```

[Senate Hearing 111-13]
[From the U.S. Government Publishing Office]

                                                         S. Hrg. 111-13
 
                SMART GRID INITIATIVES AND TECHNOLOGIES

=======================================================================

                                HEARING

                               before the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                                   TO

EXAMINE THE PROGRESS ON SMART GRID INITIATIVES AUTHORIZED IN THE ENERGY 
INDEPENDENCE AND SECURITY ACT OF 2007, AND FUNDED IN THE STIMULUS BILL, 
AND TO LEARN OF OPPORTUNITIES AND IMPEDIMENTS TO TIMELY INSTALLATION OF 
                        SMART GRID TECHNOLOGIES

                               __________

                             MARCH 3, 2009

                       Printed for the use of the
               Committee on Energy and Natural Resources

                   U.S. GOVERNMENT PRINTING OFFICE
48-648 PDF                  WASHINGTON : 2009
----------------------------------------------------------------------
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512�091800  
Fax: (202) 512�092104 Mail: Stop IDCC, Washington, DC 20402�090001

               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                  JEFF BINGAMAN, New Mexico, Chairman

BYRON L. DORGAN, North Dakota        LISA MURKOWSKI, Alaska
RON WYDEN, Oregon                    RICHARD BURR, North Carolina
TIM JOHNSON, South Dakota            JOHN BARRASSO, Wyoming
MARY L. LANDRIEU, Louisiana          SAM BROWNBACK, Kansas
MARIA CANTWELL, Washington           JAMES E. RISCH, Idaho
ROBERT MENENDEZ, New Jersey          JOHN McCAIN, Arizona
BLANCHE L. LINCOLN, Arkansas         ROBERT F. BENNETT, Utah
BERNARD SANDERS, Vermont             JIM BUNNING, Kentucky
EVAN BAYH, Indiana                   JEFF SESSIONS, Alabama
DEBBIE STABENOW, Michigan            BOB CORKER, Tennessee
MARK UDALL, Colorado
JEANNE SHAHEEN, New Hampshire

                    Robert M. Simon, Staff Director
                      Sam E. Fowler, Chief Counsel
               McKie Campbell, Republican Staff Director
               Karen K. Billups, Republican Chief Counsel

                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Bingaman, Hon. Jeff, U.S. Senator From New Mexico................     1
Butler, Frederick F., President, National Association of 
  Regulatory Utility Commissioners, Newark, NJ...................    32
Gaddis, Evan R., President and CEO, National Electrical 
  Manufacturers Association, Rosslyn, VA.........................    47
Gallagher, Patrick D., Ph.D., National Institute of Standards and 
  Technology, Department of Commerce.............................    16
Hamilton, Katherine, President, Gridwise Alliance................    38
Hoffman, Patricia, Acting Assistant Secretary for Electricity 
  Delivery and Energy Reliability, Department of Energy..........    11
Kelly, Suedeen G., Commissioner, Federal Energy Regulatory 
  Commission.....................................................     4
Lu, Edward, Advanced Projects Program Manager, Google, Inc., 
  Mountain View, CA..............................................    43
Murkowski, Hon. Lisa, U.S. Senator From Alaska...................     2
Standish, Thomas R., Group President, Regulated Operations, 
  CenterPoint Energy, Inc........................................    58
Udall, Hon. Mark, U.S. Senator From Colorado.....................     2

                                APPENDIX

Responses to additional questions................................    61

                SMART GRID INITIATIVES AND TECHNOLOGIES

                              ----------                              

                         TUESDAY, MARCH 3, 2009

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:04 a.m. in 
room SD-106, Dirksen Senate Office Building, Hon. Jeff 
Bingaman, Chairman, presiding.

OPENING STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR FROM NEW 
                             MEXICO

    The Chairman. OK, why don't we get started.
    This morning's hearing is on a topic that most of us had 
not even heard of a few years ago, but today is widely 
discussed here in Washington and around the country, and that 
is the smart grid.
    Briefly understood, this phrase refers to the digitization 
of the transmission and delivery systems for electricity in 
order to make maximum use of modern technologies. We're told 
that smart grid technologies can make the transmission system 
more efficient, reducing line loss, reducing congestion, which 
cause higher costs. We're also told that it can make the 
transmission distribution systems more reliable by allowing 
quicker response to failures in the event of emergencies. 
Further, the customers can take advantage of computerized 
meters and appliances to reduce demand at peak hours through 
shifting load to off-peak hours. This reduces the need for peak 
generation, reducing emissions and lowering costs.
    In 2007, we initiated a number of programs to further the 
digitization of the grid. In the Energy Independence and 
Security Act that President Bush signed in December 2007, we 
required the Department of Energy to form a Smart Grid Task 
Force to track developments and advance this program. We 
required the National Institute of Standards and Technology, in 
cooperation with the Department of Energy and the Federal 
Energy Regulatory Commission, to head up an effort to develop 
an interoperability framework to establish uniform standards 
for these technologies.
    We also authorized a grant program for demonstration 
projects to better understand the potential for smart grid 
benefits and to come to understand the problems that might 
attend actual installation on a commercial scale. We authorized 
a grant program for investments in the installation, 
development, and manufacture of these technologies.
    In the American Recovery and Reinvestment Act, just passed 
2 weeks ago, we funded these grant programs. Witnesses are here 
today to report on the progress thus far in implementing these 
programs. Government witnesses are able to testify as to the 
steps taken to get the interoperability framework underway, as 
well as how the funding for the grant programs is being 
prioritized and administered. Industry witnesses can give their 
perspectives on these same programs. We're anxious to know 
whether or not we have gotten it right, as far as the structure 
of the programs go, and whether there are additional actions we 
need to take to move the country to a smart grid.
    Let me call on Senator Murkowski for any comments she has.
    [The prepared statement of Senator Mark Udall follows:]

   Prepared Statement of Hon. Mark Udall, U.S. Senator From Colorado

    Thank you, Mr. Chairman, for today's hearing on smart grid 
technology.
    Smart grid technology will play a critical role in making all 
Americans smarter and better informed about how we use our energy. By 
providing up-to-the minute information about how much energy each 
individual is using and conveying the price at that moment for that 
energy, this technology allows consumers to be the ultimate 
decisionmakers about their energy use.
    We are not there quite yet. There is much more to accomplish 
regarding smart grid technology as well as the regulations and policies 
that govern how energy information is available to consumers. But with 
this hearing and a growing national awareness, we are on the right 
track.
    Specifically, I believe that if we have the right partnership of 
government, NGO's and businesses, we can promote and embrace current 
energy efficient technology, and also spur the development of new 
advances that will save future generations even more.
    Colorado is already leading the way with such a partnership through 
SmartGridCity.
    Xcel Energy, local government officials, and many others 
transformed Boulder, Colorado into a community of the future. Some 
Boulder residents can now program their dishwashers to start when 
energy prices are low from their blackberries. Or use energy stored in 
a hybrid car battery to wash clothes.
    One important point to emphasize about the SmartGridCity is that 
the Federal Government has not contributed to the approximately $100 
million cost. The fact that private, profit-driven companies put so 
much money toward this experiment shows just how promising this 
technology is.
    Smart grid is the future and the program in Boulder demonstrates 
daily how much potential this technology has. We need SmartGrid Cities 
in every state across the U.S. Today's hearing will help us get there. 
I look forward to hearing from the witnesses and would like to thank 
them for being here today.

        STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR 
                          FROM ALASKA

    Senator Murkowski. Thank you, Mr. Chairman. Thank you for 
convening this hearing. You put us in a bigger room to 
accommodate all those that are so interested in what we're 
discussing this morning: the smart grid.
    Smart grid, like shovel-ready and green jobs, is what 
everyone's talking about nowadays. I think that that's a good 
thing, but I think we need to ask the question, Are we all 
talking about the same thing? Some appear to confuse the idea 
of making our electrical grid smarter with making it bigger. We 
know that smart grid is not the buildout of miles and miles of 
high-voltage transmission lines; instead, it's--what we're 
really talking about is a potential transformation in how we 
use and deliver electricity.
    As you note, Mr. Chairman, we saw this potential, back in 
2007, with passage of the smart grid provisions in the Energy 
Independence and Security Act. In that bill we recognized that 
our national security efforts must include the modernization of 
the nation's electrical infrastructure. Senator Cantwell worked 
very hard on this and was a real leader in it.
    The promises of a smarter grid are many. Consumers will be 
able to monitor in real time the amount, price, and even source 
of the electricity that they consume. Discussion about, you 
know, your dishwasher being smarter than you are, in terms of 
when it's going to run and how much energy it will consume. 
Plug-in hybrid vehicles will be able to store electricity, and 
a more flexible network should be better able to handle the 
intermittent nature of renewable resources. Utilities will be 
able to locate, isolate, and restore power outages more 
quickly.
    At the same time, we recognize that a smarter grid poses 
some new challenges. There are several. The lack of an 
interoperability framework. It was just last week that 
Secretary of Energy Chu cited the lack of standards and 
protocols necessary to allow different systems to communicate 
with one another as the biggest roadblock in the advancement of 
smart grid technology.
    Another issue is cyber-security. Smart grid technologies 
are supposed to result in a more reliable and secure grid, but 
if cyber-security issues are not addressed, we could be making 
ourselves, perhaps, more vulnerable to cyber-attacks.
    Then, there's also the issue about public acceptance. Is 
the average consumer willing to pay the up-front costs of a new 
system, and then respond appropriately to the price signals? 
Or, you know, if people are told, or understand, that a utility 
may be able to reach inside their home to turn down a 
thermostat, is that just too much? Is that just a place where 
people are not ready to go?
    Now, as we all know, the stimulus bill provided $4.5 
billion in funding for smart grid activities. I will tell you, 
Mr. Chairman, I'm concerned with our government's ability to 
process this unprecedented amount of money in a meaningful way. 
How can this funding best be allocated to advance our smart 
grid technologies?
    Without an interoperability framework in place before these 
funds are expended, do we risk making investments in technology 
that may perhaps become obsolete?
    I want to thank the witnesses on this first panel, and on 
the second, as well. Look forward to your testimony and getting 
your thoughts on the issues that I have outlined.
    Thank you, Mr. Chairman.
    [The prepared statement of Senator Murkowski follows:]

  Prepared Statement of Hon. Lisa Murkowski, U.S. Senator From Alaska

    Good morning. Thank you all for being here today. And thank you to 
Chairman Bingaman for convening this hearing on the timely topic of 
Smart Grid.
    The term ``Smart Grid,'' like ``shovel ready'' and ``green jobs'' 
is now part of our lexicon. Millions of people saw GE's Smart Grid 
commercial during the Superbowl. It seems like everyone is talking 
about Smart Grid these days.
    But are we all talking about the same thing? Some appear to confuse 
the idea of making our electrical grid ``smarter'' with making it 
``bigger.'' Smart Grid is not the build out of miles and miles of high 
voltage transmission line. Instead, what we're really taking about is a 
potential transformation in how we use and deliver electricity.
    Congress saw this potential back in 2007 with passage of the Smart 
Grid provisions in Title XIII of the Energy Independence and Security 
Act. In that bill, we recognized that our national security efforts 
must include the modernization of the nation's electrical 
infrastructure. [I see the Senator from Washington is here today. I 
know this is an issue Senator Cantwell has worked very hard on and I'd 
like to thank her for her efforts].
    NOTE: Washington state is home to Itron, a Smart Meter manufacturer 
and Schweitzer Engineering Labs, which makes digital relay switching 
devices.

    The promises of a smarter grid are many:

   consumers will be able to monitor in real time the amount, 
        price, and even source of the electricity they consume. With 
        two-way grid communication, the dishwasher may choose to run 
        when electricity is less expensive or maybe the washing machine 
        won't turn on until wind power is available;
   plug-in hybrid electric vehicles will be able to store 
        electricity and a more flexible network should be better able 
        to handle the intermittent nature of renewable resources; and
   utilities will be able to locate, isolate and restore power 
        outages remotely and quickly.

    At the same time, a smarter grid poses some new challenges, such 
as:

   The lack of an Interoperability Framework--last week, DOE 
        Secretary Chu cited the lack of standards and protocols 
        necessary to allow different systems to communicate with one 
        another as the biggest roadblock to the advancement of Smart 
        Grid technology;
   Cyber Security--Smart Grid technologies are supposed to 
        result in a more reliable and secure grid but if cyber security 
        issues are not addressed, we could be making ourselves more 
        vulnerable to cyber attacks; and
   Public Acceptance--is the average consumer willing to pay 
        the upfront costs of a new system and then respond 
        appropriately to price signals? Or will people view a utility's 
        ability to reach inside a home to turn down a thermostat as 
        Orwellian?

    As we all know, the Stimulus bill provided $4.5 billion in funding 
for Smart Grid activities. I am concerned with the government's ability 
to process this unprecedented amount of money in a meaningful way. How 
can this funding best be allocated to advance Smart Grid technologies? 
Without an Interoperability Framework in place before these funds are 
expended, do we risk making investments in technology that may soon 
become obsolete?
    I'd like to thank all of our witnesses for joining us today. I look 
forward to hearing your testimony and getting your thoughts on the 
issues I have outlined. Mr. Chairman, thank you again for convening 
this important hearing.

    The Chairman. Thank you very much.
    Let me just introduce our first panel. First is Honorable 
Suedeen Kelly, who is a commissioner with FERC. Thank you very 
much for being here. Patricia Hoffman is principal deputy 
assistant secretary in the Office of Electricity Delivery and 
Energy Reliability at the Department of Energy. Patrick 
Gallagher is here representing the National Institute of 
Standards and Technology.
    So, why don't we just have you proceed in that order, if 
you could each take maybe about 6 minutes and tell us the main 
points we need to understand about this issue. I'm sure we'll 
have questions.
    Thank you.

  STATEMENT OF SUEDEEN G. KELLY, COMMISSIONER, FEDERAL ENERGY 
                     REGULATORY COMMISSION

    Ms. Kelly. Mr. Chairman and members of the committee, thank 
you very much for the opportunity to speak here today.
    My testimony addresses FERC's efforts to develop and 
implement smart grid technology. I will summarize them now, 
and, at the end, highlight a few issues that we see in our 
future.
    Our Nation's electricity grid generally depends on decades-
old technology and has not incorporated new digital 
technologies extensively. Introducing digital technology to the 
grid can transform it by providing benefits to the electric 
industry and its customers, enhancing the grid's efficiency, 
and enabling its technological advancement, while ensuring its 
reliability and security.
    I'd like to talk about several of our roles in this effort. 
The first is our interoperability role.
    Deployment of smart grid involves a broad range of 
government agencies at both the Federal and State levels. 
FERC's primary responsibility is to promulgate interoperability 
standards through a rulemaking once FERC is satisfied that 
NIST's work on the development of these standards has reached 
sufficient consensus.
    Development of the interoperability framework is, indeed, a 
challenging task. Well-designed standards and protocols are 
needed to make smart grid a reality. Recent funding for NIST's 
efforts will help, but coordination and cooperation among 
government agencies and industry participants is just as 
important. DOE, NIST, and FERC have been working with each 
other for the last year, and with other Federal agencies, to 
ensure progress, and those efforts will continue.
