activities that occur inside the home, anarea singled out for specific textual protection in the Fourth Amendment and one deeply ingrainedin Anglo-Saxon law.112 Even when the Court declared that “the Fourth Amendment protects
people, not places,”113 ostensibly shifting away from a property-based conception of the Fourth
Amendment, it has still carved out special protections for the home.114 However, concomitantwith the increased use of technology in our private lives is increased exposure of our private
activities, including those conducted in the home. Commonly, we share more personal(...continued)
protection, rescue, emergency management, or judicial officers in the performance of their duties.” N.C. GEN. STAT.
§132-1.1(c)(3).
107
Katz v. United States, 389 U.S. 347, 361 (1967) (Harlan, J., concurring).
108
See Smith v. Maryland, 442 U.S. 735 (1979).
109
Id.
110
United States v. Miller, 425 U.S. 435 (1976).
111
Kyllo v. United States, 533 U.S. 27, 33-4 (2001) (“It would be foolish to contend that the degree of privacy secured
to citizens by the Fourth Amendment has been entirely unaffected by the advance of technology.”).
112
See Entick v. Carrington, 19 How. St. Tr. 1029 (C.P. 1765).
113
Katz v. United States, 389 U.S. 347, 351 (1967).
114
See Orin S. Kerr, The Fourth Amendment and New Technologies: Constitutional Myths and the Case for Caution,
102 MICH. L. REV. 801, 809-10 (2004) [hereinafter Kerr, Fourth Amendment and New Technologies].

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information, even as our concerns grow that more individuals, businesses, and others can glean
more information about our personal lives as a matter of course. As with technology generally,
does the fact that more of our lives are becoming “public” call for lesser or greater constitutional
protection, and how does a “reasonable expectation”-based model continue to apply in atechnologically intensive society?
This subpart will first look at the third-party doctrine as it is commonly conceived by the courts.
Then it will discuss whether there are sufficient differences between the use of smart meters andtraditional third-party cases to counsel against its application.

Third-Party Doctrine
Traditionally, there has been no Fourth Amendment protection for information a consumer gives
to business as part of their business dealings.115 This doctrine dates back to the secret agent cases,in which any words uttered to another person, including a government agent or informant, were
not covered by the Fourth Amendment.116 It was later extended to business records, giving police
access to documents such as telephone records,117 bank records,118 motel registration records,119and cell phone records.120 The Supreme Court has reasoned that the customers assume the riskthat the information could be handed over to government authorities,121 and also that they consent
to such access.122 Some lower courts have applied this theory to traditional analog utility
meters.123 This section discusses the possible application of the third-party doctrine to smart
meters.
In Miller v. United States, agents of the Bureau of Alcohol, Tobacco, and Firearms (ATF)
subpoenaed several banks for records pertaining to the defendant, including copies of the
defendant’s checks, deposit slips, and financial statements.124 The defendant moved to suppress
the records at trial, arguing that a warrantless retrieval of the bank records (his “private
papers”)125 was an intrusion into an area protected by the Fourth Amendment. The Court
115

Orin S. Kerr, The Case for a Third-Party Doctrine, 107 MICH. L. REV. 561, 563 (2009) [hereinafter Kerr, ThirdParty Doctrine]. While the third-party doctrine has supporters like Professor Kerr, this group is overshadowed by its
vocal detractors. Professor LaFave described its underpinnings as “dead wrong” and that the “Court’s woefully
inadequate reasoning does great violence to the theory of Fourth Amendment protection which the Court developed in
Katz.” LAFAVE, supra note 78, §2.7(c). Justice Sotomayor lent credence to this sentiment in United States v. Jones,
where she posited that it “may be necessary to reconsider the premise that an individual has no reasonable expectationof privacy in information voluntarily disclosed to third parties.” United States v. Jones, 565 U.S. ___, 5 (Sotomayor, J.,
concurring in the judgment and the opinion).
116
United States v. White, 401 U.S. 745, 750 (1971) (holding that the Fourth Amendment “affords no protection to awrongdoer’s misplaced belief that a person to whom he voluntarily confides his wrongdoing will not reveal it.”)(internal quotation marks omitted).
117
Smith v. Maryland, 442 U.S. 735 (1979).
118
United States v. Miller, 425 U.S. 435 (1976).
119
United States v. Willis, 759 F.2d 1486, 1498 (11th Cir. 1985).
120
United States v. Hynson, No. 05-576, 2007 WL 2692327, at *6 (E.D. Pa. Sept. 11, 2007).
121
Smith, 442 U.S. at 744.
122
Kerr, Third-Party Doctrine, supra note 115.
123
United States v. McIntyre, 646 F.3d 1107 (8th Cir. 2011).
124
Miller, 425 U.S. at 437-438.
125
Brief for Respondent at 4, Miller, 425 U.S. 435 (No. 74-1179), 1975 WL 173642, at *4 (“The Fourth Amendment ishistorically rooted in a concern for control over personal and private information in the face of governmental demands(continued...)Congressional Research Service

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disagreed, broadly declaring “the Fourth Amendment does not prohibit the obtaining of
information revealed to a third-party and conveyed by him to Government authorities, even if it isrevealed on the assumption that it will be used only for a limited purpose and the confidence
placed in the third-party will not be betrayed.”126 The Court further noted that “the depositor takes
the risk, in revealing his affairs to another, that the information will be conveyed by that person to
the Government.”127
Three years later, the Court extended the third-party doctrine to outgoing numbers dialed from aperson’s telephone.128 In Smith v. Maryland, the defendant robbed a woman and began making
obscene phone calls to her.129 Suspecting Smith placed the calls, the police used a pen register totrack the telephone numbers dialed from his phone.130 The police failed to obtain a warrant or
subpoena before installing the pen register.131 The register revealed that Smith was in fact making
the phone calls to the woman. In denying Smith’s motion to suppress, the Court relied on thethird-party doctrine, stating that “this Court consistently has held that a person has no legitimate
expectation of privacy in information he voluntarily turns over to third parties.”132 As applied tothe telephone context, the Court found that “[w]hen he used his phone, [Smith] voluntarily
conveyed numerical information to the telephone company and ‘exposed’ that information to its
equipment in the ordinary course of business. In so doing, [Smith] assumed the risk that thecompany would reveal to police the numbers he dialed.”133
Traditionally, utility records have been handled similarly to bank records and telephone records.
Several lower federal courts have held that customers do not have a reasonable expectation ofprivacy in their utility records, thereby permitting warrantless access to these records. In UnitedStates v. Starkweather, the Ninth Circuit held that a person does not have a reasonable expectationof privacy in his utility records.134 The panel reasoned that (1) these records were no different
from phone records, and thus did not justify a different constitutional result; and (2) the public
was aware that such records were regularly maintained, thereby negating any expectation ofprivacy.135 The Eighth Circuit has also upheld warrantless police access to utility records inUnited States v. McIntyre.136 The Eighth Circuit panel distinguished Kyllo, declaring that themeans of obtaining the information in Kyllo (a thermal-imaging device) was significantly more
intrusive than simply subpoenaing the records from the utility company.137 The court held that“the means to obtaining the information is legally significant.”138 Likewise, the court in United(...continued)
for access and use.”) (citing Entick v. Carrington, 19 How. St. Tr. 1029 (C.P. 1765)).
126
Miller, 425 U.S. at 443.
127
Id.
128
Smith v. Maryland, 442 U.S. 735 (1979).
129
Id. at 737.
130
Id.
131
Id.
132
Id. at 743-44.
133
Id. at 744.
134
United States v. Starkweather, No. 91-30354, 1992 WL 204005, at *2 (9th Cir. Aug. 24, 1992).
135
Id.
136
United States v. McIntyre, 646 F.3d 1107 (8th Cir. 2011).
137
Id. at 1111.
138
Id.

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States v. Hamilton held that the means of obtaining power records from a third-party by way ofadministrative subpoena as opposed to “intrusion on the home by ‘sense enhancing technology’”is “legally significant,” removing this type of situation from the Kyllo-home privacy line of cases
into the Miller-third-party line.139
It is difficult to predict whether a court would extend this traditional third-party analysis to smart
meters. The courts may seek to ensure the predictability and stability of the third-party doctrine
generally and administration of utility services specifically, thus requiring a bright-line rule for all
third-party circumstances.140 There is an advantage to a rule that is easy to apply, that allows
utilities to better govern their affairs, and does not permit “savvy wrongdoers [to] use third-party
services in a tactical way to enshroud the entirety of their crimes in zones of Fourth Amendment
protection.”141 However, there are three overarching considerations embodied in the use of smart
meters that might weigh against the application of traditional third-party analysis. These include(a) a person’s expectation of privacy while at home; (b) the breadth and granularity of private
information conveyed by smart meters; (c) the lack of a voluntary assumption of the risk orconsent to release of this data.

Privacy in the Home
The location of the search mattered little in the traditional third-party cases, but it may take on
constitutional significance with smart meters.142 In the case of smart meters, the information is
generated in the home, an area accorded specific textual protection in the Fourth Amendment, andone the Supreme Court has persistently safeguarded.143 In no uncertain terms the Court has
asserted that “[a]t the very core [of the Fourth Amendment] stands the right of a man to retreat
into his own home and there be free from unreasonable government intrusion.”144 Even as
technology advances—whether a tracking or thermal-imaging device or something new—the
Court has maintained this bulwark. Because of the significance of the home, access to smart

139

United States v. Hamilton, 434 F. Supp. 2d 974, 980 (D. Or. 2006); Booker v. Dominion Va. Power, No. 3:09-759,
2010 U.S. Dist. LEXIS 44960, at *17 (E.D. Va. May 7, 2010); see also Samson v. State, 919 P.2d 171, 173 (Ala. App.
1996) (holding under state constitution that “utility records are maintained by the utility and do not constituteinformation in which society is prepared to recognize a reasonable expectation of privacy”); People v. Stanley, 86 Cal.
Rptr. 2d 89, 94 (Cal. App. 1999) (same).
140
See Duncan Kennedy, Form and Substance in Private Law Adjudication, 89 HARV. L. REV. 1687, 1710 (1976).
141
Kerr, Third-Party Doctrine, supra note 115, at 564.
142
In Smith, the “site of the call was immaterial for purposes of analysis” of that case. Smith v. Maryland, 442 U.S.
735, 743 (1979). Whether a person dials a telephone number from his home, a telephone booth, or any other location
does not alter the nature of the activity, and thus does not affect the Fourth Amendment analysis. The privacy interests
implicated are the same no matter where the call is placed. The same theory applies to bank records. It matters notwhere someone writes a check, or fills out a deposit slip—the privacy interest is the same.
143
Payton v. New York, 445 U.S. 573, 589 (“The Fourth Amendment protects the individual’s privacy in a variety ofsettings. In none is the zone of privacy more clearly defined than when bounded by the unambiguous physicaldimensions of an individual’s home—a zone that finds its roots in clear and specific constitutional terms: ‘The right ofthe people to be secure in their ... houses ... shall not be violated.’”) (quoting U.S. CONST. amend IV); Minnesota v.
Carter, 525 U.S. 83, 99 (1998) (Kennedy, J., concurring) (“[I]t is beyond dispute that the home is entitled to special
protection as the center of the private lives of our people. Security of the home must be guarded by law in a world
where privacy is diminished by enhanced surveillance and sophisticated communication systems.”).
144
Silverman v. United States, 365 U.S. 505, 511 (1961).