    Second, I'd like to talk about our collaborative efforts. A 
year ago, FERC and the National Association of Regulatory 
Utility Commissioners, the State regulatory commissioners, 
began a collaborative on smart grid. I and Commissioner Butler, 
of the New Jersey Board of Public Utilities, who will be 
speaking on the next panel, co-chair that collaborative. FERC 
and NARUC started this effort because we understood that 
smartening the grid will cut across traditional jurisdictional 
boundaries, and therefore, State and Federal regulators should 
work together to ensure interoperability across the boundaries, 
and coordination of information on smart grid technology and 
deployment, as well as coordination of policies.
    Currently, the collaborative has begun to develop criteria 
that participating regulators would like to see DOE use in 
applying to projects seeking smart grid grants under the 
stimulus bill funding. The collaborative members are focusing 
on criteria that would help them fulfill their responsibility 
as to the smart grid projects they will be asked to approve.
    Now, our efforts on fostering deployment of smart grid. The 
Energy Policy Act of 2005, Section 1223, directs FERC to 
encourage the deployment of advanced transmission technologies, 
and expressly includes technologies related to the smart grid 
in that section. Examples include energy storage devices, 
controllable load, enhanced power device monitoring, and direct 
system-state sensors.
    FERC can use its existing authority under the Federal Power 
Act to help facilitate implementation of smart grid technology. 
For example, FERC could provide rate incentives for appropriate 
smart grid projects, and can provide guidance on appropriate 
cost recovery for these projects. Providing clear guidance on 
the types of smart grid costs recoverable in rates and the 
procedures for seeking rate recovery may eliminate a major 
concern for utilities that are considering making these 
investments.
    A critical issue as smart grid is deployed is the need to 
ensure grid reliability and cybersecurity. The interoperability 
framework and the technology itself must leave no gaps in 
physical security or cybersecurity. Reliability and security 
must be built into smart grid devices and not added later. The 
significant benefits of smart grid technologies must be 
achieved without taking reliability and security risks that 
could be exploited.
    Another area for initial emphasis could be standards that 
promote common software semantics throughout the industry. 
These would enable realtime coordination of information from 
both demand and supply resources.
    The next level for prioritization could include standards 
related to key challenges now confronting our grid, or that 
will soon confront our grid, including, integrating more 
intermittent renewables into the grid and accommodating plug-in 
electric vehicles. Accordingly, we might suggest a priority for 
development of standards permitting system operators to rely on 
automated demand resources, emerging electric storage 
technologies, and technologies such as phase or measurement 
units for wide area system awareness and congestion management. 
Another area could be standards for the charging of plug-in 
electric vehicles.
    As to future issues, concerns about access to, and security 
of, smart grid control systems and data must be resolved. For 
example, as I mentioned earlier, consumers need realtime data 
on how and when their electricity usage is affected. Both 
demand-and supply related information.
    This data could also be valuable to various business 
entities to enable them to better design technology that helps 
consumers make smarter decisions about their electricity use. 
This data may also be helpful to regulators seeking to better 
understand the cost-benefit equation of smart grid technology. 
In making this data available, we must take a number of things 
into account, including privacy concerns, authorized 
dissemination, and possible marketing of the data, as well as 
concerns about information that might enable the identification 
of critical energy infrastructure, something that we don't want 
to have occur.
    A final issue involves enforcement of the smart grid 
interoperability standards that FERC will promulgate under the 
Energy Independence and Security Act. This section in the 
Energy Independence and Security Act is a standalone provision 
of law. In other words, it's not an amendment to the Federal 
Power Act. So, it does not provide that these standards are 
mandatory, and it does not provide authority or processes for 
enforcing them. FERC can use some existing authority in the 
Federal Power Act to require some, but not all, entities to 
comply with the standards.
    In terms of ensuring compliance, FERC's ratemaking 
authority applies to FERC jurisdictional public utilities, but, 
of course, not all the public utilities in America. Our 
mandatory reliability authority applies to users, owners, and 
operators of the bulk power system, but not the rest of the 
electric system.
    FERC's authority generally excludes local distribution 
facilities, and our reliability authority requires FERC to 
refer standards to NERC's standard-setting process before they 
can be mandated. If Congress intends for the smart grid 
standards to be mandatory beyond the scope of the Federal Power 
Act, then additional legislation should be considered.
    Thank you, again, for the opportunity to testify today. I'd 
be happy to answer any questions you have.
    [The prepared statement of Ms. Kelly follows:]

 Prepared Statement of Suedeen G. Kelly, Commissioner, Federal Energy 
                         Regulatory Commission

                        INTRODUCTION AND SUMMARY

    Mr. Chairman and members of the Committee, thank you for the 
opportunity to speak here today. My name is Suedeen Kelly, and I am a 
Commissioner on the Federal Energy Regulatory Commission (FERC or 
Commission). My testimony addresses the efforts to develop and 
implement a range of technologies collectively known as the ``Smart 
Grid.''
    Our nation's electric grid generally depends on decades-old 
technology, and has not incorporated new digital technologies 
extensively. Digital technologies have transformed other industries 
such as telecommunications. A similar change has not yet happened for 
the electric grid. As detailed below, a Smart Grid can provide a range 
of benefits to the electric industry and its customers, enhancing its 
efficiency and enabling its technological advancement while ensuring 
its reliability and security.
    Smart Grid efforts involve a broad range of government agencies, at 
both the Federal and state levels. The Federal agencies include 
primarily the Department of Energy (DOE), the National Institute of 
Standards and Technology (NIST) and FERC. DOE's tasks include awarding 
grants for Smart Grid projects and developing a Smart Grid information 
clearinghouse. NIST has primary responsibility for coordinating 
development of an ``interoperability framework'' allowing Smart Grid 
technologies to communicate and work together. FERC is then responsible 
for promulgating interoperability standards, once FERC is satisfied 
that NIST's work has led to sufficient consensus.
    Development of the interoperability framework is a challenging 
task. Recent funding for NIST's efforts will help, but cooperation and 
coordination among government agencies and industry participants is 
just as important. DOE, NIST and FERC have been working with each other 
and with other Federal agencies to ensure progress, and those efforts 
will continue. FERC also has been coordinating with state regulators, 
to address common issues and concerns.
    FERC can use its existing authority to facilitate implementation of 
Smart Grid. For example, FERC can provide rate incentives for 
appropriate Smart Grid projects, and can provide guidance on cost 
recovery for such projects.
    A critical issue as Smart Grid is deployed is the need to ensure 
grid reliability and cyber security. The significant benefits of Smart 
Grid technologies must be achieved without taking reliability and 
security risks that could be exploited to cause great harm to our 
Nation's citizens and economy.
    Finally, if the intent of Congress is for the Smart Grid standards 
to be mandatory beyond the scope of the Federal Power Act, additional 
legislation should be considered.

                                  EISA

    Section 1301 of the Energy Independence and Security Act of 2007 
(EISA) states that ``it is the policy of the United States to support 
the modernization of the Nation's electricity transmission and 
distribution system to maintain a reliable and secure electricity 
infrastructure that can meet future demand growth and to achieve'' a 
number of benefits. Section 1301 specifies benefits such as: increased 
use of digital technology to improve the grid's reliability, security, 
and efficiency; ``dynamic optimization of grid operations and 
resources, with full cyber-security;'' facilitation of distributed 
generation, demand response, and energy efficiency resources; and 
integration of ``smart'' appliances and consumer devices, as well as 
advanced electricity storage and peak-shaving technologies (including 
plug-in hybrid electric vehicles).
    Section 1305(a) of EISA gives NIST ``primary responsibility to 
coordinate the development of a framework that includes protocols and 
model standards for information management to achieve interoperability 
of smart grid devices and systems.'' NIST is required to solicit input 
from a range of others, including the GridWise Architecture Council and 
the National Electrical Manufacturers Association, as well as two 
international bodies, the Institute of Electrical and Electronics 
Engineers and the North American Electric Reliability Corporation 
(NERC). Many of the organizations working with NIST on this issue 
develop industry standards through extensive processes aimed at 
achieving consensus.
    Although EISA does not define interoperability, definitions put 
forth by others often include many of the same elements. These include: 
(1) exchange of meaningful, actionable information between two or more 
systems across organizational boundaries; (2) a shared meaning of the 
exchanged information; (3) an agreed expectation for the response to 
the information exchange; and (4) requisite quality of service in 
information exchange: reliability, accuracy, security. (See GridWise 
Architecture Council, ``Interoperability Path Forward Whitepaper,'' 
www.gridwiseac.org
    Pursuant to EISA section 1305, once FERC is satisfied that NIST's 
work has led to ``sufficient consensus'' on interoperability standards, 
FERC must then ``institute a rulemaking proceeding to adopt such 
standards and protocols as may be necessary to insure smart-grid 
functionality and interoperability in interstate transmission of 
electric power, and regional and wholesale electricity markets.'' 
Section 1305 does not specify any other prerequisites to Commission 
action, such as a filing by NIST with the Commission or unanimous 
support for individual standards or a comprehensive set of standards.
    FERC's role under EISA section 1305 is consistent with its 
responsibility under section 1223 of the Energy Policy Act of 2005. 
Section 1223 directs FERC to encourage the deployment of advanced 
transmission technologies, and expressly includes technologies such as 
energy storage devices, controllable load, distributed generation, 
enhanced power device monitoring and direct system state sensors.

                         SMART GRID TASK FORCE

    As required by EISA section 1303, DOE has established the Smart 
Grid Task Force. The Task Force includes representatives from DOE, 
FERC, NIST, the Environmental Protection Agency and the Departments of 
Homeland Security, Agriculture and Defense. The Task Force seeks to 
ensure awareness, coordination and integration of Federal Government 
activities related to Smart Grid technologies, practices, and services. 
The Task Force meets on a regular basis, and has helped inform the 
participating agencies on the Smart Grid efforts of other participants 
as well as the efforts outside the Federal Government.

                        SMART GRID COLLABORATIVE

    A year ago, FERC and NARUC began the Smart Grid Collaborative. I 
and Commissioner Frederick F. Butler of the New Jersey Board of Public 
Utilities co-chair the collaborative. The collaborative was timely 
because state regulators were increasingly being asked to approve pilot 
or demonstration projects or in some cases widespread deployment in 
their states of advanced metering systems, one key component of a 
comprehensive Smart Grid system.
    The Collaborative began by convening joint meetings to hear from a 
range of experts about the new technologies. A host of issues were 
explored. Key among them were the issues of interoperability, the types 
of technologies and communications protocols used in Smart Grid 
applications, the sequence and timing of Smart Grid deployments, and 
the type of rate structures that accompanied Smart Grid projects.
    Through these meetings, Collaborative members learned of a range of 
Smart Grid projects already in place around the country. The Smart Grid 
programs in existence were varied in that they used a mix of differing 
technologies, communications protocols and rate designs. Collaborative 
members began discussing whether a Smart Grid information clearinghouse 
could be developed that would then allow an analysis of best practices. 
This information could help regulators make better decisions on 
proposed Smart Grid projects in their jurisdictions. As discussed 
below, recent legislation requires DOE to establish such a 
clearinghouse.
    The Collaborative members have begun to look beyond the information 
clearinghouse to who could best analyze this information to identify 
best practices from Smart Grid applications. The Collaborative has met 
with staff from DOE to discuss possible funding for a project under the 
auspices of the Collaborative that could act as an analytical tool to 
evaluate Smart Grid pilot programs, using the information developed by 
the clearinghouse. This issue is still being explored.

                           THE STIMULUS BILL

    The American Recovery and Reinvestment Act of 2009 (the ``Stimulus 
Bill'') appropriated $4.5 billion to DOE for ``Electricity Delivery and 
Energy Reliability.'' The authorized purposes for these funds include, 
inter alia, implementation of programs authorized under Title XIII of 
EISA, which addresses Smart Grid. Smart Grid grants would provide 
funding for up to 50 percent of a project's documented costs. In many 
cases, state and/or Federal regulators could be asked to approve 
funding for the balance of project costs. The Secretary of Energy is 
required to develop procedures or criteria under which applicants can 
receive such grants. The Stimulus Bill also states that $10 million of 
the $4.5 billion is ``to implement
    [EISA] section 1305,'' the provision giving NIST primary 
responsibility to coordinate the development of the interoperability 
framework.
    The Stimulus Bill also directs the Secretary of Energy to establish 
a Smart Grid information clearinghouse. As a condition of receiving 
Smart Grid grants, recipients must provide such information to the 
clearinghouse as the Secretary requires.
    As an additional condition, recipients must show that their 
projects use ``open protocols and standards (including Internet-based 
protocols and standards) if available and appropriate.'' These open 
protocols and standards, sometimes also referred to as ``open 
architecture,'' will facilitate interoperability by allowing multiple 
vendors to design and build many types of equipment and systems for the 
Smart Grid environment. As the GridWise Architecture Council stated, 
``An open architecture encourages multi-vendor competition because 
every vendor has the opportunity to build interchangeable hardware or 
software that works with other elements within the system.'' (See 
``Introduction to Interoperability and Decision-Maker's Checklist,'' 
page 4, www.gridwiseac.org.)
    The Collaborative has begun discussing additional criteria that 
regulators would like to see applied to projects seeking Smart Grid 
grants. The Collaborative members are focusing on criteria that could 
help them fulfill their legal responsibilities as to Smart Grid 
projects they would be asked to approve. For example, cost-
effectiveness could be a key criterion and could inform regulatory 
decisions on rate recovery issues. Upgradeability could be another 
criterion. Once the Collaborative reaches consensus on the criteria, 
the Collaborative intends to ask the Secretary of Energy to consider 
its recommended criteria.

               INITIAL DEPLOYMENTS ARE STILL IN PROGRESS

    Initial efforts to use Smart Grid technologies are still being 
implemented and analyzed. Even comprehensive pilot projects such as 
Xcel's project in Boulder, Colorado (which includes smart meters, in-
home programmable control devices, smart substations and integration of 
distributed generation), are in the early stages of development and 
data gathering. Thus, it is too early to assess the ``lessons learned'' 
from such efforts.
    A particularly interesting project, however, is under development 
by Pepco Holdings, Inc. (PHI). At the transmission level, Smart Grid 
can be equated with wide-spread deployment of advanced sensors and 
controls and the high-speed communications and IT infrastructure needed 
to fully use the additional data and control options to improve the 
electric system's reliability and efficiency. PHI's proposal follows 
this model. In a filing with FERC seeking approval of incentive rates, 
PHI committed to promote interoperability through insistence ``upon 
open architecture, open protocols and `interoperability''' when dealing 
with potential vendors, and to adhere to ``available standards which 
have been finalized, proven, and have achieved some levels of broad 
industry acceptance'' as much as possible for its Smart Grid 
deployments. Furthermore, PHI committed to ``provide a method of 
upgrading systems and firmware remotely (through the data network as 
opposed to local/site upgrades) and ensure that unforeseen problems or 
changes can be quickly and easily made by PHI engineers and system 
operators on short notice.'' Adherence to such principles, along with 
adequate consideration of cyber security concerns, is essential at this 
early stage of Smart Grid development. The Commission granted incentive 
rates for this project, and construction is expected to start in 2009.

                               NEXT STEPS

    As Congress recognized in enacting EISA, the development of an 
interoperability framework can accelerate the deployment of Smart Grid 
technologies. The process of developing such a framework may take 
significant time. NIST has primary responsibility for this task, and 
must coordinate the efforts and views of many others. As a non-
regulatory agency, NIST is used to serving as a neutral mediator to 
build consensus toward standards. Achieving consensus among the many, 
diverse entities involved in Smart Grid may be difficult. Coordinated 
leadership is needed to help minimize conflicting agendas and 
unnecessary delay. The Stimulus Bill's funding will help NIST's 
efforts, but may not guarantee quick achievement of the goals. In the 
meantime, the Commission may be able to take steps to help hasten 
development and implementation of Smart Grid technology. For example, 
the Commission's day-to-day knowledge of the electric industry may 
allow it to suggest aspects of the interoperability framework that 
should be prioritized ahead of others. This prioritization may 
facilitate progress on the Smart Grid technologies that will provide 
the largest benefits for a broad group of participants.
    An overarching approach for prioritization could focus initially on 
the fundamental standards needed to enable all of the functions and 
characteristics envisioned for the Smart Grid. This may include, for 
example, standards for cyber security, since the electric grid and all 
devices connected to it must be fully protected. This approach also may 
include standards that promote common software semantics throughout the 
industry, which would enable real-time coordination of information from 
both demand and supply resources.
    The next set of targets for prioritization could be standards 
needed to enable key Smart Grid functionalities identified by relevant 
authorities including FERC. For example, challenges associated with 
integrating variable renewable resources into the generation mix and 
reliably accommodating any new electric vehicle fleets could be 
addressed, at least in part, through certain capabilities envisioned 
for the Smart Grid. Accordingly, priority could be placed on the 
development of: (1) standards permitting system operators to rely on 
automated demand response resources to offset an unplanned loss of 
variable generation such as wind turbines or to shift load into off-
peak hours with over-generation situations; (2) standards permitting 
system operators to rely on emerging electric storage technologies for 
similar purposes; (3) standards permitting transmission operators to 
rely on technologies such as phasor measurement units for wide-area 
system awareness and congestion management; and, (4) standards 
permitting some appropriate control over the charging of plug-in hybrid 
electric vehicles, particularly encouraging such charging to occur 
during off-peak hours.
    Even before NIST's work has led to sufficient consensus, the 
Commission could provide rate incentives to jurisdictional public 
utilities for early implementation of certain Smart Grid technologies, 
if adequate steps are taken to ensure reliability and cyber security 
while minimizing the risk of rapid obsolescence and ``stranded costs.'' 
The Commission also may be able to use its ratemaking authority, apart 
from incentives, to encourage expansion of Smart Grid technologies. 
Providing clear guidance on the types of Smart Grid costs recoverable 
in rates, and on the procedures for seeking rate recovery, may 
eliminate a major concern for utilities considering such investments.
    While FERC, by itself, may be able to take steps such as these to 
foster Smart Grid technologies, achieving the full benefits of a Smart 
Grid will require coordination among a broad group of entities, 
particularly DOE, NIST, FERC and state regulators. For example, DOE's 
authority to support up to 50 percent of the cost of a Smart Grid 
project may elicit little interest from utilities if they are uncertain 
of their ability to recover the rest of their costs. Similarly, 
Congress itself recognized, in EISA section 1305(a)(1), the need for 
NIST to seek input from FERC, the Smart Grid Task Force established by 
DOE and ``other relevant Federal and state agencies.'' Also, the 
concurrent jurisdiction of FERC and state commissions over many 
utilities will require regulators to adopt complementary policies or 
risk sending conflicting regulatory ``signals.'' More fundamentally, a 
Smart Grid will require substantial coordination between wholesale and 
retail markets and between the Federal and state rules governing those 
markets. Similarly, Smart Grid standards may require changes to 
business practice standards already used in the industry, such as those 
developed through NAESB, and the industry and government agencies 
should support the work needed to evaluate and develop those changes.
    Concerns about access to, and security of, Smart Grid control 
systems and/or data also must be resolved. For example, data on how and 
when individual customers use electricity could be valuable to various 
commercial entities, but customers may have privacy concerns about 
unauthorized dissemination or marketing of this data. Similarly, 
generation owners and operators may be concerned about cyber access to 
control systems that operate their facilities. Access to information 
enabling the identification of critical energy infrastructure must also 
be limited. Issues about who owns Smart Grid-generated data and the 
security of some of its products are unresolved.
    An additional issue involves enforcement of Smart Grid standards 
promulgated by the Commission under EISA section 1305. This section, 
which is a stand-alone provision instead of an amendment to the Federal 
Power Act (FPA), requires FERC to promulgate standards, but does not 
provide that the standards are mandatory or provide any authority and 
procedures for enforcing such standards. If FERC were to seek to use 
the full scope of its existing FPA authority to require compliance with 
Smart Grid standards, this authority applies only to certain entities 
(i.e., public utilities under its ratemaking authority in Sections 205 
and 206, or users, owners and operators of the bulk power system under 
its reliability authority in Section 215). FERC also has asserted 
jurisdiction in certain circumstances over demand response programs 
involving both wholesale and eligible retail customers. However, FERC's 
authority under the FPA excludes local distribution facilities unless 
specifically provided, its authority under sections 205 and 206 applies 
only to public utilities, and its section 215 authority does not 
authorize it to mandate standards but rather only to refer a matter to 
NERC's standard-setting process. If the intent of Congress is for the 
Smart Grid standards to be mandatory beyond the scope of the Federal 
Power Act, additional legislation should be considered.
    Finally, in developing and implementing Smart Grid technologies, 
the electric industry and vendors must meet the critical need, 
recognized by Congress in EISA section 1301, for grid reliability and 
``full cyber-security.'' An entity subject to FERC-approved reliability 
standards under FPA section 215 must maintain compliance with those 
standards during and after the installation of Smart Grid technologies. 
Also, the interoperability framework and the technology itself must 
leave no gaps in physical security or cyber security. Reliability and 
security must be built into Smart Grid devices, and not added later, to 
avoid making the grid more vulnerable and to avoid costly replacement 
of equipment that cannot be upgraded. The significant benefits of Smart 
Grid technologies must be achieved without taking reliability and 
security risks that could be exploited to cause great harm to our 
Nation's citizens and economy.

                               CONCLUSION

    A properly coordinated and timely deployment of Smart Grid can 
provide many positive benefits to the Nation's electric industry and 
its customers, if we are careful to maintain and enhance grid security 
and reliability at the same time. Indeed, I would expect Smart Grid to 
evolve in many unanticipated but beneficial ways. Well-designed 
standards and protocols are needed to make Smart Grid a reality. They 
will eliminate concerns about technology obsolescence, allow system 
upgrades through software applications, and ultimately permit plug-and-
play devices, regardless of vendor. FERC is committed to working 
closely with DOE, NIST and others to facilitate rapid deployment of 
innovative, secure Smart Grid technologies.
    Thank you again for the opportunity to testify today. I would be 
happy to answer any questions you may have.

    The Chairman. Thank you very much.
    Ms. Hoffman, go right ahead.

 STATEMENT OF PATRICIA HOFFMAN, ACTING ASSISTANT SECRETARY FOR 
  ELECTRICITY DELIVERY AND ENERGY RELIABILITY, DEPARTMENT OF 
                             ENERGY

    Ms. Hoffman. Mr. Chairman and members of the committee, 
thank you for this opportunity to testify before you on the 
Department's progress in advancing smart grid projects and 
activities under title 13 of the Energy Independence and 
Security Act and the American Recovery and Reinvestment Act.
    A smart grid uses information technology to improve the 
reliability, availability, and efficiency of electric systems 
from large generation, including renewables, through the 
delivery system to electricity consumers, and eventually to 
individual end uses or appliances.
    There are several guiding principles to the Department's 
smart grid efforts. First is the need to establish quantitative 
metrics for guiding the implementation of a smart grid. In June 
2008, the Department sponsored a Smart Grid Implementation 
Workshop, which brought together stakeholders from across the 
country to discuss smart grid definitions, metrics, and 
analysis. The Department envisions these metrics may become key 
indicators for understanding progress toward implementing a 
smart grid.
    A second guiding principle is transparency. It is the 
Department's intent to use every means at its disposal to keep 
the public informed of, and involved in, the progress of smart 
grid developments. There are several avenues for effective 
communication and coordination to occur.
    For example, the Federal Smart Grid Task Force, as required 
by EISA, Section 1303, has met every month since March 2008 to 
coordinate Federal activities. This coordination and 
involvement included the Federal Energy Regulatory Commission, 
the National Institute of Standards and Technology, the 
Environmental Protection Agency, the Department of Homeland 
Security, the United States Department of Agriculture, and the 
Department of Defense.
    Additionally, the Department is contributing to the efforts 
of a NARUC-FERC smart grid collaborative by supporting the 
development of a Web-based information clearinghouse to share 
what is known about smart grid projects and foster a better 
information exchange.
    The Department is committed to moving smart grid standards 
through the development processes and getting to them--getting 
them to the point of adjudication by Federal and State 
regulatory agencies as rapidly as possible by implementing EISA 
Section 1305. The Department is working closely with NIST, who 
has the primary responsibility to coordinate the development of 
a framework for interoperability standards.
    The cornerstone of a smart grid is the ability of multiple 
agents--for example, devices--to interact with one another via 
a communications network. The interaction of multiple devices, 
and the benefit that that brings to the electric power system, 
is what differentiates a smart grid from the existing system. 
If not properly protected, the smart grid could be vulnerable 
in areas including a breach of availability, a breach of data 
integrity, or a breach of confidentiality.
    Over the last 8 months, DOE has been working 
collaboratively with the Utilities Communication Architectures 
User Group to develop cyber-security requirements for advanced 
metering infrastructure, AMI, a key application for the smart 
grid. This work will help accelerate the development of cyber-
security requirements and other smart grid technologies.
    Additionally, the Department is currently developing EISA 
Section 1309, a study of the security attributes for a smart 
grid system, for delivery to Congress by the end of the fiscal 
year.
    The Department envisions an electric system--generation, 
delivery, and use--with the capability to measure and 
understand performance on a realtime basis, to model and 
analyze policy and regulatory objectives, and improve 
resiliency. The Department's highest priorities are to 
implement the recovery plan and accelerate the development of 
interoperable open standards.
    With respect to the Recovery Act, the Department is poised 
to release two notices of intent in order to implement the 
Smart Grid Investment Grant Program and the regional 
demonstration projects, followed by a subsequent release of 
formal solicitations for proposals.
    This concludes my statement, Mr. Chairman, and I look 
forward to answering any questions you may have.
    [The prepared statement of Ms. Hoffman follows:]

Prepared Statement of Patricia Hoffman, Acting Assistant Secretary for 
   Electricity Delivery and Energy Reliability, Department of Energy

    Mr. Chairman and Members of the Committee, thank you for this 
opportunity to testify before you on the Department's progress in 
advancing smart grid projects and activities under Title XIII of the 
Energy Independence and Security Act of 2007 and the American Recovery 
and Reinvestment Act of 2009 (Recovery Act). Creating smart grid is 
critical to meeting future demand growth while maintaining a reliable 
electric system.
    A smart grid uses information technology to improve the 
reliability, availability and efficiency of the electric system: from 
large generation through the delivery system to electricity consumers 
and eventually to individual end-uses or appliances. The information 
networks that are transforming our economy in other areas are also 
being applied to grid applications for dynamic optimization of electric 
systems operations, maintenance, and planning.
    There are several guiding principles to the Department's smart grid 
efforts. First is the need to establish quantitative metrics for 
guiding the implementation of smart grid activities. Efforts to develop 
smart grid metrics have been underway for some time. For example, in 
June 2008, the Office of Electricity Delivery and Energy Reliability 
(OE) sponsored a ``Smart Grid Implementation Workshop'' which brought 
together stakeholders from across the country to discuss smart grid 
definitions, metrics, and analysis and the data and methodologies that 
will be needed for the effective application of those metrics. The 
Department envisions these metrics may become key indicators for 
understanding progress toward implementing a smart grid.

                      POTENTIAL SMART GRID METRICS

   Dynamic Pricing:--fraction of customers and total load 
        served by Real Time Pricing (RTP), Critical Peak Pricing (CPP), 
        and Time of Use (TOU) tariffs
   Realtime System Operations Data Sharing:--Total Supervisory 
        Control and Data Acquisition (SCADA) points shared and fraction 
        of phasor measurement points shared.
   Distributed-Resource Interconnection Policy:--percentage of 
        utilities with standard distributed-resource interconnection 
        policies and commonality of such policies across utilities.
   Policy/Regulatory Progress:--weighted-average percentage of 
        smart grid investment recovered through rates (respondents' 
        input weighted based on total customer share).
   Load Participation Based on Grid Conditions:--fraction of 
        load served by interruptible tariffs, direct load control, and 
        consumer load control with incentives.
   Load Served by Microgrids:--the percentage total grid summer 
        capacity.
   Grid-Connected Distributed Generation (renewable and non-
        renewable) and Storage:--percentage of distributed generation 
        and storage.
   Electric Vehicles (EVs) and Plug-InHybrid Electric Vehicles 
        (PHEVs):--percentage shares of on-road. For example, light-duty 
        vehicles of comprising EVs and PHEVs.
   Grid-Responsive Non-Generating Demand-Side Equipment:--total 
        load served by smart, grid-responsive equipment.
   Transmission &Distribution (T&D) System Reliability:--
        utilizing the Institute of Electrical and Electronics 
        Engineers, Inc (IEEE) indices that measure distribution system 
        reliability.
   T&D Automations:--percentage of substations using 
        automation.
   Advanced Meters:--percentage of total demand served by 
        advanced metered customers
   Advanced System Measurement:--percentage of substations 
        possessing advanced measurement technology.
   Capacity Factors:--yearly average and peak-generation 
        capacity factor.
   Generation and T&D Efficiencies:--percentage of energy 
        consumed to generate electricity that is not lost.
   Dynamic Line Ratings:--percentage miles of transmission 
        circuits being operated under dynamic line ratings.
   Power Quality:--percentage of customer complaints related to 
        power quality issues, excluding outages.
   Cyber Security:--percent of total generation capacity under 
        companies in compliance with the North American Electric 
        Reliability Corporation (NERC) Critical Infrastructure 
        Protection standards.
   Open Architecture/Standards:--Interoperability Maturity 
        Level--the weighted average maturity level of interoperability 
        realized among electricity system stakeholders
   Venture Capital:--total annual venture-capital funding of 
        smart grid startups located in the U.S.

    A second guiding principle is transparency. It is the Department's 
intent to use every means at its disposal to keep the public informed 
of and involved in the progress of he smart grid developments. There 
are several avenues for effective communication to occur. These 
include, for example:

   Bi-annual reports to Congress, as required by the Energy 
        Independence and Security Act of 2007 (EISA) Section 1302, on 
        the status of smart grid implementation nationwide. The first 
        such report is undergoing the concurrence process and should be 
        available shortly.