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meter data may prompt a doctrinal shift away from the third-party doctrine. Several home privacy
cases shed light on this possible approach.145
In Kyllo v. United States, the Court had to decide whether the use of a thermal-imaging device
from the outside of a home that detected the amount of heat coming from inside the home was a
violation of the Fourth Amendment.146 In Kyllo, an agent of the Department of the Interior
suspected Danny Kyllo was growing marijuana in his home with the use of high-intensity
lamps.147 The agent used a thermal imager to scan the outside of Kyllo’s apartment to determine if
he was using these “grow” lamps.148 Thermal imagers can detect energy emitting from the outside
surface of an object.149 When scanning the home, the thermal imager produced an image withvarious shades of black, white, or gray—the shades darker or lighter depending on the warmth of
the area being scanned.150 From the passenger seat of his car, the agent scanned Kyllo’s home forseveral minutes.151 From his scan, he determined that the area over the garage and one side of hishome were relatively hot compared to neighboring homes.152 Based on utility bills, informant
tips, and the results of thermal imaging, the agents obtained a warrant to search Kyllo’s home.153
As suspected, inside the home the agents found a marijuana growing operation, including over
100 plants.154
Justice Scalia first posited that “with very few exceptions, the question whether a warrantless
search of the home is reasonable must be answered no.”155 Searches of the home were historicallyanalyzed under the common law doctrine of trespass,156 but during the mid-20th century the Court
instead anchored the Fourth Amendment to a conception of privacy.157 While this test may bedifficult to apply in the context of automobiles, telephone booths, or other public areas, it is madeeasier when concerning the home:
In the case of the search of the interior of homes—the prototypical and hence mostcommonly litigated area of protected privacy—there is a ready criterion, with deep roots inthe common law, of the minimal expectation of privacy that exists, and that is acknowledged

145
In April 2012, the Supreme Court will hear oral arguments in its most recent home privacy case, Jardines v. Florida,
73 So. 3d 34 (Fla. 2011), cert granted, 2012 U.S. LEXIS 7 (Jan. 6, 2012) (No. 11-564), where it will decide whether adrug sniff at the front door of a suspect’s house by a trained narcotics dog is a Fourth Amendment search requiring
probable cause. This case should shed further light on the parameters of privacy surrounding the home.
146
Kyllo v. United States, 533 U.S. 27, 29 (2001).
147
Id.
148
Id.
149
Id.
150
Id. at 29-30.
151
Id. at 30.
152
Id.
153
Id.
154
Id. The Ninth Circuit held that Kyllo had not exhibited a subjective expectation of privacy in the home because he
did not attempt to prevent the heat emitting from the lamps from escaping his home. United States v. Kyllo, 190 F.3d
1041, 1046 (9th Cir. 1999). Further, the panel held that even if he had a subjective expectation of privacy, it was not areasonable one since the imager “did not expose any intimate details of Kyllo’s life.” Id. at 1047.
155
Kyllo, 533 U.S. at 31.
156
See Olmstead v. United States, 277 U.S. 438 (1928).
157
Katz v. United States, 389 U.S. 347, 361 (1967) (Harlan, J., concurring). The modern formulation of the reasonable
expectation of privacy test derives not from the majority opinion but from Justice Harlan’s concurrence.

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to be reasonable. To withdraw protection of this minimum expectation would be to permit
police technology to erode the privacy guaranteed by the Fourth Amendment.158

The Court ultimately held that “obtaining by sense-enhancing technology any information
regarding the interior of the home that could not otherwise have been obtained without physicalintrusion into a constitutionally protected area constitutes a search—at least where (as here) the
technology in question is not in general public use.”159 Kyllo affirmed the notion that “anexpectation of privacy in activities taking place inside the home is presumptively reasonable.”160
The Court also protected home privacy by prohibiting the monitoring of the location of a beeper
while inside a residence.161 In United States v. Karo, with the consent of a government informant
the police attached a beeper to the false bottom of a can of ether, which was sold to Karo.162 The
can of ether was transported between several residences and storage facilities.163 The police used
the beeper to monitor the location of the can several times while it was located inside of theresidences.164 The Court was asked to determine “whether the monitoring of a beeper in a private
residence, a location not open to visual surveillance, violates Fourth Amendment rights of those
who have a justifiable interest in the privacy of the residence.”165 The Court answered in theaffirmative.
The Court reiterated the long-standing notion that “private residences are places in which theindividual normally expects privacy free of governmental intrusion not authorized by a warrant,
and that expectation is plainly one that society is prepared to recognize as justifiable.”166 Unlessthere are exigent circumstances, “searches and seizures inside a home without a warrant arepresumptively unreasonable....”167 The Court ultimately held that the warrantless monitoring of
the beeper in the home was a Fourth Amendment violation.168
Kyllo and Karo demonstrate that the Supreme Court “has defended the home as a sacred site atthe ‘core of the Fourth Amendment.’”169 Although neither the Supreme Court nor any lower
federal court has ruled on the use of smart meters, a few propositions can be deduced from Kyllo
and Karo bearing on this question.
Because smart meters allow law enforcement to access information regarding intimate details
occurring inside the home, a highly invasive investigation that could not otherwise be performed
without intrusion into the home, a court may require a warrant to access this data. In Kyllo, the158

Kyllo, 533 U.S. at 34.
Id. (internal quotation marks omitted).
160
Lerner & Mulligan, supra note 60, ¶ 18.
161
United States v. Karo, 468 U.S. 705 (1984).
162
Id. at 708.
163
Id.
164
Id. at 709-10.
165
Id.
166
Id. at 714.
167
Id. at 714-15.
168
Id. at 718.
169
Stephanie M. Stern, The Inviolate Home: Housing Exceptionalism in the Fourth Amendment, 95 CORNELL L. REV.
905, 913 (2010) (citing Wilson v. Layne, 526 U.S. 603, 612 (1999)).
159

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police merely obtained the relative temperatures of a house,170 and in Karo the police only
generally located the beeper in the house.171 Although this information was limited, the Court
nonetheless prohibited such investigatory techniques. Smart meters have the potential to produce
significantly more information than that derived in Kyllo and Karo, including what individual
appliances we are using; whether our house is empty or occupied; and when we take our daily
shower or bath.172 Further, a look at Figure 1, supra, makes it clear that this level of information
is much more intimate than prior technologies used by law enforcement. This depth of intrusionsuggests that customers may have a reasonable expectation of privacy in smart meter data.
There is also a question whether smart meters are in “general public use.” (The police must use
technology not in general public use for Kyllo to apply.)173 Unfortunately, the Court provided no
criterion for making this determination.174 Several courts applying this test have held that nightvision goggles were in general public use.175 One federal district court reasoned that the goggles
were regularly used by the military and police and could be found on the Internet, so wereconsidered in general public use.176 In 2009, the Department of Energy estimated that 4.75% of
all electric meters were smart meters.177 The department projects that by 2012 approximately 52
million more meters will be installed.178 With little guidance on this issue, it is uncertain whether
this jump in numbers would elevate smart meters into the general public use category.
The means by which data is gathered also differentiates the thermal-imaging in Kyllo from smart
meters. In Kyllo, the police independently gathered the information using the thermal imager; anagent went outside Kyllo’s house and used the thermal imager himself.179 With smart meters, theutility company compiles the information and the police subpoena the company for the data. Thisdifference in means was material in one lower court analyzing access to traditional utility data.180
It is not clear whether this difference advises against application of Kyllo here.

Mosaic and Dragnet Theories
The second factor guiding against the application of the third-party doctrine is composed of two
interconnected theories: the mosaic and dragnet theories. The mosaic theory is grounded in theidea that surveillance of the whole of one’s activities over a prolonged period is substantially170

United States v. Kyllo, 533 U.S. 27, 30 (2001).
Karo, 468 U.S. at 705, 709-10.
172
NIST PRIVACY REPORT, supra note 11, at 14 & n.35. It is unclear whether the specificity of the data from the smart
meter will directly affect the constitutional analysis. Kyllo, 533 U.S. at 37 (“The Fourth Amendment’s protection of thehome has never been tied to measurement of the quality or quantity of information obtained.”). With that said, the
NIST report maintains that sufficient information about the activities inside of the home are presented to implicate a
Kyllo, home search analysis.
173
Kyllo, 533 U.S. at 34.
174
See Douglas Adkins, The Supreme Court Announces a Fourth Amendment “General Public Use” Standard for
Emerging Technologies but Fails to Define It: Kyllo v. United States, 27 DAYTON L. REV. 245 (2002).
175
See United States v. Dellas, 355 F. Supp. 2d 1095, 1107 (N.D. Cal. 2005).
176
United States v. Vela, 486 F. Supp. 2d 587, 590 (W.D. Tex. 2005).
177
DEP’T OF ENERGY, SMART GRID SYSTEM REPORT vi (2009), available at http://energy.gov/sites/prod/files/oeprod/
DocumentsandMedia/SGSRMain_090707_lowres.pdf.
178
Id.
179
United States v. Kyllo, 533 U.S. 27, 29 (2001).
180
United States v. McIntyre, 646 F.3d 1107, 1111-12 (8th Cir. 2011).
171

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more invasive than a look at each item in isolation.181 In the case of smart meters, this is thedifference between knowing a person’s monthly energy usage, and being able to discern aperson’s daily activities with considerable accuracy. This theory intersects with dragnet-styled
law enforcement techniques in which the police cast a wide surveillance net, taking in a wealth of
personal information with the goal of finding criminal activity among the stream of data.
Although the Supreme Court has never formally adopted the mosaic theory, there seems to be aready-made majority potentially willing to consider it.182 In United States v. Jones, the police useda GPS tracking device to track Jones’s movements for almost a month.183 The majority, led by
Justice Scalia, held that attaching a GPS device on a vehicle for the purpose of collecting
information constituted a “search” under the Fourth Amendment.184 The physical intrusion, rather
than a Katz-type invasion of privacy, was the lynchpin of the decision.185 Justices Alito andSotomayor both agreed that this was a search, but on different grounds. Both discussed anadaptation of the mosaic theory as prohibiting police from tracking a person for an extended
period of time. Justice Alito, joined by Justices Breyer, Ginsburg, and Kagan, assumed that ashort-term search would not violate the Fourth Amendment, but that “the use of longer term GPS
monitoring in investigations of most offenses impinges on expectations of privacy.”186 Likewise,
Justice Sotomayor agreed with this “incisive” observation, noting that “GPS monitoring generates
a precise, comprehensive record of a person’s public movements that reflects a wealth of detailabout familial, political, professional, religious, and sexual associations.”187 Both of thesecomments closely mirror those of the opinion below, which relied on the mosaic theory: “Aperson who knows all of another’s travels can deduce whether he is a weekly church goer, aheavy drinker, a regular at the gym, an unfaithful husband, an outpatient receiving medical
treatment, an associate of particular individuals or political groups—and not just one such fact
about a person, but all such facts.”188
Although the Jones majority did not embrace the mosaic theory, the concurrences demonstratethat five justices are flirting with the idea. These arguments resemble those made against theunfettered use of smart meter data. With smart meters, police would have a rich source of
personal data that reveals far more about a person than traditional analog meters. Understanding aperson’s daily activities, including what appliances he is using, is a far leap from knowing hismonthly energy usage. This is the difference between knowing about a single trip a person took
and monitoring his movements over a month-long period. The breadth and granularity of thesmart meter data may be seen as warranting application of the mosaic theory and may perhaps
find receptive ears on the Court.
Additionally, the dragnet theory may apply to collection of energy usage data. This theory statesthat surveillance normally permitted under the Fourth Amendment—such as monitoring aperson’s movements on a public street—becomes an impermissible invasion of privacy when181

See Cent. Intelligence Agency v. Sims, 471 U.S. 159, 178 (1985).
See Orin Kerr, VOLOKH CONSPIRACY, What’s the Status of the Mosaic Theory After Jones?, http://volokh.com/2012/01/23/whats-the-status-of-the-mosaic-theory-after-jones/.
183
United States v. Jones, 565 U.S. ___, 2 (2012).
184
Id. at 3.
185
Id. at 4.
186
Id. at 13 (Alito, J., concurring in the judgment).
187
Id. at 3 (Sotomayor, J., concurring in the judgment and the opinion).
188
United States v. Maynard, 615 F.3d 544, 562 (D.C. Cir. 2010).
182

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conducted on a prolonged, 24-hour basis.189 “If such dragnet-type law enforcement practices as
respondent envisions should eventually occur,” Justice Rehnquist asserted earlier in United Statesv. Knotts, “there will be time enough then to determine whether different constitutional principles
may be applicable.”190 Twenty-four hour access to our intimate daily activities, including what
appliances we use, when we take our daily shower or bath, eat, and sleep, may push smart meters
into the dragnet category.
Coinciding with the mosaic and dragnet theories is the difference in sophistication and thequantity of the data revealed between traditional third-party cases and smart meters. Comparing
Smith with Katz provides insight into this distinction. Pen registers, as used in Smith, have“limited capabilities”—they can only record the numbers dialed from a phone.191 In comparison,in Katz the police listened to the contents of Katz’s phone call—the actual words spoken.192 In
noting this distinction, it seems the Smith Court, in permitting the use of pen registers,
intentionally limited its holding to the discrete set of data conveyed—the telephone numbers
dialed. Smart meters, to the contrary, have the potential to collect and aggregate precise detailabout the activities inside the home. It is more than one packet of data, but reveals minute-byminute activity, something far more revealing, and arguably more like Katz than Smith.