   The Smart Grid Subcommittee of the Electricity Advisory 
        Committee, as required by EISA Section 1303, which has produced 
        a report, ``Smart Grid: Enabler of the New Energy Economy,'' 
        with recommendation for how OE proceeds with its smart grid 
        activities. This report can be downloaded from our website 
        (http://oe.energy.gov/DocumentsandMedia/final-smart-grid-
        report.pdf).
   The Federal Smart Grid Task Force, as required by EISA 
        Section 1303, has met every month since March 2008 to 
        coordinate Federal activities, and includes involvement from 
        Federal Energy Regulatory Commission (FERC), National Institute 
        of Standards and Technology (NIST), Environmental Protection 
        Agency, Department of Homeland Security, United States 
        Department of Agriculture, and the Department of Defense.
   The offering of ``Smart Grid E Forums'' to provide 
        information on key topics of interest through web-based 
        seminars in collaboration with utilities, state regulators, 
        consumer groups, equipment manufacturers, and national 
        laboratories and universities from across the country. Last 
        week OE sponsored its 4th such E Forum which provided 
        information on the potential role for the smart grid to enable 
        clean energy development and covered topics such as wind 
        integration and electric and hybrid electric vehicles.
   The establishment of a Smart Grid Clearinghouse to serve as 
        a central repository for smart grid project information, 
        applications, requirements, performance, costs and benefits, 
        standards, etc.

    It is the Department's intent to build on these activities and work 
closely with key stakeholders so that the Nation is working in a 
consistent direction and not at cross purposes. There is neither the 
time nor the resources to spend dealing with problems that could be 
addressed through effective stakeholder engagement and Federal 
coordination.
    For example, the Department is contributing to the efforts of the 
National Association of Regulatory Utility Commissioners (NARUC)-FERC 
Smart Grid Collaborative by supporting the development of a web-based 
information clearinghouse to share what is known about smart grid 
projects and foster better information exchange. The Department is also 
working with the Smart Grid Stakeholders Roundtable and EPA to assist 
public and private sector group to develop a common understand of smart 
grid challenges and opportunities.
    Interoperability Standards:--The Department recognizes that one of 
the major barriers to commercial success is the lack of industry-based 
standards for governing how the many different devices involved in 
smart grid, and their ability to communicate with each other in an 
efficient and secure manner, can become more interoperable than they 
are today.
    The Department has learned hard lessons over the years about the 
amount of time and effort it takes to get standards of this type 
developed, implemented, and accepted. For example, after more than 10 
years of development, there are still activities underway for full 
implementation of uniform and consistent grid interconnection standards 
for distributed energy resources. The Department understands that there 
are standards development organizations such as the Institute of 
Electrical and Electronics Engineers, International Electrotechnical 
Commission, American National Standards Institute, International 
Organization for Standardization, and the International 
Telecommunications Union who need to be involved in the process and 
that these organizations rely primarily on volunteers and contributions 
from their members to work on the standards development effort.
    The Department is committed to moving the standards through the 
development process and getting them to the point for adjudication by 
Federal and state regulatory agencies as rapidly as possible by 
implementing EISA Section 1305. The Department is working closely with 
NIST which has primary responsibility to coordinate development of a 
framework for interoperability standards, as called for n EISA Section 
1305. The Department has provided technical and financial assistance to 
NIST to support their efforts.
    Cyber Security:--The cornerstone of a smart grid is the ability of 
multiple agents, i.e. devices, to interact with one another via a 
communications network. The interaction of multiple devices, and the 
benefit that this brings to the electric power system, is what 
differentiates the smart grid from the existing system. If not properly 
protected, the smart grid could be vulnerable including:

   Breach of Availability.--Smart grid technology will include 
        an immense communications network to manage the distribution 
        infrastructure. One of the key reliability promises of the 
        smart grid is enhanced management of the grid under emergency 
        conditions. However, without proper planning, a natural-or man-
        made event could disable the communications infrastructure, 
        rendering the smart grid ineffective at coping with the 
        emergency situation.
   Breach of Integrity.--A basic service for the smart grid is 
        the ability to measure the use of electricity and transmit that 
        information to the utility for billing purposes. A cyber 
        intruder could compromise the data and send false information 
        to the utility and either lower or increase the billing, 
        depending upon the motivation.
   Breach of Confidentiality.--If a perpetrator is able to 
        access and view data being transmitted between the utility and 
        smart meters at customer premises, they could potentially use 
        that information for unauthorized or illicit purposes.

    Over the last 8 months, DOE has been working collaboratively with 
the Utilities Communications Architecture Users Group (utilities, 
vendors, et al) to develop cyber security requirements (including 
vulnerability testing through the DOE Smart Grid Test Bed) for advanced 
metering infrastructure (AMI), a key application for the smart grid. 
This work will help accelerate the development of cyber security 
requirements for other smart grid technologies. Additionally, the 
Department is currently developing the EISA Section 130-Study of the 
Security Attributes of a Smart Grid System for delivery to Congress by 
the end of the fiscal year.
    Success Stories:--Wide Area Measurement Systems (WAMS) technology 
is based on obtaining high-resolution power system measurements (e.g., 
voltage) from sensors that are dispersed over wide areas of the grid. 
The data is synchronized with timing signals from Global Positioning 
System (GPS) satellites. The real-time information available from WAMS 
allows operators to detect and mitigate a disturbance before it can 
spread and enables greater utilization of the grid by operating it 
closer to its limits while maintaining reliability. When Hurricane 
Gustav came ashore in Louisiana in September 2008, an electrical island 
was formed in an area of Entergy's service territory. Entergy used the 
phasor measurement system to detect this island, and the phasor 
measurement units (PMU) in the island to balance generation and load 
for some 33 hours before surrounding power was restored.
    The Department has also been actively involved in supporting early 
demonstration and testing of smart grid applications through National 
Laboratories and Power Marketing Administrations. For example, Pacific 
Northwest National Laboratory and the Bonneville Power Administration 
conducted a demonstration of ``Smart'' white appliances and dynamic 
pricing on the Olympic Peninsula and elsewhere in the Northwest. The 
results of that demonstration have been studied nationally and 
internationally. Building on this type of Department success is a 
priority in moving he smart grid along.
    End Goal:--The Department envisions an electric system (generation, 
delivery and use) with the capability to 1) measure and understand 
system performance on a real-time (time and location) basis; 2) model 
and analyze policy and regulatory objectives and 3) improve resiliency 
(faster response times and ability to withstand cyber attacks without 
loss of critical services).
    The Department's highest priorities are to implement the Recovery 
Plan and accelerate the development of interoperable, open standards. 
With respect to the Recovery Act, the Department is focused on 
releasing two notices of intent (NOIs) in order to implement the Smart 
Grid Investment Grant program and the Regional Demonstration Projects, 
followed by a subsequent release of formal solicitations for proposals. 
The NOIs will provide instructions regarding what types of projects 
qualify, who is eligible to be receive funding, and how proposals will 
be evaluated. The Recovery Act requires issuance of NOIs for the 
Investment Program within 60 days of enactment and within 30 days for 
the Regional Demonstration Projects. The apartment is currently on 
track to complete both NOIs prior to the respective deadlines.
    This concludes my statement, Mr. Chairman. I look forward to 
answering any questions you and your colleagues may have.

    The Chairman. Thank you very much.
    Dr. Gallagher.

   STATEMENT OF PATRICK D. GALLAGHER, PH.D, DEPUTY DIRECTOR, 
 NATIONAL INSTITUTE OF STANDARDS AND TECHNOLOGY, DEPARTMENT OF 
                            COMMERCE

    Mr. Gallagher. Chairman Bingaman, Ranking Member Murkowski, 
members of the committee, I want to thank you for the 
opportunity to appear before you today to discuss the role of 
the National Institute of Standards and Technology to enable 
interoperability of smart grid devices and systems.
    NIST is the nation's measurement science and standards 
agency. For over 100 years, NIST's world-class science has 
provided the foundation for American innovation by providing 
technical leadership, cutting-edge measurement technologies, 
and by promoting effective standards in the marketplace.
    As part of the Department of Commerce, NIST's mission is 
uniquely focused on U.S. industry. These characteristics make 
NIST well suited and ready to support the national effort on 
smart grid technology.
    Smart grid presents an exciting and yet complex challenge. 
It is fundamentally the marriage of two complex systems: the 
Nation's electrical transmission grid with modern digital 
information technology. The capability that results from this 
marriage will provide the measurements and controls to enable 
greater reliability of electrical power, and it will enable a 
host of new technologies, from distributed power generation 
from renewable sources to smart appliances that can adjust to 
market conditions. The President has repeatedly emphasized the 
importance of smart grid to achieving both of these goals.
    What is the NIST role in smart grid? Under the Energy 
Independence and Security Act, NIST has primary responsibility 
to coordinate development of a framework that includes 
protocols and model standards for information management to 
achieve interoperability of smart grid devices and systems.
    Interoperability refers to the ability of a system to work 
with other systems without any special effort on the part of 
the consumer. An interoperable smart grid will allow utilities 
and customers to purchase equipment that works smoothly, 
reliably, and securely with other smart grid systems.
    Manufacturers of smart grid equipment need assurance that 
their products will be interoperable on the smart grid network. 
Achieving interoperability requires effective standards and 
tests to measure and validate that the performance conforms 
with the standards. This is a classic NIST role.
    The Nation's present electrical grid is already a complex 
engineering marvel. There is a universe of standards on which 
the present infrastructure is based, and NIST and many other 
organizations are now assessing the applicability of these 
standards to smart grid and to identify what new standards need 
to be developed.
    The addition of information technology will greatly 
increase the complexity of this system. Many of the devices and 
appliances that will be part of the smart grid do not presently 
exist, but will be developed to meet future utility and 
customer demands. Due to its inherent complexity, there can be 
no single standard for smart grid devices and systems; rather, 
suites of standards need to be developed, and these standards 
will not be static, but they need to evolve to ensure that the 
system interoperability is maintained even as new technology is 
brought onto the grid.
    Another challenge in the effort to develop smart grid is 
the diversity of the participants in its development, use, and 
regulation. Developing the smart grid involves Federal 
agencies, State and local governments, utilities, 
manufacturers, standards development organizations, and 
consumer groups.
    Engaging all of these stakeholders is an essential 
ingredient to develop effective smart grid standards if they 
are to be adopted and used. The Energy Independence and 
Security Act specifically called for NIST to solicit input from 
a wide variety of private and public entities, for this very 
reason.
    Knowledge of the standards development process is a unique 
strength of NIST. We are viewed as an impartial and technically 
knowledgeable partner. We have a long history of working 
collaboratively with industry, standards organizations, and 
government agencies. Over the past year, NIST has formed 
stakeholder groups, called Domain Expert Working Groups, many 
of whom have not previously worked in close coordination, to 
promote the information-sharing necessary for the development 
of effective smart grid standards. We are using their expertise 
to identify where interoperability barriers exist, where 
relevant standards current exist, and where standards exist but 
are not interoperable, and, at times where the gaps exists, 
where new standards need to be developed.
    With appropriations from the American Recovery and 
Reinvestment Act, NIST will expand the public-private 
coordination framework and move more rapidly to make the needed 
progress in smart grid standards. We are working closely at the 
interagency level to develop the detailed action plans that 
will support this expanded effort.
    This coordination framework will allow us to establish 
standards development priorities--a key step--support standards 
assessments, and accelerate key standards development or 
harmonization efforts where they are needed.
    I would like to note that the process of agreeing upon 
comprehensive and effective suites of standards is hard work. 
To be effective, standards must be agreed upon, and, if 
necessary, developed with broad representation and buy-in from 
all stakeholders. While it can take time to develop the 
consensus needed for success, NIST's framework will provide the 
broad-based and expert input through an open and transparent 
process. In the long term, we believe this will save time.
    We believe that we can also maintain the aggressive 
schedule needed to meet smart grid goals. While some of the 
work can be done immediately, other aspects of this problem 
will be more of a challenge. NIST has the means and capability 
to meet it.
    Standards alone do not guarantee interoperability. They 
must be supported by conformity assessment testing to ensure 
that smart grid devices and systems that are developed based on 
the standards are truly interoperable. NIST laboratories will 
be focused on supporting this effort.
    NIST is proud to have been given an opportunity and to have 
this role in the Energy Independence and Security Act 
Legislation and under the American Recovery and Reinvestment 
Act. I want to thank you for the opportunity to testify today 
on our work. I would be happy to answer any questions the 
committee may have.
    [The prepared statement of Mr. Gallagher follows:]

  Prepared Statement of Patrick D. Gallagher, Ph.D. Deputy Director, 
 National Institute of Standards and Technology, Department of Commerce

    Chairman Bingaman, Ranking Member Murkowski and Members of the 
Committee, thank you for the opportunity to appear before you today to 
discuss the National Institute of Standards and Technology's (NIST's) 
role to enable a resilient Smart Grid composed of secure and 
interoperable devices and systems. NIST carries out this work in 
coordination with the Department of Energy (DOE) and the Federal Energy 
Regulatory Commission (FERC), both represented here today.
    The availability of clean, reliable and affordable energy is 
essential to the economic welfare and security of our Nation. We can 
improve our energy supply through increased use of new renewable and 
distributed energy sources provided that we can make them widely 
accessible to industry, businesses and consumers through the Nation's 
electric power grid. This, however, is not an easy task given the 
current state of the electric power grid.
    As stated by President Obama, we need to ``update the way we get 
our electricity by starting to build a new Smart Grid that will save us 
money, protect our power sources from blackout or attack, and deliver 
clean, alternative forms of energy to every corner of our nation.''\1\
---------------------------------------------------------------------------
    \1\ Gross, Grant. ``Obama Includes Broadband, Smart Grids in 
Stimulus Package.'' Stimulus Speech. January 8, 2009. IDG News Service. 
www.itworld.com/government.
---------------------------------------------------------------------------
    For this vision to succeed, utilities and others who are 
implementing the Smart Grid need to be able to purchase equipment in 
the marketplace and readily incorporate it into the Smart Grid so that 
it works seamlessly and interoperates with all other systems.
    Interoperability refers to the ability of a system or a product to 
work with other systems or products without special effort on the part 
of the customer. Achieving interoperability requires reliable standards 
and validated performance--that is the challenge for NIST.
    Under the Energy Independence and Security Act (EISA) of 2007 
(Title XIII, Section 1305), NIST has ``primary responsibility to 
coordinate development of a framework that includes protocols and model 
standards for information management to achieve interoperability of 
smart grid devices and systems . . . '' The American Recovery and 
Reinvestment Act provided $10 million for NIST for this purpose.
    NIST is well-suited for this role. The agency has a reputation as 
an impartial, technically knowledgeable third party with a long history 
of working collaboratively with industry and other government agencies, 
including DOE and now the Federal Energy Regulatory Commission (FERC). 
NIST also has provided measurement technology and assistance to 
utilities, equipment manufacturers, and other power-system 
stakeholders. Only through collaborative efforts with all stakeholders 
will Smart Grid solutions to the complex and layered problems of 
interoperability be adopted by the many participants--power generators, 
Independent System Operators (ISOs), Regional Transmission Operators 
(RTOs), electric service providers, consumers, vendors, etc
    The present electric power grid infrastructure is based on numerous 
standards, and many organizations are now assessing their applicability 
to the Smart Grid and determining what new standards need to be 
developed. NIST is working with these organizations to ``tie it all 
together'' so that unnecessary redundancy, conflicts, and gaps among 
the standards can be avoided and resolved. For there to be true 
interoperability, new Smart Grid devices also require testing to show 
that they conform with the standards.
    The nation's electrical grid has been called ``the greatest 
engineering achievement of the 20th century'' and ``largest 
interconnected machine on Earth.'' Due to the complexity of the grid, 
we and many others believe that there can be no single standard for 
Smart Grid devices and systems. Rather, we expect suites of standards 
to be developed for different aspects, including distributed energy 
resources (DER), demand response (DR) devices/appliances, electric 
vehicles, wide area measurement systems (WAMs), and other parts of the 
Smart Grid vision. The Smart Grid also needs to be evolutionary--
beginning with the existing energy infrastructure and evolving as new 
innovations arise and the energy infrastructure and consumer needs and 
behavior change. This means that standards, conformance tests and other 
efforts to ensure interoperability must also continue to evolve.
    NIST has begun the coordinating of the interoperability framework 
by bringing together the many stakeholders. Working in close 
cooperation with the DOE and its Grid Wise Architecture Council (GWAC), 
domain expert working groups have been established that cover key areas 
of the Smart Grid, including transmission & distribution, and 
commercial, industrial, and residential buildings. Additional groups 
and task forces to address higher-level and crosscutting issues--in 
business and policy, cyber security, and smart grid framework/
architecture, to name a few--have been initiated.
    Our goal is to bring these experts together, many of whom have not 
worked in close coordination before, to promote the information sharing 
necessary for the development of effective Smart Grid standards. We are 
using their expertise to support the framework development by 
identifying where the barriers to interoperability exist. In addition, 
we are identifying where relevant standards currently exist, where 
standards exist but are not interoperable, and where gaps exist that 
will need to be filled by new standards.
    With appropriations from the recent enactment of the American 
Recovery and Reinvestment Act (ARRA), NIST will make significant 
headway working with its team comprising of NIST staff, contractors, 
and staff from the Department of Energy (DOE), the Federal Energy 
Regulatory Commission (FERC), the Grid Wise Architecture Council (GWAC) 
and many other industry and standards developing organizations to more 
rapidly make progress in the following ways:

   Interoperability Framework/Architecture.--An initial version 
        of the interoperability framework will be developed--one that 
        will have the flexibility to evolve as the Smart Grid develops.
   Smart Grid Standards Gap Analysis and Roadmap.--We will 
        develop a smart grid standards gap analysis and road map to 
        identify critical areas and guide interoperable standards 
        development.
   Publicly Accessible Interoperability Knowledge Base.--NIST 
        plans to create a publicly accessible interoperability 
        knowledge base that will be the repository of the information 
        necessary to perform standards assessments.
   Accelerate Standards Development. With the clear picture of 
        the standards landscape and roadmap established, NIST will work 
        effectively with standards development organizations (SDOs), 
        contractors, and industry experts and other stakeholders to 
        accelerate the development of scalable, compatible and 
        interoperable standards.

    I would like to caution, however, that the process of creating good 
consensus-based standards is not easy. To develop robust standards and 
ensure their use, the standards developing groups should have broad 
representation from all key stakeholders. Achieving consensus agreement 
among such a diverse group of stakeholders can take significant time, 
particularly if the resulting standards need to be applicable 
domestically and internationally.
    Having good standards alone does not guarantee interoperability. 
Conformity assessment testing is necessary to ensure that the Smart 
Grid devices and systems developed based on the standards are truly 
interoperable. The NIST laboratories have long supported the 
development of the reference implementations of the standards for 
emerging technologies and the tests that will validate their 
interoperability.
    NIST has been providing technical support for the development of 
Smart Grid devices for several years now. These include the Phasor 
Measurement Units, devices that will enable operators to get the 
information about grid conditions that they need to limit the effects 
of disruptions and instabilities in the grid and avoid large scale 
blackouts as occurred in the Northeast in August 2003. They also 
include high-megawatt power converters that will provide the 
flexibility to readily and reliably connect alternative and renewable 
resources to the grid.
    Under the EISA, once sufficient consensus has been achieved, FERC 
will begin the rulemaking process for adopting standards and protocols. 
NIST's goal is to support this action by working closely with 
stakeholders to identify and develop the standards as quickly as 
possible based on broad participation and expert input. NIST believes 
that the most effective standards will be developed through broad input 
from experts, including industry and other stakeholders. The proposed 
approach will provide expert input through a voluntary consensus 
standards development process, while pursuing the aggressive schedule 
needed to develop the Smart Grid.
    Finally, NIST has the important responsibility to develop Federal 
Cyber Security standards. Interoperability across the electric power 
grid infrastructure will do us no good if the grid is disabled by a 
cyber attack enabled by access through the Smart Grid system. Security 
must be integrated into the interoperability framework in order to 
ensure the integrity and availability of the infrastructure and the 
privacy of Smart Grid users. The cyber security strategy for the Smart 
Grid must account for both domain-specific and common risks when 
developing interoperability solutions. Collaborative efforts will 
enable the development of the standards needed to reach our vision for 
Smart Grid interoperability.
    The following is a preliminary list of cross cutting security 
requirements for the Smart Grid that have been identified and will be 
addressed by NIST and its team:

   Identification and authentication to provide unambiguous 
        reference to system entities.
   Access control to protect critical information. Integrity to 
        ensure that the modification of data or commands is detected.
   Confidentiality to protect sensitive information, including 
        personally identifiable information (PII) and business 
        identifiable information (BII).
   Availability to ensure that intentional attacks, 
        unintentional events, and natural disasters do not disrupt the 
        entire Smart Grid or result in cascading effects.
   Security architecture to ensure that there is no single 
        point of failure.
   Conformity Assessment Procedures for Smart Grid devices and 
        certification criteria for the personnel and processes.
   Strategies for isolating and repairing compromised 
        components of the Smart Grid.
   Auditing to monitor changes to the Smart Grid.
   Supply chain security to ensure that products and services 
        are not compromised at any point in the life cycle. This is a 
        defense-in-breadth strategy.

    NIST is proud to have been given such an important role in the EISA 
legislation. We have received enthusiastic support from DOE, GWAC, and 
many industry and other stakeholders. We believe that with the 
continued cooperation and collective expertise of the industry in this 
effort, we will be able to establish the interoperability and standards 
frameworks that will enable the Smart Grid vision to become a reality.
    Thank you for the opportunity to testify today on NIST's work on 
Smart Grid interoperability. I would be happy to answer any questions 
the committee may have.

    The Chairman. Thank you. Thank all of you for your 
testimony.
    I'll start with a couple of questions. I guess one 
question, maybe to you, Dr. Gallagher--I'm not clear as to what 
kind of timeframe you're looking at here. I think you referred 
to developing this framework, as I understand it, in order to 
meet the schedule for deployment of the smart grid. I believe, 
something to that effect. What is the schedule for deployment 
of the smart grid? Are there time limits on development of 
these suites of standards that you've referred to here? What 
can we expect?
    Mr. Gallagher. I think the question of timing is front and 
center for everybody right now, and we are all changing gears 
rapidly to address a much quicker pace on this program. I think 
that there are no defined timeframe standards, at least from 
the Federal interagency process, but we do know of some very 
powerful drivers on the standards development process, 
including the fact that the grants program, that DOE will be 
managing, will be investing heavily in smart grid devices and 
technology, and that these investments make more sense when 
there is a standards framework involved.
    What NIST is focused on doing is basically accelerating the 
process by which the standards development can occur. In other 
words, the convening and the priority-setting. The actual 
standards development work is going to be a process that takes 
place largely in the private sector, with standards development 
organizations, with utilities, with all the stakeholders. The 
duration of those processes will depend on the complexity of 
the specific problem. In some cases, it will occur very 
quickly--months--and in other cases, if it's technically very 
challenging, it may take considerably longer.
    But right now what's desperately needed is a overall 
roadmap; in other words, a coordination effort by which we can 
establish which standards in this complex suite of issues are 
the most important to address right away, which ones affect 
regulatory concerns or technical challenge, and to basically 
provide that coordination to the community.
    The Chairman. Do you have an idea--if what is needed is 
this roadmap, when will the roadmap be completed?
    Mr. Gallagher. The roadmap is under development now. We 
were beginning that work even before the Recovery Act funding. 
We hope to have an initial draft of the roadmap by this summer, 
working with the community.
    The Chairman. OK. So, initial drafts and--when would it be 
sufficiently final that, say, FERC could--as I understand it, 
you've got to complete this roadmap, so-called ``framework,'' 
and then FERC and other agencies have to then move and adopt--
do a rulemaking to adopt standards. When would the roadmap be 
sufficiently finalized that FERC could go ahead and begin to 
adopt a standard?
    Mr. Gallagher. I don't want to answer for FERC, but it's my 
understanding that what FERC would need in rulemaking is 
basically, what makes it powerful to them is a standard that's 
widely adopted and used in the community. In other words, it's 
the level of consensus surrounding a given standard that makes 
it appealing, that it is useful in the rulemaking process for 
regulations, because it basically allows their rulemaking not 
to address the formation of a specific standard.
    So, I don't believe that this roadmap is directly tied to 
the progress FERC needs to make. What the roadmap is really 
designed to do is--the smart grid itself is so complex; we have 
transmission and distribution, we have devices, we have demand 
response, we have all of these various subsystems in the smart 
grid that there's a bit of a jam right now, in terms of which 
specific standards are most urgent to move forward. The roadmap 
basically provides that coordination. The timeframe that FERC 
needs to look at is the actual specific standards in their 
regulatory area that are out there and have reached a level of 
maturity where they believe it's suitable for rulemaking. At 
least that would be my understanding.
    The Chairman. Commissioner Kelly, did you have a 
different--a thought on that?
    Ms. Kelly. Yes, thank you, Mr. Chairman.
    Dr. Gallagher is correct--we believe that the first step is 
to come up with a roadmap, and that means prioritizing the 
development of the standards. NIST is in charge of putting 
together the standards development organizations and attempting 
to get as much consensus around proposed standards as possible. 
We believe that that process really has to be driven and 
managed so that it doesn't just meander. We are very optimistic 
that, with the stimulus bill's funding of $10 million for NIST, 
that they will now have sufficient resources to be able to do 
that. We are working with them, and will continue to work with 
them, to provide input on how the standards development process 
should be prioritized, and also to help give them information, 
based on our day-to-day understanding of the electric industry, 
about how to move forward. But, we are anxious that it move 
forward with some urgency, and we do believe that NIST agrees 
with us.
    The Chairman. Senator Murkowski.
    Senator Murkowski. Thank you.
    I mentioned Dr. Chu's comments about the lack of standards 
being the greatest bottleneck, and he suggested that we lock 
people up in a room and tell 'them to come out with a standard 
in a few weeks. Based on what you've just told us, Dr. 
Gallagher, and confirmed by you, Commissioner Kelly, you're 
probably not going to be able to come up with standards in a 
week or so, even if you were to be locked in a room.
    But, it does certainly present the question. There is a 
great deal of funding--Federal funding out there now for NIST 
for implementation of the smart grid. Should disbursal of these 
stimulus funds be contingent on development of the standards 
and protocols? I mean--what I'm concerned about is 
obsolescence. We go ahead and we direct hundreds of millions, 
perhaps even billions, of dollars, but if we don't have the 
standards and protocols in place, we spend it, but we don't 
have the systems, the interoperability, that we had hoped for, 
and now the money that we have spent is on obsolete systems, 
and, to a certain extent, we're starting all over again. Is 
there some prioritization of this funding that we might be 
considering?
    Commissioner Kelly.
    Ms. Kelly. Thank you, Senator.
    We believe that there are some safeguards that can and 
should be put into place by DOE, in acting on these 
applications, that would ensure or minimize to a great extent 
the risk of obsolescence. That's basically that the 
applications deal with the open architecture issue.
    Short of standards, technology can be developed that is 
open, if you will. It may not be plug-and-play, but if it can 
upgraded with--relatively easily, at relatively little cost, it 
may be open enough to be approved.
    But, the point you raise is an important one. We don't 
think that we have to wait until standards are promulgated, but 
we do think that addressing the issue of how open the 
architecture is, or the technology that's proposed, is 
something that's very important.
    We also believe that some of the demonstration projects can 
help with standards development, because some of the standards 
and protocols that are being discussed--there isn't consensus 
around them, because, in part, they haven't been tested. So, 
the demonstration projects could help further the standards 
process, if it's handled appropriately.
    Senator Murkowski. So, Dr. Ghallagher [sic], is this what 
you were referring to when you said that the standards would 
not be static?
    Mr. Gallagher. That's correct. I think that anytime you're 
developing standards in a realm where the technology itself is 
rapidly evolving--and I think some of the demonstration 
projects that will be funded through the DOE program are 
designed to basically push the technology forward--
interoperability in this environment is difficult because you 
can't write a standard against a technology that doesn't exist 
yet. So, this issue of extense-ability and extend-ability of 
the standards to preserve the upgrade-ability of the devices is 
going to be a key component.
    Senator Murkowski. Let me ask you, Ms. Hoffman--you 
mentioned the information clearinghouse is going to make this 
smart grid data available to the public. How does DOE propose 
to undertake this responsibility, just in terms of the 
information that is out there? How do we deal with the privacy 
concerns?
    Ms. Hoffman. In implementing the clearinghouse, what the 
Department of Energy plans to do is release a solicitation 
asking for competitive bids for an organization to manage the 
clearinghouse and to have it Web-based. We have worked with 
FERC and NARUC to develop a consensus of what types of 
information should be placed in the clearinghouse in order to 
evaluate costs and benefits of each of the different smart-
grid-type demonstration projects, so there can be a consistent 
framework or architecture for evaluation of the different 
projects. Those are our initial thoughts on what we plan to do 
with implementing the clearinghouse.
    Senator Murkowski. Question for all three of you. Is NIST 
the right entity to deal with the interoperability framework? 
Dr. Gallagher, you said you're ready to take it on. You've been 
given the task, you've been given the money. Are you the right 
entity?
    Mr. Gallagher. I think the answer to that question, from 
our perspective, is yes, but it's not, in the sense that we 
were a smart-grid agency ready to be deployed. What we are is 
an agency that has a long track record of working on standards-
related issues, including interoperability of standards; for 
example, in health IT, in computer security standards. It's not 
so much not just the technical expertise within NIST and our 
laboratories, but it's also our ability to work--we have a long 
track record of working effectively with standards development 
organizations, of understanding how to coordinate Federal 
involvement in standards, and we believe this positions us 
somewhat uniquely.
    But, I would say it's not a question of NIST doing this 
alone. I take most seriously the language in the EISA Act, that 
NIST coordinate. This has to be intrinsically an interagency 
process, and that the governance and priority- setting has to 
be done in concert with DOE.