Assumption of the Risk—Consent
The third difference between traditional third-party cases and smart meters is the nature ofservices involved and whether the customer actually assumes the risk or consents to thisinformation being shared with others. Assumption of the risk and consent are the two leading
theories supporting the third-party doctrine. In United States v. Miller, the customer “assumed therisk” that the bank would turn over the bank records to government authorities.193 That was a risk
he took in doing business with the bank. As to the consent theory, one commentator asked andanswered the question as follows: “When does a person’s choice to disclose information to athird-party constitute consent to a search? So long as a person knows that they are disclosing
information to a third-party, their choice to do so is voluntary and the consent valid.”194
With banking or telephone services, a customer has the option of transferring his business toanother bank or another telephone carrier.195 To the contrary, because electric utilities are
essentially monopolies, the customer cannot simply switch services. The only way to avoid therecordation of his electric usage is to terminate his utility service altogether, an impracticable
option in modern society. As one state court has noted:
Electricity, even more than telephone service, is a “necessary component” of modern life,
pervading every aspect of an individual’s business and personal life: it heats our homes,
189

Id. at 558.
United States v. Knotts, 460 U.S. 276, 283-84 (1983). Because this statement was not essential to the holding, it was
dictum: persuasive, but not binding.
191
Smith, 442 U.S at 741 (citing Katz v. United States, 389 U.S. 347 (1967)).
192
Katz, 389 U.S. at 348.
193
Smith, 442 U.S. at 744 (citing United States v. Miller, 425 U.S. 435 (1976)).
194
Kerr, Third-Party Doctrine, supra note 115, at 588.
195
Contra Smith, 442 U.S. at 750 (Marshall, J., dissenting) (“[U]nless a person is prepared to forgo use of what for
many has become a personal or professional necessity, he cannot help but accept the risk of surveillance. It is idle tospeak of “assuming” the risk in contexts where, as a practical matter, individuals have no realistic alternative.”).
190

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powers our appliances, and lights our nights. A requirement of receiving this service is thedisclosure to the power company (and in this case an agent of the state) of one’s identity andthe amount of electricity being used. The nature of electrical service requires the disclosureof this information, but that disclosure is only for the limited business purpose of obtaining
the service.196

It is not clear whether assumption of the risk or consent should apply to smart meters. It isreasonable to assume that customers understand utility companies must collect usage data to bill
the customer for that usage. Customers receive their statement each month demonstrating thisfact. However, most customers are probably not familiar with the sophistication of smart meters
and the detailed data sets that can be derived from them. Even if customers are aware their utility
usage can be recorded in sub-fifteen minute intervals, a reasonable customer would probably be
surprised, if not shocked, to know that data from smart meters can potentially be used to pinpoint
the usage of specific appliances. If knowledge of the sophistication of the data is a prerequisite toassumption of the risk or consent, it is difficult to say whether a reasonable customer would
understand the privacy implications with this new technology.197
Because smart meters are an emerging technology not yet judicially tested, it is difficult toconclude with certainty how they would be handled under the Fourth Amendment. Further,beyond the possible constitutional implications of smart meters, federal communication andprivacy statutes may also apply. As noted by Professor Kerr, “in recent decades, legislative
privacy rules governing new technologies have proven roughly as privacy protective, and quite
often more protective than, parallel Fourth Amendment rules.”198

Statutory Protection of Smart Meter Data
This section discusses federal statutory protections that may be applicable to the contents ofcommunications sent by a smart meter, independent of the Fourth Amendment, while they are
either stored within the smart meter prior to transmission, during transmission, or after they havebeen delivered to the utility. Three federal laws, the Electronic Communications Privacy Act(ECPA),199 the Stored Communications Act (SCA),200 and the Computer Fraud and Abuse Act(CFAA)201 may be applicable to these situations and are discussed in more detail below.

196

In re Restraint of Maxfield, 133 Wn.2d 332, 341 (Wash. 1997); see also Balough, supra note 63, at 185.
Cf. United States v. Warshak, 631 F.3d 266, 288 (6th Cir. 2010) (“Miller involved simple business records, as
opposed to the potentially unlimited variety of ‘confidential communications’ at issue here.”).
198
Kerr, Fourth Amendment and New Technologies, supra note 114, at 806.
199
For more detailed information on ECPA, see CRS Report R41733, Privacy: An Overview of the Electronic
Communications Privacy Act, by Charles Doyle.
200
For a more detailed discussion of the SCA, see CRS Report R41733, Privacy: An Overview of the Electronic
Communications Privacy Act, by Charles Doyle.
201
For more detailed information on the CFAA, see CRS Report 97-1025, Cybercrime: An Overview of the Federal
Computer Fraud and Abuse Statute and Related Federal Criminal Laws, by Charles Doyle.
197

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The Electronic Communications Privacy Act (ECPA)
ECPA, enacted in 1986, “addresses the interception of wire, oral and electronic
communications.”202 The statute defines electronic communications as “any transfer of signs,
signals, writing, images, sounds, data, or intelligence of any nature transmitted in whole or in partby a wire, radio, electromagnetic, photoelectronic or photooptical system that affects interstate or
foreign commerce....”203 Based on the description of the smart meter network provided above,204
the envisioned transmission of customers’ energy usage data by smart meters would seem to fallsquarely within the definition of electronic communications under ECPA.
ECPA generally prohibits the interception of electronic communications, but also provides amechanism for government entities to conduct such surveillance, and a number of otherexceptions.205 Additionally, the statute provides that interception under the procedures andexceptions set forth in ECPA, or pursuant to the Foreign Intelligence Surveillance Act, are theexclusive means for intercepting electronic communications.206 The unlawful interception ofelectronic communications in violation of ECPA is generally punishable by imprisonment for not
more than five years and/or a fine of not more than $250,000 for individuals and not more than
$500,000 for organizations.207
Of particular relevance to the immediate discussion is the fact that ECPA permits interception ofan electronic communication where a party to the communication has consented to suchinterception.208 In the context of a smart meter network that is the subject of this report, it appears
that the utility would be a party to all of the communication sent by the smart meters, since it isprimarily receiving that information for its own billing purposes. Therefore, if the utility consents
to law enforcement’s interception of the traffic which is addressed to it, that surveillance would
not appear to violate the prohibitions in ECPA.
ECPA also provides a procedural mechanism for law enforcement to conduct surveillance
activities for investigative purposes without the consent of any party to the communication. The
statute limits the types of criminal cases in which electronic surveillance may be used209 andrequires court orders authorizing electronic surveillance to be supported by probable cause tobelieve that the target is engaged in criminal activities, that normal investigative techniques are

202

S.Rept. 99-541 at 3.
18 U.S.C. §2510(12).
204
See supra note 47 and accompanying text (noting that smart meters may use a variety of communications
technologies, including fiber optics, wireless networks, satellite, and broadband over power line).
205
18 U.S.C. §2516. Exceptions cover things such as interception with the consent of a party to the communication andinterception by communication service providers as an incident to providing service.
206
18 U.S.C. §2511(2)(f). FISA defines electronic surveillance to include more than the interception of wire, oral, or
electronic communications, 50 U.S.C. §1801(f), but places limitations on its definition based upon the location or
identity of some or all of the parties to the communications involved.
207“Except as provided in (b) of this subsection or in subsection (5), whoever violates subsection (1) of this section
shall be fined under this title or imprisoned not more than five years, or both.” 18 U.S.C. §2511(4)(a).
208
18 U.S.C. §2511(2)(c).
209
The list of covered criminal provisions can be found at 18 U.S.C. §2516(1), and includes offenses such as violence
at international airports; animal enterprise terrorism; arson; bribery of public officials and witnesses; unlawful use of
explosives; fraud by wire, radio, or television; terrorist attacks against mass transportation; sexual exploitation ofchildren; narcotics production and trafficking; and many others.
203

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insufficient, and that the facilities that are the subject of surveillance will be used by the target.210
It also limits the use and dissemination of information intercepted.211 In addition, when aninterception order expires, authorities must notify those whose communications have beenintercepted.212 Law enforcement may also conduct electronic surveillance when acting in an
emergency situation pending issuance of a court order.213
The government may also conduct electronic surveillance under the authority of the ForeignIntelligence Surveillance Act (FISA). FISA governs the gathering of information about foreign
powers, including international terrorist organizations, and agents of foreign powers.214 Although
it is often discussed in relation to the prevention of terrorism, it applies to the gathering of foreign
intelligence information for other purposes.215 Although some exceptions apply, such as for
emergency situations,216 the government typically must obtain a court order, supported byprobable cause, from the Foreign Intelligence Surveillance Court (FISC), a neutral judicial
decision maker, in order to conduct electronic surveillance pursuant to FISA.217

The Stored Communications Act (SCA)The SCA was enacted in 1986 as Title II of the Electronic Communications Privacy Act(ECPA),218 to “address[] access to stored wire and electronic communications and transactional
records.”219 The SCA prohibits unauthorized persons from accessing a facility through which an
electronic communication service (ECS) is provided; or obtaining, altering, or preventing accessto an electronic communication while it is in electronic storage in an ECS.220 The SCA also limits
the circumstances in which providers of ECS or a remote computing service (RCS) may disclose
information that they carry or maintain.221 The SCA also provides a mechanism by which law
enforcement may compel the disclosure of stored communications.222
The terms “electronic communication service,” “remote computing services,” and “electronicstorage” are all specifically defined by the SCA. As described above, the SCA applies only toproviders of either an ECS or an RCS; stored communications held by other types of entities are
not protected by the SCA. Therefore, in order to determine whether the SCA would protect stored
information collected by a smart meter, this report will first examine whether a utility’s
deployment of a smart meter network falls within the definition of an ECS or an RCS and then210

18 U.S.C. §§2516, 2518(3).
18 U.S.C. §2517.
212
18 U.S.C. §2518(8).
213
18 U.S.C. §2518(7).
214
See 50 U.S.C. §1801(a) (definition of “foreign power”).
215
For example, it extends to the collection of information necessary for the conduct of foreign affairs. See 50 U.S.C.
§1801(e) (definition of “foreign intelligence information”).
216
50 U.S.C. §1805(e).
217
50 U.S.C. §§1801-1808. FISA authorizes electronic surveillance without a FISA order in specified instances
involving communications between foreign powers. 50 U.S.C. §1802.
218
P.L. 99-508.
219
S.Rept. 99-541 at 3.
220
18 U.S.C. §2701(a). Unauthorized access includes exceeding an authorization to use the facility. Id.
221
18 U.S.C. §2702.
222
18 U.S.C. §2703.
211

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discuss the protections and disclosure restrictions that might apply to any smart meter networkthat qualifies as an ECS or RCS.

Electronic Communication Services
An ECS is defined by the SCA as any service which provides users “the ability to send or receive
wire or electronic communications.”223 The statute also defines an “electronic communication” as“any transfer of signs, signals, writing, images, sounds, data, or intelligence of any naturetransmitted in whole or in part by a wire, radio, electromagnetic, photoelectronic or photoopticalsystem that affects interstate or foreign commerce.”224 As described above, one of the essentialfunctions of a smart meter would appear to be the capability to transmit consumer electricity
usage data to the smart grid using a variety of communications technologies.225 Thesetransmissions would seem to fall neatly within the SCA’s definition of an electronic
communication. Therefore, whether a smart meter network would qualify as an ECS would likely
depend on whether the deployed smart meters could be said to be providing this ability to users.
It is not clear whether it would be accurate to categorically describe smart meters as providing
customers with “the ability to send or receive” communications. It could be argued that a utility
customer would use the smart meter to transmit usage information to the utility, in the same waythat the same customer uses a traditional meter to record household electricity usage over abilling period. However, the Ninth Circuit has suggested that an ECS should not include
situations in which electronic communications are used only “as an incident to providing someother service, as is the case with a street-front shop that requires potential customers to speak into
an intercom device before permitting entry, or a ‘drive-thru’ restaurant that allows customers toplace orders via a two-way intercom located beside the drive-up lane.”226 On one hand, it may not
be accurate to describe utility customers as users of smart meters at all, particularly if the
deployment of such smart meters is intended principally for the benefit of the utility and does notchange the experience of utility customers. On the other hand, some of the proposed uses of
deployed smart meters may include using collected data for the benefit of the customers, forexample by determining the energy efficiency of specific household appliances.227 As a result, theultimate classification of a particular smart meter network as an ECS may depend largely on thespecific facts present, such as the manner in which it is marketed, or the ostensible purposes forwhich the transmissions are intended to be used.
If a smart meter network qualifies as an ECS, then transmissions containing smart meter data
would be protected under the SCA only while such transmissions are in electronic storage, as thatterm is defined by the statute.228 Therefore, one must first determine whether, and under whatcircumstances, the data collected by a smart meter network is in electronic storage in order todetermine what protections apply.
223

18 U.S.C. §2510(15).
18 U.S.C. §2510(12). Wire communications are defined as communications containing the human voice and are not
implicated here. 18 U.S.C. §2510(1).
225
See supra note 47 and accompanying text.
226
Company v. United States (In re United States), 349 F.3d 1132, 1141 (9th Cir. 2003) (holding that definition of ECS
includes service that provides drivers with the ability to make phone calls from their car for directory assistance,
driving directions, or roadside assistance because those activities are intrinsically communicative).
227
See supra note 8.
228
18 U.S.C. §2701.
224

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For purposes of the SCA, a communication is in electronic storage at an ECS if it is in temporary,intermediate storage incidental to electronic transmission or in storage for backup protection.229
As applied to the smart meter network, data residing on the smart meter itself prior to being sent
to the utility would appear to be in electronic storage, as such storage is likely temporary andundertaken solely in anticipation of some eventual transmission to the utility. In contrast, once thedata has arrived at the utility and resides on its servers, it may no longer be in temporary orintermediate storage. However, some form of the communications may still be being held for
backup purposes, and in such a case might be considered in electronic storage under the statute.
To the extent that the data would be considered in electronic storage, either while on the meter oron the utility’s computers, the data would appear to be subject to the SCA’s provisions applicableto providers of ECS.
The SCA prohibits intentionally accessing without authorization, a facility through which an ECS
is provided and obtaining, altering, or preventing access to an electronic communication while it
is in electronic storage.230 Criminal penalties for violating the SCA’s prohibitions on unauthorizedaccess start at imprisonment for not more than one year (not more than five years for asubsequent conviction) and/or a fine of not more than $100,000.231 However, violationscommitted for malicious, mercenary, tortious or criminal purposes are subject to higher penalties
and may be punished by imprisonment for not more than five years (not more than 10 years for asubsequent conviction) and/or a fine of not more than $250,000 (not more than $500,000 fororganizations).232 Victims of a violation of the SCA also have a civil cause of action for equitablerelief, reasonable attorneys’ fees and costs, and damages equal to the loss and gain associatedwith the offense but not less than $1,000.233
The SCA generally restricts the ability of providers of ECS to disclose the contents ofcommunications in electronic storage, if the ECS is offering those services to the public.234
However, the statute also permits certain disclosures to law enforcement. Such permitted
disclosures by a provider of electronic communication services to law enforcement can be either
voluntary or compelled. Normally, voluntary disclosure to law enforcement is authorized only if
the contents of the communication were inadvertently obtained by the service provider andappear to pertain to the commission of a crime.235 However, it should be noted that the utility inthis case appears to be the intended recipient of all communications sent over the smart meter
network, and the SCA’s restrictions on disclosures of electronically stored information held by
ECS or RCS providers may generally be overcome if an intended recipient of the communicationconsents to the disclosure.236 Consequently, the utility may have more latitude to sharecommunications in electronic storage with law enforcement than a traditional provider of ECS,
such as a telephone company, would have.

229

18 U.S.C. §2510(17).
18 U.S.C. §2701(a). Unauthorized access includes exceeding an authorization to use the facility. Id.
231
18 U.S.C. §2701(b)(2).
232
18 U.S.C. §2701(b)(1).
233
18 U.S.C. §2707.
234
18 U.S.C. §2702(a)(1) (“a person or entity providing an electronic communication service to the public shall notknowingly divulge to any person or entity the contents of a communication while in electronic storage by that
service”).
235
18 U.S.C. §2702(b)(7).
236
See 18 U.S.C. §2702(b)(3).
230

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For purposes of compelled disclosures to law enforcement, the SCA distinguishes between recent
communications and those that have been in electronic storage for more than 180 days. A search
warrant is required to compel providers to disclose communications held in electronic storage for
180 days or less.237 However, communications held for more than 180 days may be obtained bylaw enforcement through a warrant, subpoena, or a court order supported by specific andarticulable facts sufficient to establish reasonable grounds to believe that the contents are relevant
and material to an ongoing criminal investigation.238 Customers whose communications havebeen disclosed are generally required to be given notice of such disclosure, but such disclosure
may be delayed if notification might result in endangering the life or physical safety of anindividual; flight from prosecution; destruction of or tampering with evidence; intimidation ofpotential witnesses; or otherwise seriously jeopardizing an investigation or unduly delaying a
trial.239

Remote Computing Services
It is likely that the classification of a smart meter network as an RCS would similarly be factdependent. The SCA defines an RCS as a service in which computer storage or processing
services by means of an ECS are provided to the public.240 It is conceivable that the data collectedby smart meters may in fact be stored or processed by the utility, but there is no indication thatsuch storage or processing would be categorically provided as a service to the public, rather thansolely for the utility’s internal benefit.241 If such service is not provided to the public, then it
would likely be inaccurate to classify the smart meter network as an RCS. However, if one of thefeatures of a particular smart meter deployment is to give customers the ability to store or process
their usage data, then it would appear to qualify as an RCS.
For those smart meter networks which qualify as an RCS, the SCA generally protects the contentsof electronically transmitted communications “carried or maintained on that service” forcustomers of the service. Disclosures of such information are generally prohibited,242 but the SCA
also provides a means for law enforcement to obtain access to the contents of such
communications. The government may obtain a warrant supported by probable cause, or use a
subpoena or a court order supported by specific and articulable facts sufficient to establish
reasonable grounds to believe that the contents are relevant and material to an ongoing criminal
investigation.243 However, use of a subpoena or court order supported by specific and articulable
facts also requires the government to give prior notice to the customer whose information issought, unless particular circumstances warrant delayed notice.244 RCS customers whose
237

18 U.S.C. §2703(a).
18 U.S.C. §2703(d). Some courts have held that this “reasonable grounds” standard is a less demanding standard
than “probable cause.” See In re Application of the United States, 620 F.3d 304, 313 (3d Cir. 2010) (“We also conclude
that this [§2703(d)] standard is a lesser one than probable cause.”).
239
18 U.S.C. §2705(a).
240
18 U.S.C. §2711(2).
241
However, if some other service provided by the utility allows the data collected by a smart meter to be stored ormanipulated for the benefit of the utility’s customers, it is possible that this system would fall within the definition of
an RCS.
242
The SCA allows providers of an RCS to disclose stored communications with the consent of the subscriber of an
RCS. 18 U.S.C. §2702(b)(3).
243
18 U.S.C. §2703(b)(1).
244
18 U.S.C. §2703(b)(1)(B).
238

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communications have been disclosed in violation of the SCA may pursue a civil cause of action
for equitable relief, reasonable attorneys’ fees and costs, and damages equal to the loss and gain
associated with the offense but not less than $1,000.245

The Computer Fraud and Abuse Act (CFAA)The Computer Fraud and Abuse Act (CFAA) prohibits intentionally accessing and obtaining
information from a computer used in or affecting interstate commerce, without authorization or inexcess of a granted authorization.246 The definition of a computer for purposes of the CFAA is “anelectronic, magnetic, optical, electrochemical, or other high speed data processing device
performing logical, arithmetic, or storage functions, and includes any data storage facility orcommunications facility directly related to or operating in conjunction with such device”
excluding “an automated typewriter or typesetter, a portable hand held calculator, or other similar
device....”247
The servers on a utility’s network would likely fall squarely within the definition of a computerunder the CFAA. Similarly, smart meters themselves also appear to meet the definition of acomputer, insofar as they store customers’ energy usage data and also perform logical operations
by routing transmissions across the utility’s network. Additionally, in light of the significant rolethat energy utilities play in the modern economy, the smart meter network would also likely beconsidered to have an effect on interstate commerce, even if they operate entirely within one
state. Therefore, intentionally gaining access to the utility’s servers or smart meters to obtaincustomer data would likely constitute a violation of the CFAA if done without the utility’s
authorization or in excess of an authorization granted by the utility.
The criminal penalties for violating the unauthorized access provisions of the CFAA have a threetier sentencing structure. Simple violations are punished as misdemeanors, imprisonment for not
more than one year and/or a fine of not more than $100,000 ($200,000 for organizations).248 At
the next level, cases in which: “(i) the offense was committed for purposes of commercial
advantage or private financial gain; (ii) the offense was committed in furtherance of any criminalor tortious act in violation of the Constitution or laws of the United States or of any State; or (iii)the value of the information obtained exceeds $5,000” may be punished by imprisonment for not
more than five years and/or a fine of not more $250,000 ($500,000 for organizations).249 The third
tier is for repeat offenders whose punishment is increased to imprisonment of not more than 10
years and/or a fine of not more than $250,000 ($500,000 for organizations) for a second or
subsequent conviction.250

245

18 U.S.C. §2707.
18 U.S.C. §1030(a)(2). For more detailed information on the CFAA, see CRS Report 97-1025, Cybercrime: An
Overview of the Federal Computer Fraud and Abuse Statute and Related Federal Criminal Laws, by Charles Doyle.
247
18 U.S.C. §1030(e)(1).
248
18 U.S.C. §1030(c)(2)(A).
249
18 U.S.C. §1030(c)(2)(B).
250
18 U.S.C. §§1030(c), 3571.
246

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The Federal Trade Commission Act (FTC Act)
Section 5 of the FTC Act prohibits “unfair or deceptive acts or practices in or affecting
commerce”251 and gives the Federal Trade Commission (FTC) jurisdiction to bring enforcement
actions against “persons, partnerships, or corporations” that engage in these practices.252 In thepast, the FTC has used its authority under Section 5 to take action against businesses that violate
their own privacy policies or that fail to adequately safeguard a consumer’s personal
information.253 Although there do not appear to be any cases in which the FTC has taken action
against an electric utility for failing to protect consumer smart meter data, the Commission would
have authority to enforce Section 5 against a utility that fell within its statutory jurisdiction.