    Senator Murkowski. Commissioner Kelly, you agree?
    Ms. Kelly. Yes, Senator, I agree. We believe that NIST does 
have the in-depth expertise to handle this task, and also, it 
does have established relationships with standards-development 
organizations, including international ones. In particular, 
attempting, at this point, to transfer the task to another 
agency would cause delay. As I mentioned before, the $10 
million that the stimulus bill provides in funding for the 
standards development work should enable the process to be 
accelerated, which is what we would like to see; we would like 
to see it accelerated. We think that we can play a very 
constructive role, as Dr. Gallagher mentioned, providing 
information that we have, that NIST doesn't have, about the 
technology and the day-to-day workings of the industry.
    Senator Murkowski. My time is up. Did you want to add 
something, Ms. Hoffman?
    Ms. Hoffman. Yes, very quickly, Senator. I agree with, and 
I concur with, the statements that were said earlier.
    One other point is, we do need to be able to bring things 
to closure, to be able to adjudicate, to be able to actually 
get acceptance of the standards, with FERC and the States, just 
to bring things to closure, to keep things moving.
    The Chairman. Senator Cantwell.
    Senator Cantwell. Thank you, Mr. Chairman. Thank you for 
having this hearing this morning.
    I was looking at the statute, section 1305, which is called 
a Smart Grid Interoperability Framework. I'm noticing, 
thankfully--remembering, thankfully, how much we wrote that 
word ``framework'' into that language in the section, because, 
listening to the testimony this morning--and I think--
Commissioner Kelly, I think you even have a section where you 
talk about open architecture, which--I think, Dr. Gallagher, 
what we're really talking about here is APIs, right? We 
certainly want open standards, but we want, you know, 
application program interfaces so that various technologies can 
talk to each other. Is that correct?
    Mr. Gallagher. I think that anytime you're including 
looking at digital information technology being added to 
something, the communication interfaces and protocols are going 
to be at the heart of that system.
    Senator Cantwell. I'm comparing that to the difference 
between open architectures, which means, you know, opening up 
someone's entire architecture; you don't care what someone's 
architecture is, as much as it can communicate with other 
companies and that there's a protocol that can do that. We've 
had a lot of confusion in the stimulus bill about this issue, 
and so, I want to make sure that we're clear this morning.
    Mr. Gallagher. Yes, I think our position is that this has 
more to do with the characteristics of the standard both being 
flexible, uniform, and technology-neutral; in other words, not 
having proprietary lock-in as part of the standards, that's 
correct.
    Senator Cantwell. Wouldn't you say that a lot of the 
standards bodies that are referenced in the statute--they are 
like IEEE and others--you know, are pretty good organizations 
for helping us get this done?
    Mr. Gallagher. Oh, I think there's no question. In fact, I 
think, in the United----
    Senator Cantwell. That we might even impede them sometimes?
    Mr. Gallagher. I think so, and I think they don't like to 
be held back. I think, in the United States, we have a long 
track record of having standards developed in the private 
sector. The NIST role is not to take over their role. We 
basically want to harness that energy and ability. The issue 
has been the priority-setting and coordination. We believe 
that's been the missing piece.
    Senator Cantwell. So, we have to figure out how we can do 
that in this particular instance, because I think there's a lot 
going on with the technology in the private sector that 
probably is already coordinated, to a certain degree. Anyway, 
I'd just go back to the point that it is about a framework, and 
it is about APIs and open standards, as opposed to open 
architectures; that being an important point.
    Another issue is, as it relates to, say, for example, like, 
wireless meters, you know, there's a certain element here that 
the packets of information are so small, it's not really cost-
effective to do, you know, on an Internet protocol. Is that 
your understanding?
    Mr. Gallagher. I don't have a specific understanding on 
that issue, at this point.
    Senator Cantwell. OK. I think that's something else that we 
also--because, again, there was a lot of discussion in the 
stimulus about, you know, an IP architecture, where, you know, 
there's--which is great for a lot of data to flow--may not be 
as cost-effective for a small amount, a packet of information. 
So, that's why these networks that are already there are 
working effectively. So, we need to keep our eyes on that.
    I think this discussion we've had here, and I'm sure the 
next panel will have a lot of input, and so, I look at it, and 
I think, OK, coordinate with IEEE and others, and make our way 
down this road, leaning on them, but the one thing that we can 
do, the one thing that we have to really think about, is rate 
recovery. Commissioner Kelly, you touched on it, and others. 
That's a key issue here. That's the stumbling block. We look at 
this issue from weatherization, and we say, yes, invest in 
weatherization now; it's costing you some money, and you save 
money in the future. Yet, the same principle is here. The same 
principle of smart metering, from an investment perspective, is 
``Invest now, and you're going to get a return.'' So, how can 
we do a better job, as policymakers, on this greater recovery 
issue, and flatten this so that we can make this energy-
efficiency platform happen at a more rapid rate?
    So, Commissioner Kelly.
    Ms. Kelly. Yes, Senator. You raise an excellent point. The 
demonstration project, and the funding of it, I think, is a 
real opportunity to advance this, because, with the 50-50 
match, it will give an incentive to spend the money and recover 
the outlay for the utility. I think what we anticipate seeing 
is a real demonstration of the benefits, and that the benefits 
justify the cost.
    At the transmission level, it's easier for us to do that, 
frankly, than at the distribution level, because some of the 
benefits at the distribution level are, as yet, unknown, and 
it's unclear exactly how the interfaces will work with 
consumers, and what the consumer acceptance will be, and the 
consumers' ability to respond. I think the demonstration 
projects will help establish that.
    Senator Cantwell. Anybody else on that point?
    No? OK, I guess I'll save my follow up for the second 
panel, on this point.
    But, Mr. Chairman, I actually think that this is--I think 
this rate-of-recovery issue is one that we need to spend more 
time thinking about. So, I thank you for the hearing.
    The Chairman. Thank you.
    Senator Corker.
    Senator Corker. Very good. Mr. Chairman, thank you for this 
hearing. Thank each of you for testifying.
    I have to say that the smart grid is interesting to me. OK? 
I can see some tremendous benefits, and, at the same time, we 
sort of live in this world right now where, you know, quote, 
``capitalism has failed,'' and we're going to kind of make 
everything happen from this central government. This one 
doesn't seem quite as concerning as some of the other things 
that I've heard throughout the last several weeks. But, what is 
your greatest fear? I mean, as you look at this, at the smart 
grid--and I can see all kinds of benefits, if this is done 
properly--what is--as you step back away from it, and maybe 
somebody else occupies or your position in a couple of years, 
and maybe they make a huge blunder of this--what are your 
biggest concerns? Each of you. Briefly. Thank you.
    [Laughter.]
    Mr. Gallagher. That could be a long list.
    [Laughter.]
    Mr. Gallagher. Thank you. I have a number of concerns, but 
I think going narrowly to the position of trying to establish 
an effective mechanism because what NIST is talking about is 
putting together the machinery that makes the standards 
development activity work very effectively--is basically making 
sure that all the players are brought to the table. The concern 
is that you have, in some cases, the technology moving forward 
in some areas already--States, localities, and so forth--and we 
want that type of innovation; and yet, it can start to jam the 
ability to get people together to reach consensus. We think 
that everyone understands the urgency to work together, because 
the entire system depends on reaching a broad agreement about 
how these devices will work in concert with each other. That's 
really what makes smart grid smart, is the ability of these 
systems to work together.
    So, NIST can work with DOE, we can convene, we can help set 
priorities, but the real pace of this is going to be set by the 
willingness of this entire sector--the utility companies, 
consumer groups, industry, manufacturers--to work effectively 
together. I think they're up to it, but I think that's the 
concern. That's really the major issue I think about.
    Senator Corker. OK, thank you.
    Ms. Hoffman. Following on with what Dr. Gallagher said, my 
concern is that we may miss an opportunity if we don't 
adequately integrate the technology with the policy options--
i.e., for consumers you can have a smart meter, but you need to 
have an innovative rate for the consumers to help them, educate 
them on their consumption. It's not just energy efficiency, 
it's energy management at the consumer level. So, my concern is 
that we don't miss any opportunities to educate the consumers 
to advance energy efficiency to the next level, to advance the 
intelligence on the transmission system, that we can have 
faster recovery and resiliency on the system.
    Senator Corker. Commissioner.
    Ms. Kelly. Thank you, Senator.
    Our first concern is security and cyber-security, and we 
want to ensure that, with the two-way communication capability, 
that the security is retained.
    Our second concern is the possibility of stranded costs and 
obsolescence, but we think that, with the appropriate emphasis 
on openness for the demonstration projects, that that concern 
will be minimized or eliminated.
    Then, the third concern is, Will the benefits to the 
consumer actually be able to be demonstrated? There are a 
number of things that have to come into place to ensure that 
that happens, including that the information that the consumer 
needs is readily available and that the ability of the consumer 
to respond with demand response is available.
    Again, we think that, with the appropriate handling of the 
demonstration projects that DOE has money to implement, that we 
can achieve those objectives.
    Senator Corker. So, I look at the stimulus bill. I know 
that has $4 and a half billion in there. I've watched the 
healthcare situation. I think all of us scratch our head to 
look at a healthcare system that doesn't have a standard 
technology where everybody talks with each other. I mean, it's 
been the most frustrating thing, I think, that most of us have 
looked at in that industry. So, I can see why developing this 
framework in advance is important, before people get sort of 
married to certain types of software and hardware.
    So, on the stimulus bill, does it not make sense for you 
all to sort of finish that before money starts being spent on a 
smart grid, in that, aren't we simultaneously creating a 
problem for ourselves? It's not as massive as we have in the 
healthcare system, but that part doesn't make a lot of sense to 
me.
    Since my time's running out and I won't be able to ask 
another question, also, How important is this to 
transportation? To me, it seems like it might be very important 
down the road.
    But, I'd love any answers along both those lines, if the 
Chairman will let you answer.
    Ms. Hoffman. I think it's very important to implement the 
$4.5 billion in the Recovery Act, especially the demonstration 
projects and such, to get that moving further along, as 
Commissioner Kelly has already brought up. It will provide us 
great insights along with some of the existing projects 
currently going on, into, what are the costs, what are some of 
the benefits, and what are some of the hurdles that we need to 
plan for.
    Ms. Kelly. Senator, I would agree with Ms. Hoffman that we 
can ensure a minimum risk of obsolescence and stranded costs if 
the applications are evaluated with an eye to their openness 
and their ease of upgrade-ability with minimum cost.
    Mr. Gallagher. Yes, I'm going to answer the question from a 
different perspective. Speaking as somebody looking at the 
standards development process, while it's desirable to lower 
the risk of these investments by having the standards in place 
first and making it a precondition, two things make that not 
necessarily the right approach.
    One is, we want to see the innovation coming out of these 
projects, because they will, in essence, drive some of the 
standards work itself. But, the other issue is that it can turn 
the priority-setting around. In other words, the priorities can 
become about which standards need to go out to release funding 
to do specific things, rather than which standards need to go 
out to basically promote the overall interoperability of the 
system. So, we believe that the priority-setting process within 
the standards development framework needs to be driven by this 
major goal of making sure the system is interoperable, and not 
necessarily according to other criteria.
    The Chairman. Senator Dorgan.
    Senator Dorgan. Mr. Chairman, I was on the floor of the 
Senate, so I missed the presentations. However, I've had a 
chance to read some of the testimony.
    My colleague from Tennessee asked the question about 
government involvement. Let me ask it in a different way. What 
if smart grid, as a terminology and as a point of discussion 
with respect to government policy, just takes a complete 
backseat. I know we've got money out there in the stimulus 
bill, but let's assume that this is not about government, but 
about companies deciding what they want to do in their own 
interest. What would become of what we now call smart grid 
initiatives?
    Ms. Hoffman.
    Ms. Hoffman. From my perspective, it would still move 
forward, but at a slower pace. Currently, I believe FERC 
estimates there are 7 million meters out there. I know that a 
recent report from KEMA estimates, that by 2015, they're going 
to see approximately 30 million meters come out in the 
marketplace. I do believe the technology will move forward. The 
question is how can we coordinate as Federal agencies to make 
sure that we have the most open architecture possible and that 
we actually can advance the state of communication and 
capabilities within the United States.
    Ms. Kelly. Senator, I would say that one of the differences 
here is that we have a regulated industry, versus deployment of 
technology in a competitive market without regulated 
industries. Because we have regulated industries, we have a 
couple of gatekeepers. We have the utility, which is a 
gatekeeper, and we have the Federal and State regulators, which 
are gatekeepers. That process makes the deployment of advanced 
technology in the sector much slower.
    So, providing stimulus money helps cut through that and 
enables--and the other thing I guess I was going to say is that 
those gatekeepers, particularly the utility, when it spends 
money on smart grid technology, the benefits don't necessarily 
accrue entirely to the utility. So, it's--having a stimulus 
funding helps them get over that hurdle.
    Senator Dorgan. Yes. In many ways, smart grid is kind of at 
odds with the traditional concept of a utility company. A 
utility company is in place to sell electricity for the benefit 
of its shareholders and to earn a profit. One would expect that 
better performance is measured by better sales and more sales. 
However, smart grid is, in many ways, about more efficient use 
and conservation. The CEO of Duke Energy, James Rogers, for 
example often speaks before our committee about the basic model 
of our system.
    Let me ask a question about Xcel Energy's Boulder Smart 
Grid City initiative. What is happening with respect to a 
demonstration project, like Boulder, and the interaction 
between the folks that put that project together and the folks 
that are developing standards? What kind of interaction exists, 
at this point?
    Mr. Gallagher. I don't have specific names, but I know that 
the NIST folks who are working on the standards development are 
working with the city of Boulder, in terms of their 
demonstration projects. That's true of many of the areas where 
these demonstration projects are going on, we are actually very 
interested in these demonstration projects, and want the people 
involved with them to be involved in the standards development 
effort.
    Senator Dorgan. Ms. Hoffman.
    Ms. Hoffman. The Xcel project looks at different aspects of 
the smart grid, from the smart home to the smart city. So, what 
it does is, it provides some insights on the different 
technologies that are used at the home which will allow some of 
the standards to be developed with respect to communicating 
with a hybrid vehicle or with other home area networks. It 
provides insight, as well as feedback, into the development of 
the standards, as required.
    Senator Dorgan. Dr. Gallagher, you talked about 
cybersecurity some. I had a CEO of a major corporation meet 
with me, within the last 2 weeks, who talked about your company 
setting up a computer with the substantial protections and so 
on. They did it as a demonstration to find out what kind of 
attacks were going to be coming against that computer. Within 
24 hours, of establishment, there was an attack against that 
computer. They traced it to an eastern European company, which 
was traced then to an African country, and then they lost the 
trace. But, there was still an attempt to infiltrate that 
computer. So, the issue of cyber-security is really important. 
Should there be demonstration projects that deal with cyber-
security----
    Mr. Gallagher. I think there's----
    Senator Dorgan [continuing]. As we put together smart grid?