Covered Electric Utilities
This section considers whether the FTC would have Section 5 jurisdiction over each of the fourtypes of electric utilities identified by the Energy Information Administration (EIA): investorowned, publicly owned, federally owned, and cooperative.254 It finds that the FTC clearly has
jurisdiction over investor-owned utilities. It is unclear whether the Commission has jurisdiction
over publicly owned utilities or federally owned utilities. The FTC could enforce Section 5against for-profit electric cooperatives, and case law suggests that nonprofit electric cooperatives
may also be subject to the act’s requirements.
The FTC has jurisdiction to enforce Section 5 against “persons, partnerships, or corporations,”
with exceptions not applicable here.255 Utilities that are “persons” or “partnerships” would be
subject to the FTC’s enforcement powers automatically,256 as the statute does not provide any
additional jurisdictional requirements for these entities. Most electric utilities, however, areorganized as legal entities that would potentially fit within the definition of “corporation.” The
FTC Act states that, for the purposes of Section 5, the term “corporation”:
shall be deemed to include any company, trust, so-called Massachusetts trust, or association,
incorporated or unincorporated, which is organized to carry on business for its own profit orthat of its members, and has shares of capital or capital stock or certificates of interest, andany company, trust, so-called Massachusetts trust, or association, incorporated orunincorporated, without shares of capital or capital stock or certificates of interest, except
partnerships, which is organized to carry on business for its own profit or that of its
members.257

251

15 U.S.C. §45(a)(1).
15 U.S.C. §45(a)(2).
253
See “Enforcement of Data Privacy and Security,” infra p. 41; see also NIST PRIVACY REPORT, supra note 11, at 23
n.48.
254
ENERGY INFO. ADMIN., ELECTRIC POWER INDUSTRY OVERVIEW (2007) [hereinafter EIA ELECTRIC POWEROVERVIEW], available at http://www.eia.gov/cneaf/electricity/page/prim2/toc2.html.
255
15 U.S.C. §45(a)(2).
256
The FTC Act does not further define “persons” or “partnerships” or impose any additional jurisdictional
requirements on these entities in the way that it does for “corporations.” See 15 U.S.C. §44.
257
15 U.S.C. §44.
252

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This definition, particularly in its use of the words “shall be deemed to include,” suggests that awide variety of legal entities could potentially constitute “corporations.” Moreover, in California
Dental Ass’n v. FTC, the Supreme Court remarked that the “FTC Act directs the Commission toprevent the broad set of entities under its jurisdiction” from violating Section 5.258 In that case,
the Court found that the term “corporation” also included nonprofit entities, so long as they
imparted significant economic benefit to their members.259 Thus, as the Court’s opinion
demonstrates, the key question when determining whether an entity is a “corporation” for the
purposes of Section 5 jurisdiction is not what legal form the entity takes, but rather whether theentity is “organized to carry on business for its own profit or that of its members.”

Investor-Owned Utilities
Investor-owned utilities are clearly subject to the FTC’s Section 5 jurisdiction as “corporations.”
The EIA defines investor-owned electric utilities as those that “have the fundamental objective of
producing a profit for their investors” and distributing these profits as dividends or reinvestingthem in the business.260 These utilities satisfy the definition of “corporation” under the statutebecause they are companies organized to carry on business for the profit of their investors.261

Publicly Owned Utilities
It is unclear whether the FTC has Section 5 jurisdiction over publicly owned utilities. The agency
probably lacks jurisdiction over these utilities if it characterizes them as “corporations,” but it ispossible that it may have jurisdiction over them if it characterizes them as “persons.” Publicly
owned utilities include “municipals, public utility districts and public power districts, Stateauthorities, irrigation districts, and joint municipal action agencies.”262 The EIA describes these as“nonprofit government entities that are organized at either the local or State level,” are exempt
from state and federal income taxes, and “provide service to their communities and nearby
consumers at cost.”263 In contrast to investor-owned utilities or cooperatively owned utilities,
publicly owned utilities obtain capital by issuing debt rather than selling an ownership interest in
the utility to investors or members.264

As “Corporations”
Publicly owned utilities probably do not fall within the FTC’s Section 5 jurisdiction over“corporations” because they are not organized to carry on business for profit. Rather,governments form these utilities for the sole purpose of distributing electricity to consumers at

258

Cal. Dental Ass’n v. FTC, 526 U.S. 756, 768 (1999) (emphasis added) (internal quotation marks omitted).
Id. at 766-69.
260
EIA ELECTRIC POWER OVERVIEW, supra note 254.
261
Indeed, the FTC has asserted Section 5 jurisdiction over holding companies with investor-owned electric utility
subsidiaries in the past. See, e.g., DTE Energy Co., 131 F.T.C. 962 (May 15, 2001) (complaint); CMS Energy Corp.,
127 F.T.C. 827 (June 2, 1999) (complaint). See also In re DTE Energy Co., FTC File No. 001 0067 (May 15, 2001)(consent order); In re CMS Energy Corp., FTC File No. 991 0046 (June 2, 1999) (consent order).
262
EIA ELECTRIC POWER OVERVIEW, supra note 254.
263
Id.
264
DAVID E. MCNABB, PUBLIC UTILITIES: MANAGEMENT CHALLENGES FOR THE 21ST CENTURY 165 (2005).
259

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cost.265 Significantly, when publicly owned utilities realize net income—that is, revenues theyearn in excess of their expenses—they either (1) use it to finance their operations in lieu of
issuing more debt,266 or (2) transfer it to the general fund of the political subdivision that they
serve.267 These utilities typically lack investors or members to which they could distribute net
income as dividends.268 Thus, publicly owned utilities are probably not “organized to carry on
business” for profit and are probably exempt from the FTC’s Section 5 jurisdiction ifcharacterized as “corporations.”

As “Persons”
It is unclear whether a court would find that the FTC has Section 5 jurisdiction over publicly
owned utilities as “persons,” as a court could employ several different canons of statutory
interpretation when deciding whether “persons” includes state or local government entities.269 In
the 1980s, the FTC attempted to assert Section 5 jurisdiction over two state-chartered municipal
corporations—the cities of New Orleans and Minneapolis—as “persons,” alleging that the cities
engaged in unfair methods of competition by assisting taxicab companies in maintaining highprices and stifling competition.270 The Commission later withdrew both complaints, and thus nocourt considered whether jurisdiction was proper. More recently, the Commission has asserted
jurisdiction over state government agencies that regulate certain professions such as dentistry,271
optometry,272 and funeral services.273
There appears to be only one court case that engages in a full discussion and interpretation of themeaning of “persons” under Section 5. In California State Board of Optometry v. FTC, the D.C.
Circuit Court of Appeals considered “whether a State acting in its sovereign capacity is a ‘person’
within the FTC’s enforcement jurisdiction.”274 The FTC had issued a rule declaring “certain statelaws restricting the practice of optometry to be unfair acts or practices.”275 Petitioners, whichwere state boards of optometry and professional associations, argued that the court should strike
down the rule because it went beyond the FTC’s statutory authority.276 In vacating the rule, thecourt found nothing in the relevant provisions of the FTC Act “to indicate that Congress intended
to authorize the FTC to reach the ‘acts or practices’ of States acting in their sovereign
capacities.”277
265

EIA ELECTRIC POWER OVERVIEW, supra note 254.
MCNABB, supra note 264, at 165.
267
EIA ELECTRIC POWER OVERVIEW, supra note 254.
268
MCNABB, supra note 264, at 165.
269
In contrast to entities that are “corporations,” the FTC does not have to show that entities qualifying as “persons” areorganized for profit. See 15 U.S.C. §44.
270
In re City of Minneapolis, 105 F.T.C. 304 (May 7, 1985) (order withdrawing complaint); In re City of New Orleans,
105 F.T.C. 1 (Jan. 3, 1985) (order withdrawing complaint).
271
In re N.C. State Bd. of Dental Exam’rs, 151 F.T.C. 607 (Feb. 3, 2011) (state action opinion); In re South Carolina
State Bd. of Dentistry, 138 F.T.C. 229 (Sept. 12, 2003) (complaint).
272
In re Mass. Board of Registration in Optometry, 110 F.T.C. 549 (June 13, 1988) (decision).
273
In re Va. Bd. of Funeral Dirs. & Embalmers, 138 F.T.C. 645 (Oct. 1, 2004) (complaint).
274
910 F.2d 976, 979 (D.C. Cir. 1990).
275
Id. at 978.
276
Id. at 978-79.
277
Id. at 980, 982.
266

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A court approaching the question of whether “persons” includes publicly owned utilities would
start with the language of the statute. Courts traditionally give broad deference to an agency when
the agency interprets the extent of its own jurisdiction unless the reach of its jurisdiction is clear
from reading the statute “under ordinary principles of construction.”278 Attempting to discern theCommission’s jurisdiction under Section 5 of the FTC Act is difficult, as the statute does notdefine the term “persons” for the purposes of that provision. Title 1, Section 1 of the UnitedStates Code (the Dictionary Act) provides: “In determining the meaning of any Act of Congress,
unless the context indicates otherwise ... the words ‘person’ and ‘whoever’ include corporations,companies, associations, firms, partnerships, societies, and joint stock companies, as well as
individuals.”279
However, the context in which “persons” appears in Section 5 probably forecloses the use of thedefault definition of “person” in the Dictionary Act. In Section 5, Congress listed the terms“persons,” “partnerships,” and “corporations” separately, which indicates that it intended to give
each term independent significance. The terms “corporations” and “partnerships” would not have
independent meaning in Section 5 if the term “persons” in Section 5 included the entities listed in
the Dictionary Act. Furthermore, the FTC Act requires that “corporations” be organized for theirown profit or the profit of their members in order for the FTC to exercise jurisdiction overthem—a requirement it does not impose on the other entities.280 By reading the term “persons” toinclude the entities listed in the Dictionary Act, the FTC could evade this additional requirement
simply by bringing its complaint against an entity as a “person” rather than a “corporation”—aresult that Congress probably did not intend. Thus, a court that ended its analysis here could findthat the meaning of “persons” remains ambiguous. The court could then choose to defer to the
FTC’s broad interpretation of its own jurisdiction under the Supreme Court’s decision in Chevron
U.S.A., Inc. v. NRDC, Inc.281
The California Optometry court, however, declined to defer to the FTC’s interpretation of its own
jurisdiction because it found that principles of federalism outweighed Chevron deference.282
Quoting the Supreme Court’s decision in Will v. Michigan Department of State Police,283 the278
See Cal. Dental Ass’n v. FTC, 526 U.S. 756, 765-66 (1999) (“Respondent urges deference to this interpretation of
the Commission’s jurisdiction as reasonable. But we have no occasion to review the call for deference here, theinterpretation urged in respondent’s brief being clearly the better reading of the statute under ordinary principles of
construction.”) (internal citations omitted); see also Chevron U.S.A., Inc. v. NRDC, Inc., 467 U.S. 837, 842-43 (1984).
279
1 U.S.C. §1 (emphasis added).
280
See 15 U.S.C. §44.
281
Chevron, 467 U.S. at 842-43. In that case, the Court held that
When a court reviews an agency’s construction of the statute which it administers, it is confronted
with two questions. First, always, is the question whether Congress has directly spoken to theprecise question at issue. If the intent of Congress is clear, that is the end of the matter; for the
court, as well as the agency, must give effect to the unambiguously expressed intent of Congress.
If, however, the court determines Congress has not directly addressed the precise question at issue,
the court does not simply impose its own construction on the statute, as would be necessary in theabsence of an administrative interpretation. Rather, if the statute is silent or ambiguous with respect
to the specific issue, the question for the court is whether the agency’s answer is based on apermissible construction of the statute. Id.
282
Todd H. Cohen, Double Vision: The FTC, State Regulation, and Deciding What’s Best for Consumers, 59 GEO.
WASH. L. REV. 1249, 1267 (1991) (“In sum, the California State Board of Optometry court relied on federalism
principles to justify protecting state interests. The court extended the judicially-created Parker state action doctrine tocover FTC trade regulation rules and applied the clear statement doctrine to prevent the FTC from invalidating a state
law as unfair without additional congressional action.”).
283
491 U.S. 58 (1989).

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California Optometry court stated that “in common usage, the term person does not include thesovereign, and statutes employing the word are ordinarily construed to exclude it.”284 In the Will
case, the Court considered whether the term “person” as it appeared in 42 U.S.C. §1983 included
a state.285 The Court held that it did not, invoking the principles of federalism when it wrote that“[t]his approach is particularly applicable where it is claimed that Congress has subjected theStates to liability to which they had not been subject before.”286 The Court found that the statute’s
language fell “far short of satisfying the ordinary rule of statutory construction that if Congress
intends to alter the ‘usual constitutional balance between the States and Federal Government,’ itmust make its intention to do so ‘unmistakably clear in the language of the statute.’”287
The Court’s decision in Will, as interpreted by the D.C. Circuit in California Optometry, suggeststhat Congress must clearly indicate in a particular statute when it wishes to subject states to a newform of liability, particularly when this would change the balance between state and federal
authority by intruding on the actions a state takes in its sovereign capacity. There does not appear
to be a clear indication that Congress intended the word “persons” in the FTC Act to subject
publicly owned utilities to FTC enforcement actions.288 Thus, if the FTC’s enforcement of Section
5 against a publicly owned utility would alter the balance between the state and federal
governments, a court might read “persons” to exclude these utilities. As the California Optometry
court indicated, whether the balance is altered may depend on whether the operation of the utility
amounts to the state acting in its sovereign capacity (balance altered) or merely engaging in a
proprietary function (balance not altered).289 The California Optometry court suggested thatwhether a state is acting in its sovereign capacity or engaging in a proprietary function may vary
according to the antitrust laws’ state action doctrine, a multi-pronged analysis that is beyond thescope of this report.290 If a court found that the state was acting in its sovereign capacity when thestate (or one of its subdivisions) operated an electric utility, the court could hold that the FTC
does not have Section 5 jurisdiction because of the federalism principles and clear statement rulethat guided the interpretation of the statute in Will and were adopted by the court in California
Optometry.291
A third possible choice for a court would be to adopt the reasoning of the FTC and find that
Congress clearly intended “persons” to include government entities, because under the other
antitrust laws, the term “persons” includes state and local government entities, and the antitrust
284

California Optometry, 910 F.2d 976, 980 (D.C. Cir. 1990) (internal quotation marks omitted).
Will, 491 U.S. at 60.
286
Id. at 64.
287
Id. at 65 (citations omitted).
288
Representative Covington, the sponsor of the act, explained during floor debate on the measure that Section 5“embraces within the scope of that section every kind of person, natural or artificial, who may be engaged in interstate
commerce.”51 CONG. REC. 14,928 (1914). Despite this remark, courts have not taken such a broad view of the FTC’s
jurisdiction under the act. Even the Supreme Court has held that there are some limits on the entities covered by
Section 5. See Cal. Dental Ass’n v. FTC, 526 U.S. 756, 766-67 (1999) (requiring, for jurisdiction, that a “proximate
relation” must exist between the activities of a nonprofit and the benefit it provides to its members, and implying thatthe activities must confer “more than de minimis or merely presumed economic benefits” on the members).
289
See California Optometry, 910 F.2d at 980-81 (“This rule of statutory construction serves to ensure that the States’
sovereignty interests are adequately protected by the political process.”).
290
Id. at 980. For more information on the factors that courts consider when making this determination, see FED. TRADE
COMM’N, REPORT OF THE STATE ACTION TASK FORCE (2003), available at http://www.ftc.gov/os/2003/09/
stateactionreport.pdf.
291
See Cohen, supra note 282, at 1267.
285

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laws, including the FTC Act,292 should be read together.293 The California Optometry court
acknowledged this argument, writing that “several Supreme Court decisions hold that a State is aperson for purposes of the antitrust laws.”294 The court ultimately rejected the argument, however,
because it found that “when a State acts in a sovereign rather than a proprietary capacity, it isexempt from the antitrust laws even though those actions may restrain trade,” and that this state
action doctrine may “limit the reach of the FTC’s enforcement jurisdiction.”295 Thus, if a court
found that a state acted in its proprietary capacity when the state (or one of its subdivisions)operated a public utility, then the state action doctrine would not apply, and it would be possible
for a court to find jurisdiction even under the California Optometry case. The FTC has advanced
this reasoning, arguing that the state boards over which it asserts jurisdiction do not amount to thestates acting in their sovereign capacities.296 Whether the operation of a particular publicly owned
utility consists of the state acting in its sovereign capacity or engaging in a proprietary function
may vary according to the antitrust laws’ state action doctrine, a multi-pronged analysis that isbeyond the scope of this report.297
Thus, whether a court would find that the word “persons” in Section 5 includes certain
government entities such as publicly owned utilities is unclear because it may depend on which, ifany, of several principles of statutory construction the court adopts. A court could, among otheroptions: (1) find that the meaning of “persons” in Section 5 is ambiguous, and thus defer to the
FTC’s broad interpretation of its own jurisdiction because of the Chevron doctrine; (2) find thatthe statute is ambiguous, but that principles of federalism outweigh the court’s usual Chevron
deference to the Commission’s interpretation of its own jurisdiction—a determination that may
require a court to find that the state is acting in its sovereign capacity when the state (or one of its
subdivisions) operates an electric utility; or (3) find that Congress clearly intended “persons” toinclude government entities because Section 5 should be read together with the other antitrust
laws, under which the term “person” includes state and local government entities—adetermination that may require a court to find that the state is performing a proprietary function
when the state (or one of its subdivisions) operates a utility.

Federally Owned Utilities
It is unclear whether the FTC could enforce Section 5 against a federally owned utility. Indeed,
there does not appear to be any case in which the FTC has sought to enforce Section 5 against afederal agency.298 The FTC probably lacks Section 5 jurisdiction over the nine federally owned
292
Although this report focuses on the FTC’s consumer law cases under Section 5 (“unfair or deceptive acts orpractices”), and not its antitrust cases (“unfair methods of competition”), both types of prohibited activities share thesame phrase for the purposes of determining the agency’s jurisdiction: “persons, partnerships, or corporations.” See 15
U.S.C. §45(a)(2).
293
See In re Mass. Board of Registration in Optometry, 110 F.T.C. 549 (June 13, 1988) (decision) (citations omitted).
294
California Optometry, 910 F.2d at 980 (citations omitted).
295
Id. at 980 (citation omitted).
296
See, e.g., In re N.C. State Bd. of Dental Exam’rs, 151 F.T.C. 607 (Feb. 3, 2011) (state action opinion); In re Mass.
Board of Registration in Optometry, 110 F.T.C. 549 (June 13, 1988) (decision).
297
For more information on the factors that courts consider when making this determination, see FED. TRADE COMM’N,REPORT OF THE STATE ACTION TASK FORCE (2003), available at http://www.ftc.gov/os/2003/09/stateactionreport.pdf.
298This report does not consider whether any constitutional implications would result if the FTC, an independent
executive branch agency, brought an enforcement proceeding against another executive branch agency. See generally
Michael Eric Herz, When Can the Federal Government Sue Itself?, 32 WM. & MARY L. REV. 893 (1991).

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utilities operating in the United States299 if it characterizes them as “corporations.” Like publicly
owned utilities, federally owned utilities are not organized for profit. As the EIA notes, “federal
power is not sold for profit, but to recover the costs of operations and repay the Treasury forfunds borrowed to construct generation and transmission facilities.”300 If the Commission
characterizes these utilities as “persons,” it is unclear whether a court would find that this term
includes government entities.301
As a practical matter, FTC enforcement of Section 5 against federally owned utilities is probably
unnecessary in the context of smart meter data because of other federal laws, such as the Privacy
Act,302 that would likely protect this data when it is stored in records systems maintained byfederal agencies, including federally owned utilities.303

Cooperatively Owned Utilities
For-profit electric cooperatives would clearly fall within the Commission’s Section 5 jurisdiction
over “corporations” operated for their own profit or that of their members.304 Indeed, the FTC has
maintained jurisdiction over for-profit cooperatives as “corporations” in the past, including a rural
healthcare cooperative305 and a wine maker.306 However, it appears that most electriccooperatives—and particularly the cooperatives that will receive funds under the Department ofEnergy’s Smart Grid Investment Grant program—are nonprofits.307
It is possible that the FTC would have Section 5 jurisdiction over these nonprofit electriccooperatives as “corporations” organized for profit. These distribution utilities are owned by the“consumers they serve,” and those that are tax-exempt must “provide electric service to theirmembers at cost, as that term is defined by the Internal Revenue Service.”308 However, when theactivities of a cooperative result in revenues that exceed the cooperative’s costs, these “netmargins ... are considered a contribution of equity by the members that are required to be returnedto the members consistent with the organization’s bylaws and lender limitations imposed as acondition of loans.”309 Thus, in contrast to publicly owned utilities, which typically transfer any
net income to the general fund of the government that they serve, electric cooperatives return net
margins to their members as equity, and when that equity is retired by the board of directors,
members receive cash payments.310 Although it does not appear that a court has considered
299
EIA ELECTRIC POWER OVERVIEW, supra note 254. Among these utilities are the Tennessee Valley Authority, thefour power marketing administrations in the Department of Energy, and the Army Corps of Engineers. Id.
300
Id.
301
See supra notes 269-97 and accompanying text.
302
5 U.S.C. §552a.
303
See “The Federal Privacy Act of 1974,” infra p. 45.
304
15 U.S.C. §44.
305
In re Minn. Rural Health Coop., FTC File No. 051 0199 (Dec. 28, 2010) (decision and order).
306
In re Heublein, Inc., 96 F.T.C. 385 (Oct. 7, 1980) (final order).
307
See DEP’T OF ENERGY, CASE STUDY – NATIONAL RURAL ELECTRIC COOPERATIVE ASSOCIATION SMART GRIDINVESTMENT GRANT 1, available at http://energy.gov/sites/prod/files/oeprod/DocumentsandMedia/
NRECA_case_study.pdf.
308
EIA ELECTRIC POWER OVERVIEW, supra note 254.
309
Id. “Net margins” is the term given to “revenues in excess of the cost of providing service.” Id.
310
See, e.g., Cent. Rural Electric Coop., Patronage Capital, http://www.crec.coop/CRECAdvantage/PatronageCapital/
tabid/711/Default.aspx (“Allocated patronage capital appears as an entry on the permanent financial records of the(continued...)Congressional Research Service

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whether the FTC has Section 5 jurisdiction over a nonprofit electric cooperative that returns its
net margins to its consumer-members in addition to providing them with electricity service, theSupreme Court, as well as lower federal courts, have issued guidance on factors that a court may
consider in answering this question.

Applicable Law
Under Section 5, the FTC Act requires that a “corporation” be “organized to carry on business for
its own profit or that of its members.”311 In California Dental Ass’n v. FTC, the Court considered
whether the FTC could enforce Section 5 against a “voluntary nonprofit association of local
dental societies” that was exempt from paying federal income tax and furnished its members with“advantageous insurance and preferential financing arrangements” in addition to lobbying,
litigating, and advertising on their behalf.312 The Court found that the FTC had jurisdiction over
the California Dental Association as a “corporation,” stating that
the FTC Act is at pains to include not only an entity “organized to carry on business for its
own profit,” but also one that carries on business for the profit “of its members.” While sucha supportive organization may be devoted to helping its members in ways beyond immediateenhancement of profit, no one here has claimed that such an entity must devote itself singlemindedly to the profit of others. It could, indeed, hardly be supposed that Congress intended
such a restricted notion of covered supporting organizations, with the opportunity this would
bring with it for avoiding jurisdiction where the purposes of the FTC Act would obviously
call for asserting it.313

The Court declined to specify the percentage of a nonprofit entity’s activities that must be “aimed
at its members’ pecuniary benefit” to subject it to FTC jurisdiction.314 However, the Court wrotethat a “proximate relation” must exist between the activities of the entity and the profits of its
members, and implied that the activities must confer “more than de minimis or merely presumed
economic benefits” on the members.315 The Court’s justification for this result was that “nonprofit
entities organized on behalf of for-profit members have the same capacity and derivatively, at(...continued)
cooperative and reflect [sic] your equity or ownership in CREC. When patronage capital is retired, a check or bill credit
is issued to you and your equity in the cooperative is reduced. ... When considering a retirement, the board analyzes thefinancial health of the cooperative and will not authorize a retirement that will adversely affect the financial integrity of
the cooperative.”); Fall River Rural Electric Coop., Patronage Capital, http://www.frrec.com/myAccount/patronageCapital.aspx (“The Cooperative’s Board of Directors retires patronage capital when finances allow, often on
an annual basis. The oldest patronage capital is retired first. Fall River currently retires patronage capital on a rotationof approximately 20 years.”); Kauai Island Util. Coop., Member Patronage Capital Information, http://www.kiuc.coop/member_patcap-qa.htm (“A portion of Patronage Capital may be periodically paid to the members upon approval of theBoard of Directors and our lenders.”); Sulphur Springs Valley Electric Coop., Inc., Patronage Capital Credits,
http://www.ssvec.org/?page_id=583 (“Capital credits represent your share of the Cooperative’s margins – margins are
the operating revenue remaining after operating expenses. The amount assigned in your name depends on your energy
purchases. To calculate this, we divide your annual energy purchase by the Cooperative’s operating income for theyear. The more electricity you buy, the more capital credits you earn.”).
311
15 U.S.C. §44 (emphasis added).
312
526 U.S. 756, 759-60, 767 (1999).
313
Id. at 766 (internal citations omitted).
314
Id.
315
Id. at 766-67.