    Mr. Gallagher. I think there's absolutely no question that, 
when you combine digital information technology into a system 
that's controlling and moving electricity, that the security 
implications are enormous. The way I view it is, the 
information security has to be built in. It's the very 
foundation of these standards. It can be, not only in the 
demonstrations, in terms of looking at vulnerabilities in those 
deployed demonstrations, but it's a key part of the conformity 
assessment piece. In other words, you have to have the ability 
to test these systems to make sure that they're complying with 
the standards, including the security standards.
    Senator Dorgan. If I might just make a comment, as my time 
is up, that I think the two barriers on smart grid have been 
described as the standards, both technology standards and 
interoperability standards. I think Senator Cantwell talked 
about that. The second, I referred to in my first question; 
that is, the need for regulatory reform and incentive 
structures. Because the existing model, is a model largely--it 
has been, for decades--to sell more and increase your revenue--
this actually is counterintuitive to that model. But, there are 
a number of utility companies--I mentioned Xcel and Duke--that 
are very interested in helping us and working with us to change 
that model, which I think is refreshing, as well.
    Let me thank the panel.
    The Chairman. Senator Barrasso.
    Senator Barrasso. Thank you very much, Mr. Chairman. I want 
to thank the members of the panel. I apologize for missing the 
presentation.
    Mr. Chairman, I want to thank you for the leadership that 
you showed this morning on getting Tony Blair and others here 
to discuss the issues of global climate change, energy, and 
those needs. I thought it was very productive. One of the 
things we discussed was smart grid and the need to have that 
kind of interaction and opportunity and technology.
    So, as we talked about energy and the economy and the 
environment, all together, smart grid is an important part of 
that. Obviously, deploying this is going to require significant 
cost. When you turn on the news and find, now, 27 percent of 
Americans are having a hard time sleeping because of the 
economy, the question is, What are the costs going to be, and 
what's the impact going to be, on the users, and what those 
expenses are going to be? Are there thoughts of that? Someone 
mentioned the idea of informing the consumer, educating the 
consumer. What's being done about that?
    Ms. Kelly. Senator, through the regulatory process, there 
has to be approval by the Federal regulator, for smart grid 
advancements to the transmission system, and the State regular, 
for smart grid advancements to the distribution system. As part 
of that process, the cost-benefit analysis is required to be 
demonstrated. The clearinghouse, the information clearinghouse 
provisions that you added to the stimulus bill, will help us in 
this effort, because we don't always fully understand what the 
benefits are likely to be, because it's new technology, and it 
hasn't been deployed, and it hasn't been used by consumers. 
But, the point that you make is a critical one. We have to have 
a benefit, and be able to show consumers a benefit for the 
investment.
    Senator Barrasso. Yes. Ms. Hoffman, you had mentioned the 
stimulus package, and there was a front-page story in the Wall 
Street Journal, ``Next Challenge On Stimulus: Spending All That 
Money,'' and they specifically talked about the Department of 
Energy. It says, ``The new Energy Secretary says he'll have to 
transform how parts of his agency work if the President's--if 
the President's stimulus plan is to succeed.'' This goes on, 
and there's a picture of the new Secretary with the President; 
talks about, ``DOE is going to have to dramatically change how 
it does business if it hopes to push all this money out the 
door,'' said a former senior Energy Department official who--it 
says, quote, ``They're going to need more people, more 
oversight, and more freedom to waive regulations.'' Could you 
talk about what's going on in that area, please?
    Ms. Hoffman. Thank you, sir.
    The Secretary has made a statement, even within the 
Department, that we are going to put the resources necessary to 
implement all aspects of the stimulus bill at the Department of 
Energy. We are looking at accelerating as many processes as 
possible with respect to the smart grid legislation. We are 
trying to get more information out to the public sooner, so 
that they can plan for projects, proposals, and submissions in 
a timely fashion. We plan to release funding opportunities for 
smart grid activities shortly. From that point, we hope to 
teach potential applicants faster, as well as through the Web 
site, grants.gov, and get them engaged in the process so that 
they're informed and we can expedite implementation.
    Senator Barrasso. This article goes on to say, ``The 
Department has a history of delays, of letting--and of letting 
costs spiral.'' It says, ``The Energy Department has missed 
deadlines and misjudged the cost of projects before.'' It said, 
``Mr. Chu has heard an earful about such delays,'' and he says 
he's talking to officials at other agencies that he says have, 
quote, ``a better track record of getting financial aid to 
companies quickly. Some of these agencies' employees could be 
temporarily reassigned,'' it says, ``to the Department of 
Energy to help it mete out the funds.'' Are you doing things 
along those lines yet?
    Ms. Hoffman. Yes, sir. The Secretary is looking at all 
possible avenues, as well as talking to other agencies, and is 
looking at bringing folks onboard to help implement the 
program.
    Senator Barrasso. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Thank you very much.
    Dr. Gallagher, let me just ask if you could, maybe, provide 
us with something. In your testimony, you talk about suites of 
standards to be developed for different aspects of this smart 
grid, including distributed energy resources, demand-response 
devices, appliances, electric vehicles, wide area measurement 
systems, and other parts of the grid. You also talk about the 
various standard-setting organizations, or standards 
development organizations, SDOs. Could you give us sort of an 
inventory--I don't mean right now, but I mean submit it to us--
as to what the different standards are that you currently think 
will need to be developed and what the organizations are that 
would logically be involved in the development of those?
    Mr. Gallagher. Yes, we'd be happy to provide both the 
structure of why we set this framework up in these areas, 
identify the standard suites that we envision, and, to the 
extent we know them at this point, the standards that are 
involved in each of those areas. We'd be happy to----
    The Chairman. That's great. As I understand it, this draft 
framework you're talking about having this summer will at least 
begin to prioritize which of these standards have to be done 
first and what the timeframes are. Is that accurate?
    Mr. Gallagher. That's accurate. The idea is to provide the 
coordination so we can decide what's most important to move 
forward.
    The Chairman. Yes. That would be very useful, I think.
    Senator Murkowski, did you have anything else from this 
panel? We have a second panel.
    Senator Murkowski. Just very, very quickly. This follows up 
on Senator Barrasso's comments about the cost. There was an 
article in the Wall Street Journal, just a week or so ago, 
speaking to the effort in Boulder, Colorado. It was very 
interesting reading. You know, you think about Boulder as a 
pretty innovative community looking to take on some cutting-
edge things, and the comments about just how people were 
dealing with a smart grid capability within their home, and 
what it meant, I think--the comment that struck me was the--was 
that of the head of the university, or the president of the 
university, and his wife. You would think that these would be 
some pretty progressive people. It's going to be a challenge 
for us to really educate consumers as to, How do you take 
advantage of this? Because if you don't take advantage of it, 
you're going to be billed for it, and you're not going to be 
seeing the benefits.
    So, haven't really heard as much this morning about how 
that outreach will actually work, how this information 
clearinghouse is actually going to work. I do hope that we will 
be aggressive, and we will be aggressive before things are put 
in place, because then you're just going to be playing catch-up 
with people. So, I would hope that, within the Department, that 
effort, as far as public education and how we transmit this 
information, is really a very aggressive one.
    Ms. Hoffman, do you care to comment on that?
    Ms. Hoffman. Briefly. The Department has been appropriated 
$100 million for work force training and education as part of 
the Recovery Act, and we will make an effort to help consumers 
better understand the smart grid, and the benefits and the 
costs as part of that.
    Senator Murkowski. Thank you, Mr. Chairman.
    The Chairman. Senator Shaheen, we're through with our 
questions of this panel. We have a second panel coming on, 
here. Did you want to ask some questions of this panel?
    Senator Shaheen. No, I'll wait.
    The Chairman. OK.
    Thank you all very much for your testimony, and we will 
stay in touch.
    I'll call the second panel forward. We have The Honorable 
Frederick Butler, who is the head of the National Association 
of Regulatory Utility Commissioners--he's the president of that 
organization this year, as I understand it; Edward Lu, who is 
with Google, Inc.; Katherine Hamilton is with GridWise 
Alliance; and Evan Gaddis, who is with the National Electrical 
Manufacturers Association. So, thank you all for being here.
    I think if we could follow the same basic procedure with 
this panel and each of you take maybe about 6 minutes and tell 
us the main points you think we need to understand, and then we 
will have a few questions.
    Why don't we start with you, Fred, if you would go ahead 
and give us the perspective of the National Association of 
Regulatory Utility Commissioners.
    Thank you.

     STATEMENT OF FREDERICK F. BUTLER, PRESIDENT, NATIONAL 
  ASSOCIATION OF REGULATORY UTILITY COMMISSIONERS, NEWARK, NJ

    Mr. Butler. Thank you very much, Senator. Good morning, 
Senator Bingaman and Senator Murkowski, members of the 
committee.
    My name is Fred Butler, and I am a member of the New Jersey 
Board of Public Utilities. I also serve as president of the 
National Association of Regulatory Utility Commissioners, 
NARUC, on whose behalf I'm testifying here today. I am honored 
to have the opportunity to appear before you and to offer our 
State's perspectives on smart grid.
    We have submitted testimony, which I hope will go into the 
record, and I will summarize our views for you.
    My message is simple: the timing and deployment of smart 
grid is the key here, and that we don't think we should put the 
cart before the horse. As a State regulator in New Jersey, and 
as co-chair of the national board of the FERC-NARUC 
collaborative studying smart grid issues, I'm convinced of the 
smart grid's potential to revolutionize how energy is delivered 
and consumed. I know the smart grid can change how utilities 
oversee their networks and improve reliability. I know that 
consumers could have greater control over their usage and have 
potential to conserve energy and lower their carbon footprint 
and lower their bills. I also know that if we do not do this 
correctly, in terms of implementing this, we can endanger our 
coming even close to meeting any of those lofty aspirations.
    The benefits of the smart grid are obvious, and we must be 
sure that we move deliberately so that the costs of rolling out 
the necessary infrastructure are borne by those who will 
benefit. This means that we should not focus immediately on the 
end user; rather, we must start with the backbone, the 
transmission and distribution systems themselves, while 
proceeding carefully to go inside consumers' homes.
    Our Nation's energy problems will not be slain by a silver 
bullet, but rather by what's been referred to by many, and 
what's become one of my mantras, the silver buckshot. This 
includes building some new transmission, encouraging renewable 
resources, promoting efficiency, resolving the nuclear waste 
storage problem, and developing new technologies.
    Meanwhile, achieving the ultimate goal of reliable service 
at a fair and reasonable price is becoming harder in this era 
of rising costs. There's a high probability that, within the 
next 3 to 10 years, all electric consumers will be facing 
higher bills due to increased costs driving rate increase, new 
environmental regulations, and other factors. I mention this 
right now because some of us are selling the smart grid as that 
silver bullet that will empower consumers to lower their usage 
and, correspondingly, their energy bills. While this may 
ultimately be the case, we must learn from electricity 
restructuring experience that many States have had.
    The promise of restructuring is that consumers would save 
money by shopping for power. In many States, rates were cut 
and/or frozen for a set number of years so that, at the outset, 
the structuring seemed to be a success. The 2000-2001 western 
energy crisis prompted many to rethink this approach. Instead 
of lower prices, consumers saw their rates skyrocket as 
utilities were forced to buy electricity through the volatile 
spot market, which we later found out was being manipulated. 
Also, in Illinois and along the East Coast, starting in 2006, 
when the rate caps expired in Maryland and, to a certain 
extent, in Delaware, ratepayers and politicians led a mutiny 
that nearly resulted in the demise of the States' public 
service commissions in those jurisdictions. The problem was not 
restructuring, per se, but the way it was sold to consumers; we 
promised too much and we delivered too little. Because of this 
approach, the concept of restructuring has taken a significant 
hit. We cannot make the same mistake with the smart grid. If we 
want to make the biggest impact, we should focus on the 
operational side first, before moving to the end-use consumers.
    Many have extolled the virtues of how an updated 
transmission system will give grid operators a much better view 
of their transmission and distribution network. New 
technologies can be installed on distribution poles in 
neighborhoods, and on those lines themselves, to give advanced 
warning of an imminent power system failure. A modernized grid 
can help utilities lower costs by avoiding some outages, 
reducing the need for sending out trucks to read meters or 
restore power. Business operations can be streamlined, 
reliability can be improved, and money can be saved.
    The question of who pays is of utmost importance, and with 
consumers already being challenged because of rising rates and 
the economic downturn, we must be careful before putting more 
on their plate. In this case, starting with the backbone means 
the initial investments would be paid for mostly by the 
utilities themselves, as they will be the largest initial 
beneficiaries. Meanwhile, advanced meters, and the applications 
they enable, can be deployed strategically in pilot and 
demonstration projects, thus proving the benefits to those end-
use customers.
    The second part of smart grid should be implemented by and 
at the State and local--by a State and local effort. In my 
experience, I've found that a key component for an initiative 
such as smart grid is public outreach. We must use Federal 
resources and State resources to explain to consumers that a 
new smart grid program is worthwhile. Most State commissioners 
understand the benefits of advanced-metering infrastructure and 
time-of-use rates, but most consumers do not. Because these new 
programs will need new rate structures, States must be sure 
that consumers will embrace the technology and tolerate the 
initial investment. You can't have a smart grid and dumb rates. 
So far, this is only occurring in a few States.
    In terms of where we go from here, a good place to look is 
at the work we've done with the NARUC-FERC smart grid 
collaborative, which I co-chair with FERC Commissioner Suedeen 
Kelly. As this is an issue that cuts across both wholesale and 
retail energy markets, the dialogs we are initiating through 
this process will help us all as we move forward. The 
collaborative has met three times since its February 2008 
inception; most specifically, at NARUC, the winter meeting, 
recently, last month. In my role as co-chair, I have spent a 
considerable amount of time getting up to speed on different 
technologies and pilot programs throughout the country. This 
collaborative is analyzing these pilot and demonstration 
projects, such as the Boulder, Colorado, Smart Grid City, to 
see what works and what doesn't.
    Smart meters are not cheap. Right now we're talking about 
approximately $150 to $200 per meter. So, we must be careful in 
forcing anyone to upgrade if they are not willing and if 
they're not ready.
    Pilot programs must be structured to create the buzz, 
create the interest in the possibilities that exist, and a 
certain level of excitement, not a taxpayer revolt--or, a 
ratepayer revolt.
    In addition, there should be large-scale demonstration 
projects that cover a larger geographic area, that reflects a 
microcosm of the country at large, including different incomes 
and different education levels.
    Smart grid can be successful, provided that we have Federal 
and State governments working in concert with one another as 
partners, not working in contrast as adversaries. The challenge 
before us is great. The technology and the potential benefits 
are exciting.
    I respectfully request that this committee and this Senate 
recognize and respect the unique roles of the Federal and State 
governments and enable us to work together toward a truly 21st-
century electricity delivery system.
    Thank you for your time, and I would be happy to answer any 
questions.
    [The prepared statement of Mr. Butler follows:]

Prepared Statement Frederick F. Butler, President, National Association 
            of Regulatory Utility Commissioners, Newark, NJ

    Good morning Chairman Bingaman, Ranking Member Murkowski, and 
Members of the Committee:
    My name is Frederick F. Butler, and I am a member of the New Jersey 
Board of Public Utilities (NJBPU). I also serve as President of the 
National Association of Regulatory Utility Commissioners (NARUC), on 
whose behalf I am testifying here today. I am honored to have the 
opportunity to appear before you this morning and offer a State 
perspective on ``Smart Grid''.