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least, the same incentives as for-profit organizations to engage in unfair methods of competitionor unfair and deceptive acts.”316
It is clear that the FTC may still have Section 5 jurisdiction even when the benefits that a
nonprofit provides to its members are secondary to its charitable functions. In American Medical
Ass’n v. FTC, the Second Circuit considered whether the FTC could enforce Section 5 against
three medical professional associations, including the American Medical Association (AMA), a
nonprofit corporation composed of “physicians, osteopaths, and medical students.”317 The court,
acknowledging that the associations served “both the business and non-business interests of theirmember physicians,” found jurisdiction because the “business aspects” of their activities,
including lobbying for members and offering business advice to them, subjected them to the
FTC’s jurisdiction despite the fact that the business aspects “were considered secondary to thecharitable and social aspects of their work.”318
When determining whether jurisdiction exists, a court may consider other factors in addition to
the benefits that the nonprofit provides to its members. In Community Blood Bank v. FTC, theEighth Circuit considered whether a “corporation” included all nonprofit corporations.319 The
appeals court held that the FTC lacked Section 5 jurisdiction over nonprofit blood banks because
the banks’ activities did not result in “profit” in the sense of “gain from business or investment
over and above expenditures.”320 The blood banks, the court observed, lacked shares of capital,
capital stock, or certificates, and were “organized for and actually engaged in business for only
charitable purposes.”321 One bank’s articles of incorporation touted the entity’s charitablepurposes, and all of the banks were exempt from paying federal income taxes.322 Upondissolution, the corporations would transfer their assets to other charitable or nonprofit
organizations.323 In addition, none of the funds collected by the blood banks had “ever been
distributed or inured to the benefit of any of their members, directors or officers.”324 The court
found that these factors made the blood banks “charitable organizations” both “in law and infact,” exempting them from the FTC’s Section 5 jurisdiction.325

Analysis
The case law suggests several factors that a court may weigh when determining whether a private,nonprofit entity composed of members, such as an electric cooperative, is subject to the FTC’s
Section 5 jurisdiction as a “corporation.”326 The most significant factor is whether the nonprofit
316

Id. at 768.
638 F.2d 443, 446 (1980).
318
Id. at 448. The court noted in passing that the AMA’s articles of incorporation stated that one purpose of theorganization was to “safeguard the material interests of the medical profession.” Id.
319
405 F.2d 1011, 1015 (8th Cir. 1969).
320
See id. at 1017. The court also remarked that at least one case had established that “even though a corporation’s
income exceeds its disbursements its nonprofit character is not necessarily destroyed.” Id.
321
Id. at 1020, 1022.
322
Id. at 1020.
323
Id.
324
Id.
325
Id. at 1019.
326
This analysis assumes that a court would extend the holdings of the applicable case law, which covered entities
organized as nonprofit corporations and professional associations, to include entities organized as nonprofit electric(continued...)317

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provides an economic benefit to its members that is more than de minimis and that is proximately
related to the nonprofit’s activities. This benefit need not be the sole—or even primary—functionof the nonprofit. Additional factors that the case law suggests weigh in favor of a finding ofjurisdiction include that the nonprofit: (1) has gain from its business or investments that exceeds
its expenditures; (2) has shares of capital or capital stock or certificates; (3) is not organizedsolely for charitable purposes or does not engage only in charitable work; (4) has articles ofincorporation that list profit-seeking objectives; (5) is subject to federal income tax liability; (6)would distribute its assets to profit-seeking entities upon dissolution; and (7) distributes any of
the funds it collects to its members, directors, or officers.
It is possible that the FTC has Section 5 jurisdiction over nonprofit electric cooperatives, although
the outcome in any particular case may depend on the characteristics of the individual utility. A
court could find that the typical nonprofit electric cooperative provides “economic benefit” to its
members in at least two ways: (a) by providing electricity service to members;327 and (b) byreturning net margins to members in the form of patronage capital, which is an ownership interestin the cooperative that is later converted to cash payments to members when that capital isretired.328 With regard to (a), it is likely that a court would find that electricity service is an“economic benefit” as defined in the case law. In California Dental Ass’n, the nonprofit
professional association provided “advantageous insurance and preferential financing
arrangements,” as well as lobbying, litigation, and advertising services to its members.329 In
American Medical Ass’n, the nonprofit lobbied on behalf of its members and offered businessadvice to members.330 These benefits, it is assumed, enabled the members to more easily conductbusiness profitably. Electricity service allows people to conduct activities at all times of the day,and thus provides a similar and clearly significant economic benefit to those who use it, whether
for business or recreational purposes. As the primary objective of an electric cooperative is toprovide electricity service to members, the necessary proximate relation between the activities of
the nonprofit and the benefit to its members clearly exists.
Despite its pecuniary nature, there are a few problems with considering benefit (b), patronage
capital, to be an “economic benefit” as defined by the Court. First, it is not clear that patronage
capital actually is a benefit. A court could view patronage capital as a no-interest loan from theconsumer-member to the utility,331 or, because it is typically allocated to member accounts in amanner proportional to members’ spending on electricity, simply a refund of money collectedfrom the members that reflects the actual cost of providing service in a particular year.332 If(...continued)
cooperatives.
327
Many cooperatives provide other services to their communities that could constitute “economic benefits.” The
National Rural Electric Cooperative Association notes that, “In addition to electric service, many electric co-ops are
involved in community development and revitalization projects” that include “small business development and jobs
creation, improvement of water and sewer systems, and assistance in delivery of health care and educational services.”Nat’l Rural Electric Coop. Ass’n, Member Directory, http://www.nreca.coop/members/MemberDirectory/Pages/
default.aspx.
328
See sources cited supra note 310.
329
Cal. Dental Ass’n v. FTC, 526 U.S. 756, 759-60, 767 (1999).
330
Am. Med. Ass’n v. FTC, 638 F.2d 443, 448 (1980).
331
See, e.g., Cent. Rural Electric Coop., Patronage Capital, http://www.crec.coop/CRECAdvantage/PatronageCapital/
tabid/711/Default.aspx (“These margins represent an interest-free loan of operating capital by the membership to thecooperative.”).
332
See, e.g., Kauai Island Util. Coop., Member Patronage Capital Information, http://www.kiuc.coop/member_patcap(continued...)Congressional Research Service

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adopted by a court, neither of these characterizations would appear to be consistent with the“profit” that the statute describes333 or the “economic benefit” that the Supreme Court requires fora nonprofit to be a “corporation.”
Second, even if a court found patronage capital to be an economic benefit, it is not clear that it ismore than de minimis. Patronage capital must be “retired” before members receive cash payments
for it.334 Retirements are made at the discretion of the cooperative’s board of directors because thecapital is needed to finance the cooperative’s ongoing expenses, and thus retirement of a class ofcapital typically occurs after a long rotation period, such as 20 years.335 Although the Supreme
Court did not hold that an “economic benefit” must produce immediate advantage to the membersof a nonprofit, a court could potentially view the decades-long delay in cash payments as
significantly decreasing the degree of economic benefit that the capital provides. In addition,
patronage capital would probably be considered de minimis if the cooperative’s net margins were
small, as this would mean that little capital would be issued to members. It is thus difficult todiscern whether a court would find that an economic benefit accrues to members as a result of
their receipt of patronage capital, which nevertheless probably bears the requisite “proximate
relation” to the activities of the cooperative that produce any net margins distributed as capital.
With regard to the additional factors, those favoring jurisdiction include (2) cooperatives typicallyhave shares of capital stock, including patronage capital;336 (3) cooperatives do not operate solely
for the benefit of the people outside of the organization like the nonprofits in Community Blood
Bank did because cooperatives provide electricity service and patronage capital to theirmembers;337 and (7) an electric cooperative typically returns any net margins to members in theform of patronage capital, an ownership interest refunded to consumer-members as cash when thecapital is retired.338 Factors that cannot be evaluated because they are specific to each individual
cooperative include (1) whether the revenues of the cooperative exceed its expenditures; (4) the
particular objectives listed in a cooperative’s articles of incorporation or other foundational
document; (5) whether a nonprofit electric cooperative is exempt from federal income tax
liability, which depends on whether it meets the requirements under Section 501(c)(12) of theInternal Revenue Code;339 and (6) whether a cooperative would distribute its assets to profitseeking entities upon dissolution—a factor that also may depend on state laws.340
It is likely that a court would find that nonprofit electric cooperatives impart economic benefits totheir members by distributing electricity to them or, possibly, by issuing patronage capital tothem. However, because many of the other factors that courts consider may differ for each(...continued)
qa.htm (characterizing the retirement of patronage capital as a “refund”).
333
15 U.S.C. §44.
334
See sources cited supra note 310.
335
See id.
336
See Nat’l Rural Electric Coop. Ass’n, Seven Cooperative Principles, http://www.nreca.coop/members/
SevenCoopPrinciples/Pages/default.aspx (describing “Members’ Economic Participation”).
337
Whether electricity service and patronage capital, which are clearly benefits, constitute “economic benefits” within
the meaning of the Supreme Court’s holding in California Dental Ass’n is a separate question.
338
See sources cited supra note 310.
339
I.R.C. §501(c)(12).
340
See Cmty. Blood Bank v. FTC, 405 F.2d 1011, 1020 (8th Cir. 1969).

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particular cooperative, it is not possible to draw any general conclusions about whether the FTC
would have Section 5 jurisdiction over these entities as “corporations.”

Enforcement of Data Privacy and Security
If the FTC has Section 5 jurisdiction over a particular electric utility, it may bring an enforcement
action against the utility if its privacy or security practices with regard to consumer smart meterdata constitute “unfair or deceptive acts or practices in or affecting commerce.”341 The FTC Act
defines an “unfair” act or practice as one that “causes or is likely to cause substantial injury toconsumers which is not reasonably avoidable by consumers themselves and not outweighed bycountervailing benefits to consumers or to competition.”342 According to the FTC, an act orpractice is “deceptive” if it is a material “representation, omission or practice” that is likely to
mislead a consumer acting reasonably in the circumstances.343 The history of the Commission’s
enforcement of consumer data privacy and security practices shows that the agency has brought
complaints against entities that (1) engage in “deceptive” acts or practices by failing to comply
with their stated privacy policies; or (2) employ “unfair” practices by failing to adequately secure
consumer data from unauthorized parties.344 Often, conduct constituting a violation could fallunder either category, as a failure to protect consumer data may be an unfair practice because of
the unavoidable injury it causes, as well as a deceptive practice because it renders an entity’s
privacy policy materially misleading.

“Deceptive” Privacy Statements
A utility that fails to comply with its own privacy policy may engage in a “deceptive” act orpractice under Section 5 of the FTC Act. In Facebook, Inc., the FTC alleged, among other things,
that the social networking site violated promises contained in its privacy policy when it madeusers’ personal information accessible to third parties without users’ consent.345 Facebook had
claimed that users could limit third-party access to their personal information on the site. Despite
this promise, applications run by users’ Facebook friends were able to access the users’ personal
information. The Commission also charged that Facebook altered its privacy practices without
users’ consent, causing personal information that had been restricted by users to be available tothird parties. This change, which allegedly “caused harm to users, including, but not limited to,threats to their health and safety, and unauthorized revelation of their affiliations” constituted botha “deceptive” and an “unfair” practice in the view of the Commission.346 Finally, the Commission
alleged that Facebook had represented to users that it would not share their personal information
with advertisers but had done so anyway.
341
15 U.S.C. §45(a)(1). For more details on FTC enforcement of consumer data privacy and security under Section 5,
see CRS Report RL34120, Federal Information Security and Data Breach Notification Laws, by Gina Stevens.
342
15 U.S.C. §45(n).
343
In re Cliffdale Assocs., Inc., 103 F.T.C. 110, 174 (1984) (policy statement at end of opinion).
344
See Consumer Privacy: Hearing Before the S. Comm. on Commerce, Sci., and Transp., 11th Cong. (2010) (statementof Jon D. Leibowitz, Chairman, Fed. Trade Comm’n) (describing the FTC’s enforcement activity in the areas ofconsumer data privacy and security), available at http://www.ftc.gov/os/testimony/100727consumerprivacy.pdf. The
FTC recently released a preliminary report on the consumer privacy implications of new technologies. FED. TRADE
COMM’N, PROTECTING CONSUMER PRIVACY IN AN ERA OF RAPID CHANGE: A PROPOSED FRAMEWORK FOR BUSINESSESAND POLICYMAKERS (2010), available at http://www.ftc.gov/os/2010/12/101201privacyreport.pdf.
345
FTC File No. 092 3184 (Nov. 29, 2011) (complaint).
346
Id.

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In Twitter, Inc., the FTC alleged that the social networking site engaged in “deceptive” acts when
it violated claims made in its privacy policy about the security of consumer data by failing to “usereasonable and appropriate security measures to prevent unauthorized access to nonpublic user
information.” 347 The Commission found that Twitter had permitted its administrators to accessthe site with easy-to-guess passwords and failed to limit the extent of administrators’ accessaccording to the requirements of their jobs. In a consent order, the company agreed not tomisrepresent its privacy controls and to implement a comprehensive information security
program that would be assessed by an independent third party.348
As smart meter data becomes valuable to third parties,349 utilities may be tempted to sell or share
this information with others to increase revenues and provide new services to their customers. If
prohibited by the terms of the utility’s privacy policy, it may be a “deceptive” act or practice forthe utility to share a consumer’s personal information with third parties without a consumer’s
consent.350 The FTC could also find deception when a utility represents that its privacy controls
are capable of protecting smart meter data when, in fact, they are not.

“Unfair” Failure to Secure Consumer Data
Failure to Protect Against Common Technology Threats or Unauthorized Access
The FTC may consider it an “unfair” practice when an electric utility fails to safeguard smart
meter data from well-known technology threats as the data travels across the utility’scommunications networks. For example, in DSW Inc., the FTC brought enforcement proceedings
against the respondent, the owner of several shoe stores.351 The agency alleged that the
respondent failed to protect customers’ credit card and check information as it was transmitted tothe issuing bank for authorization. The information collected at the register traveled wirelessly tothe store’s computer network, and from there to the bank or check processor, which
communicated its response back to the store through the same channels. The agency charged that[a]mong other things, respondent (1) created unnecessary risks to the information by storing
it in multiple files when it no longer had a business need to keep the information; (2) did notuse readily available security measures to limit access to its computer networks throughwireless access points on the networks; (3) stored the information in unencrypted files that
could be accessed easily by using a commonly known user ID and password; (4) did not
limit sufficiently the ability of computers on one in-store network to connect to computers onother in-store and corporate networks; and (5) failed to employ sufficient measures to detect
unauthorized access. As a result, a hacker could use the wireless access points on one instore computer network to connect to, and access personal information, on the other in-store
and corporate networks.352

347

FTC File No. 092 3093 (Mar. 2, 2011) (complaint).
FTC File No. 092 3093 (Mar. 2, 2011) (decision and order)
349
NIST PRIVACY REPORT, supra note 11, at 14, 35-36.
350
As suggested below, it may also be an “unfair” practice, regardless of whether the utility has a privacy policy.
351
FTC File No. 052 3096 (Mar. 7, 2006) (complaint).
352
Id.
348

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Similarly, in Cardsystems Solutions, Inc., the Commission brought a complaint against a credit
and debit card authorization processor.353 The FTC alleged that the respondent failed to protect its
systems by neglecting to guard its network against “commonly known or reasonably foreseeableattacks” that could be avoided using low-cost methods.354 As part of settlement agreements in
DSW and Cardsystems, the respondents had to create “a comprehensive information security
program” to protect consumer information that would be assessed periodically by an independent
third party.355
Smart meters also transmit personal consumer information, often wirelessly, across several
different communications networks located in various physical places.356 Thus, it is possible that
the FTC would view a utility’s failure to protect smart meter data against common technology
threats as an “unfair” practice if the utility could have avoided the threats by using low-cost
methods such as encrypting the data; storing it in fewer places and for no longer than needed;
implementing basic wireless network security; and taking other reasonable measures suggestedby the agency in DSW Inc.

Failure to Dispose of Data Safely
A utility’s failure to dispose of smart meter data safely may also constitute an “unfair” practiceunder Section 5. For example, in Rite Aid Corp., the respondent, the owner of retail pharmacy
stores, purportedly failed to safely dispose of personal information in its possession when it
neglected to: “(1) implement policies and procedures to dispose securely of such information,”including rendering “the information unreadable in the course of disposal; (2) adequately train
employees to dispose securely of such information; (3) use reasonable measures to assess
compliance with its established policies and procedures for the disposal of such information; and(4) employ a reasonable process for discovering and remedying risks to such information.”357 The
information was later found in various publicly accessible garbage dumpsters in readable form.
This suggests that utilities holding smart meter data and other personal information, whether onelectronic or physical media, must ensure that the methods used to destroy this data render it
unreadable to third parties.

Penalties
There is no private right of action in the FTC Act. If the Commission has “reason to believe” thata violation has occurred, it may, after notice to the respondent and an opportunity for a hearing,issue an order directing the respondent to cease and desist from acts or practices that the agency
finds violate the act.358 If the respondent disobeys an order that has become final, the U.S.
Attorney General may bring an action in district court seeking the imposition of civil monetary353

FTC File No. 052 3148 (Sept. 5, 2006) (complaint).
Id.
355
See, e.g., In re Cardsystems Solutions, Inc., FTC File No. 052 3148 (Sept. 5, 2006) (decision and order).
356
NIST PRIVACY REPORT, supra note 11, at 23.
357
FTC File No. 072 3121 (Nov. 12, 2010) (complaint).
358
15 U.S.C. §45(b). The Commission may seek a preliminary injunction in district court if it “has reason to believe”
that an entity subject to the Commission’s jurisdiction “is violating, or is about to violate, any provision of law
enforced” by the FTC, and such an injunction would be in the public interest. 15 U.S.C. §53(b). In “proper cases theCommission may seek, and after proper proof, the court may issue, a permanent injunction.” Id.
354

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penalties of up to $16,000 per violation ($16,000 per day for continuing violations), as well as
further injunctive and equitable relief that the court deems appropriate.359
After a party becomes subject to a final cease and desist order under the act, the Commission may
seek redress for consumers by bringing suit in state or federal court against the party if theCommission “satisfies the court that the act or practice to which the cease and desist order relates
is one which a reasonable man would have known under the circumstances was dishonest or
fraudulent.”360 “Such relief may include, but shall not be limited to, rescission or reformation ofcontracts, the refund of money or return of property, the payment of damages,” and public
notification of the violation, “except nothing in [15 U.S.C. §57b(b)] is intended to authorize theimposition of any exemplary or punitive damages.”361 Once the Commission has issued a final
cease and desist order (not a consent order) finding an act or practice to be deceptive, then it may
bring suit in district court to obtain a civil penalty against an entity that engages in that act orpractice: (1) after the order became final (“whether or not such person, partnership, or corporation
was subject to such cease and desist order”); and (2) “with actual knowledge that such act orpractice is unfair or deceptive and is unlawful” under Section 5 of the FTC Act.362

The Federal Privacy Act of 1974 (FPA)
Smart meter electricity usage data pertaining to U.S. citizens or permanent residents that is
retrievable by personal identifier from a system of records maintained by any federal “agency,”
including federally owned utilities, is subject to the protections contained in the Privacy Act363
when it is maintained, collected, used, or disseminated by the agency.

Federally Owned Utilities as “Agencies”
All nine of the federally owned utilities are federal agencies covered by the Privacy Act. For the
purposes of the act, the term “agency” includes, but is not limited to, “any executive department,
military department, Government corporation, Government controlled corporation, or otherestablishment in the executive branch of the Government (including the Executive Office of the
President), or any independent regulatory agency.”364 According to EIA, utilities that are part ofan executive department include the four power marketing administrations in the Department ofEnergy (Bonneville, Southeastern, Southwestern, and Western), the International Boundary andWater Commission in the Department of State, and the Bureau of Indian Affairs and the Bureau359

15 U.S.C. §45(l). The size of the civil monetary penalty was last adjusted for inflation in 2009. 16 C.F.R. §1.98.
15 U.S.C. §57b(a)(2).
361
15 U.S.C. §57b(b).
362
15 U.S.C. §45(m)(1)(B).
363
5 U.S.C. §552a. The federally owned utilities primarily sell electricity to nonprofit electric utilities on the wholesalemarkets rather than distribute electricity directly to consumers. EIA ELECTRIC POWER OVERVIEW, supra note 254. As
these utilities provide only about 1% of total sales of electricity to end user consumers, id., they may be unlikely toacquire consumer smart meter data, which is typically transmitted to distribution utilities. However, as the smart grid
becomes more interconnected, more utilities at different points in the smart grid may come into possession of this data.
NIST PRIVACY REPORT, supra note 11, at 23.
364
See 5 U.S.C. §552(f)(1). The act also covers data in a “system of records” operated by a government contractor on
behalf of a federal agency. See 5 U.S.C. §552a(m).
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Smart Meter Data: Privacy and Cybersecurityof Reclamation in the Department of the Interior.365 The U.S. Army Corps of Engineers resides inthe Department of Defense, which is an executive department.366 The Tennessee Valley Authority
is a government-owned corporation.367

Smart Meter Data as a Protected “Record”
The Privacy Act protects the type of electricity usage data gathered by smart meters, provided thatthe data pertains to U.S. citizens or permanent residents, is personally identifiable, and isretrievable by the individual’s name or another personal identifier. The Privacy Act “governs thecollection, use, and dissemination of a ‘record’ about an ‘individual’ maintained by federal
agencies in a ‘system of records.’”368 Under the statute, a “record” is “any item, collection, orgrouping of information about an individual that is maintained by an agency ... that contains his
name, or the identifying number, symbol, or other identifying particular assigned to theindividual, such as a finger or voice print or a photograph.”369
An “individual” is defined as “a citizen of the United States or an alien lawfully admitted forpermanent residence.”370 A “system of records” is “a group of any records under the control of
any agency from which information is retrieved by the name of the individual” or other personal
identifier “assigned to the individual.”371
Smart meter data held by an agency certainly fits within the broad definition of a “record”
because it is a grouping of information about an individual, namely, data on that individual’s
electricity usage. The data is typically stored along with a consumer’s account information, whichusually includes a consumer’s name, social security number, or other “identifying particular.”372
Thus, smart meter data would constitute a protected “record” under the Privacy Act, assumingthat it pertains to a citizen of the United States or lawful permanent resident and is retrievable bya personal identifier such as a consumer’s name or account number.

Requirements
For information on the general safeguards that the Privacy Act provides for data that ismaintained by a federal agency and meets the other requirements for a covered record under theact, see CRS Report RL34120, Federal Information Security and Data Breach Notification Laws,
by Gina Stevens.

365

EIA ELECTRIC POWER OVERVIEW, supra note 254.
DEP’T OF THE ARMY CORPS OF ENG’RS, CIVIL WORKS STRATEGIC PLAN 1 (2004), available at
http://www.corpsresults.us/pdfs/cw_strat.pdf. It is also a “Major Command within the Army.” Id.
367
Tenn. Valley Auth., About TVA, http://www.tva.com/abouttva/index.htm.
368
See CRS Report RL34120, Federal Information Security and Data Breach Notification Laws, by Gina Stevens(citations omitted).
369
5 U.S.C. §552(a)(4).
370
5 U.S.C. §552a(a)(2).
371
5 U.S.C. §552a(a)(5).
372
NIST PRIVACY REPORT, supra note 11, at 26-27.
366

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Author Contact Information
Brandon J. Murrill
Legislative Attorneybmurrill@crs.loc.gov, 7-8440

Richard M. Thompson II
Legislative Attorney
rthompson@crs.loc.gov, 7-8449

Edward C. Liu
Legislative Attorney
eliu@crs.loc.gov, 7-9166

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