    NARUC is a quasi-governmental, non-profit organization founded in 
1889. Our membership includes the State public utility commissions 
serving all States and territories. NARUC's mission is to serve the 
public interest by improving the quality and effectiveness of public 
utility regulation. Our members regulate the retail rates and services 
of electric, gas, water, and telephone utilities. We are obligated 
under the laws of our respective States to ensure the establishment and 
maintenance of such utility services as may be required by the public 
convenience and necessity and to ensure that such services are provided 
under rates and subject to terms and conditions of service that are 
just, reasonable, and non-discriminatory.
    There's a worn-out cliche that goes something like this: Don't put 
the cart before the horse. In an industry as old as the electric 
utility sector, this saying aptly describes the situation we face in 
dealing with the modern Smart Grid and future demand growth. As a State 
regulator in New Jersey and co-chair of a national board analyzing 
Smart Grid issues, I am absolutely convinced of the Smart Grid's 
potential to revolutionize how energy is delivered and consumed. I know 
the Smart Grid can change how utilities oversee their networks and 
improve reliability. I know that, in the end, consumers could have 
greater control over their usage and have the potential to lower their 
bills. I also know, however, that if we do not do this correctly, if we 
move too quickly and promise too much we can endanger our coming close 
to meeting any of those lofty aspirations.
    That is why it is important to remember that old cliche and not put 
the cart before the horse. The benefits of the Smart Grid are obvious, 
and we must be sure that we move deliberately and in stages so that the 
costs of rolling out the necessary infrastructure are borne by those 
who will benefit. If we expect the horse--i.e. the consumers--to push 
the cart before it is ready, we many never get the Smart Grid off the 
ground. This means that we should not focus immediately on the end user 
and demand response; rather, we must start with the backbone--the 
transmission and distribution systems--while proceeding carefully to go 
inside consumers' homes.
    Achieving the ultimate goal of reliable service at a fair and 
reasonable price is becoming harder and harder in this era of rising 
costs. There is a high probability that within the next three to 10 
years all electricity consumers will be facing higher costs because of 
rising fuel and commodity prices, as well as the initial sticker shock 
of Federal and State initiatives to increase renewable generation and 
the anticipated costs associated with climate change legislation. These 
costs are and will continue to hit energy companies hard, and State 
regulators are faced with having to approve rate increases that a 
growing number of consumers may not be able to afford. Should the 
potentially substantial price tag of Smart Grid be suddenly thrust upon 
them, not withstanding the Federal funding increase in the stimulus 
law, ratepayers will not be happy.
    The utility industry is facing tremendous challenges, and we all 
need to welcome new technologies that could help this country become 
more efficient while bolstering the existing transmission grid. The 
Smart Grid has this potential, but only if embraced by utilities and, 
most importantly, consumers. Without getting the consumers on board, 
the Smart Grid may just be another good intention.
    Before going too much further, it must be stated that our nation's 
energy woes will not be slain by a single silver bullet, but rather by 
what has been referred to as silver buckshot, a whole array of various 
and new revolutionary energy programs. This includes building some new 
transmission, encouraging renewable energy resources, promoting energy 
efficiency, resolving the nuclear-waste storage problem, and developing 
new technologies. The easiest and cheapest of this list is, of course, 
energy efficiency, but we must consider the role new technologies can 
play in helping us fix our current situation.
    Here is where the Smart Grid comes into play. With the right 
investment and incentives, modernizing the nation's transmission system 
could revolutionize how and when we use electricity. If done correctly, 
utilities can streamline their operations and have more control over 
their networks. The more efficient we get, the less electricity will be 
lost on the transmission grid. Consumers, meanwhile, can reduce their 
usage across the board, and especially during peak times. This can 
actually lead to reduced electricity bills. From an operational, 
business, environmental and economic standpoint, the Smart Grid, if 
implemented properly, can be a major win-win.
    But we do need to be careful. Right now, we are selling the Smart 
Grid as a means of empowering consumers to lower their usage and, 
correspondingly, their energy bills. While this may ultimately be the 
case, we must learn our lesson from the restructuring experience before 
heading down this path. The promise of restructuring was that consumers 
would save money by shopping for power. Nearly half the States 
introduced some kind of restructuring legislation in the mid- and late-
1990's. Congress also considered mandating a national restructuring 
scheme during the late 1980's and early 1990's. In many States, rates 
were cut and/or frozen for a set number of years, so at the outset, 
restructuring seemed to be a success.
    The 2000-2001 Western Energy Crisis prompted many to rethink this 
approach. Instead of lower prices, consumers saw their rates skyrocket 
as utilities were forced to buy electricity through the volatile spot-
market costs which, we later found out, were being manipulated. Along 
the East Coast, starting in 2006, when rate caps expired in Maryland, 
ratepayers and politicians led a mutiny that nearly resulted in the 
demise of the State's Public Service Commission. Cooler heads prevailed 
and the massive rate increases were phased in over time, but many 
consumers still feel burned. Delaware and Illinois have had similar 
experiences. We have not had these kinds of problems in New Jersey, but 
the sting in many States is being felt across the country.
    The problem here was not restructuring per se, but it was the way 
it was sold to consumers. Instead of determining the best way to move 
forward deliberatively, we jumped right in, with the promise of lower 
rates to follow. Because of this approach, and because of the results, 
the concept of restructuring has taken a significant hit. Indeed, we 
put the cart before the horse.
    We cannot make this same mistake with the Smart Grid if we want it 
to succeed. There is no doubt that the Smart Grid will bring consumers 
significant benefits. However, if we want to make the biggest impact, 
we should consider a different approach and concentrate first on the 
operational side while we educate consumers and deploy smart meters 
very strategically. Many utilities, engineers, and vendors have 
extolled the virtues of how an updated, modernized transmission system 
will give grid operators a much better view of their transmission and 
distribution network. New technologies can be installed on distribution 
poles and on the lines themselves to give advanced warning of a power 
surge. A modernized grid can help utilities lower costs by reducing the 
need for sending out trucks to read meters or restore power. Business 
operations can be streamlined, reliability can be improved, and money--
real money--can be saved.
    For instance, phasor measurement and backscatter sensors on the 
transmission grid, along with video sagometers and wireless mesh 
sensors, can use radio-frequency identification (RFID) technology to 
give utilities real-time information on the status of specific lines. 
These sensors can detect problems on the grid as they develop and that 
are relayed back to the utility for resolution before they escalate 
into a massive blackout. Instead of relying on costly and time-
consuming manual visits from work crews, utilities will have up-to-date 
information on their system and can act accordingly. These reasons 
alone will make the Smart Grid a safe and worthwhile investment for 
utilities, whether or not end-users choose to get on board later.
    From my perspective as a State regulator, it seems to make the most 
sense that if we're going to begin investing in a Smart Grid, we should 
start here. If we start with the backbone--if we update and improve the 
delivery system first--we will see the utility company side benefits of 
the Smart Grid. The question of who pays is important--and with 
consumers already challenged because of rising rates and the economic 
downturn, we must be careful before putting more on their plate. In 
this case, starting with the backbone means the initial investments 
would be paid for by the utilities themselves, as they will be the 
initial beneficiaries, and not immediately by ratepayers. While we all 
would like to see end users enjoy the benefits of Advanced Metering 
Infrastructure, the Smart Grid can still make an immediate and long-
lasting improvement for the industry by making the delivery system more 
efficient. This alone will result in considerable savings and fewer 
outages. Meanwhile, advanced meters and the applications they enable 
can at the same time be deployed strategically in pilot and 
demonstration projects thus demonstrating the benefits to end-use 
customers. Moreover, these backbone investments are necessary at some 
point during the transition to the Smart Grid. So let's ready the cart 
to be pulled before asking the horse--or consumers--to pull it.
    The second part of Smart Grid should be developed and implemented 
in an effort coordinated by State and local officials. In my experience 
as a Commissioner I have found that a key component for an initiative 
such as Smart Grid is public outreach. We should use some Federal 
resources to explain to the consumers that a new Smart Grid program is 
worthwhile. Most State commissioners understand the benefits of 
Advanced Metering Infrastructure and time-of-use rates, but most 
consumers do not. Because these new programs will need new rate 
structures that will be disruptive to habits of paying energy that have 
been in place for over 120 years, we must proceed carefully to avoid 
public backlash. Time-of-use rates are being welcomed by some sectors 
of society and feared by others. States must be sure that consumers 
will embrace the technology and tolerate the initial investment. So 
far, this is only occurring in a few States. In California, for 
example, the Public Utilities Commission is committed to rolling out 
the Smart Grid to their consumers. The State has taken a number of 
steps laying out the initial foundation, including a decision in 
September 2008 approving a smart-metering program for Southern 
California Edison, one of the State's three investor-owned utilities.
    Still, my colleague on the California PUC, Commissioner Dian 
Grueneich, said that despite the commission's conclusion on the 
benefits, key California consumer groups remain unconvinced that the 
Smart Grid will deliver. The advanced metering infrastructure 
deployment for Southern California Edison will cost about $1.63 
billion, with estimated benefits ranging from $9 million and $304 
million for consumers. Speaking in September 2008 at the Grid Week 
forum in Washington, D.C., Commissioner Grueneich said the PUC moved 
forward despite the strong opposition from some consumers. ``Very 
significant costs have been authorized and put into rates,'' she said. 
``Our consumer groups are not comfortable'' with this.
    The concern that many of my colleagues are trying to resolve is 
that consumers are convinced that the Smart Grid will only raise their 
rates with no discernable benefits. In a high-priced environment, some 
or perhaps most consumers see advanced metering rollouts as just one 
more headache and budget buster and are particularly scared that 
utilities and vendors will keep raising rates as the technology 
changes.
    California will be launching a major education, marketing, and 
outreach campaign next year. This will need as much support as possible 
from all parties so the program can succeed and perhaps reduce the 
sting on ratepayers. Once they see the benefits, they should also see 
how they can turn this into savings.
    As this experience demonstrates, the way a Smart-Grid program is 
structured and rolled out is absolutely key to its success, and 
regulators and industry must be flexible to ensure that consumers will 
not feel inundated or overwhelmed. Depending on how a Smart-Grid 
program is structured and rolled out will be the key to its success, 
and Congress, regulators, and industry must be flexible to ensure that 
consumers will not feel inundated or overwhelmed. As a State regulator, 
here's how I think we should proceed.
    A good place to look is at the work we're doing with the NARUC-
Federal Energy Regulatory Commission (FERC) Smart Grid Collaborative, 
which I co-chair with FERC Commissioner Suedeen Kelly. As this is an 
issue that cuts across both wholesale and retail energy markets, the 
dialogs we are initiating through this process will help us all as we 
move forward. The Collaborative brings together a diverse group of 
State and Federal regulators, consumer groups, and industry experts and 
allows us to talk in a public setting about these issues.
    The Collaborative has met three times since its February 2008 
inception, most recently at the NARUC Winter Committee Meetings last 
month. We have discussed issues such as cost allocation, specific 
technologies, interoperability, and pilot programs with consumers and 
industry executives who are promoting Smart-grid technologies.
    In my role as co-chair of this Collaborative, I have spent a 
considerable amount of time getting up to speed on the different 
technologies and pilot programs throughout the country. I am, as is the 
entire Smart-Grid industry, very interested in the pilot program in 
Boulder, Colorado, which is aiming to become the nation's first ``Smart 
Grid City.'' I have discussed the many different pilots with my 
regulatory colleagues and am convinced that we must take a deliberate 
approach to introducing these new technologies to end-use consumers. As 
described above, consumers have yet to ``buy into'' the concept of the 
Smart Grid, and when they see any associated rate increases, they are 
more than likely not going to be pleased. Smart meters are expensive--
right now we're talking about approximately $150-$200 per meter--so we 
must be very careful in forcing anyone to upgrade if they are not 
willing. Pilot programs must be carefully structured in such a way that 
creates a ``buzz'' and excitement, not a ratepayer revolt.
    In addition, there should be large-scale ``demonstration projects'' 
that cover a larger geographic area. We are all watching the Boulder, 
Colorado effort and that project's success is instrumental to the 
future of the Smart Grid. These kinds of projects must cover a 
significant demographic area that reflects a microcosm of the country 
at large, including different incomes and education levels. While the 
pilot programs are useful, these larger projects will give us a glimpse 
as to how a larger pool of consumers will react to the Smart Grid. The 
project doesn't have to be huge, but it must be an accurate 
representation of the society.
    This approach lets consumers take part by building interest and 
selling the product amongst themselves, rather than having Congress, 
utilities, or regulators do it for them. The consumers who want the 
meters will get the meters, and through word-of-mouth, others will find 
out how valuable this new system can be, and will be more willing to 
endure a slight rate increase to pay for it. What concerns me is that 
under some proposals, millions of people will get these smart meters 
whether they want them or not. They will be getting a rate increase and 
new gadgets that they do not know how to use installed in their homes. 
I am not sure if this will breed anything but hostility among a rate 
class that is already facing challenging economic times.
    Smart Grid can be successful provided we have Federal and State 
governments working in concert with one another as partners; not 
working in contrast to one another as adversaries. The challenge before 
us is great, the technology and potential benefits exciting. The 
Federal Government has resources that the States do not; the States 
have expertise in the development and implementation of programs that 
the Federal Government does not have. Therefore, this challenge calls 
for a true partnership between the States and FERC that we are already 
developing through the NARUC-FERC Smart Grid Collaborative.
    We have to remember that the Smart Grid will only achieve its vast 
potential if consumers embrace it. While we can certainly see major 
improvements in efficiencies and reliability by upgrading the 
transmission and distribution backbone, we will not change consumers' 
habits and consumption if we are unable to convince them of its 
promise. I respectfully request that this Committee and this Senate 
recognize and respect our unique roles so that we can work toward a 
truly 21st Century electricity delivery system.

    The Chairman. Thank you very much.
    Ms. Hamilton.

 STATEMENT OF KATHERINE HAMILTON, PRESIDENT, GRIDWISE ALLIANCE

    Ms. Hamilton. Chairman Bingaman, Ranking Member Murkowski, 
members of the committee, thank you for inviting me to testify 
on smart grid. On behalf of our membership, thank you for your 
support and attention to the vision and goals of smart grid, 
including creating the smart grid title 13 in the Energy 
Independence and Security Act of 2007. Now, with the enactment 
of the American Recovery and Reinvestment Act, we'll have the 
opportunity to realize the impact of that title.
    GridWise Alliance is a coalition of 78 organizations 
advocating for a smarter grid for the public good. Our members 
include utilities, independent system operators, utility 
equipment manufacturers, large IT and communications companies, 
small technology companies, venture capital firms, consultants, 
universities, research organizations. By design, we are a very 
broad representation of the energy value chain. That puts us in 
a position to be an unbiased advisor.
    We operate on a consensus basis. Everyone has the same 
voice. We focus on policy solutions rather than technologies. 
We believe the market should determine which smart grid 
technologies will prevail.
    GridWise Alliance advocates for making the entire grid 
smarter, from the power plant bus bar through the transmission 
lines and substations all the way to the meter and load center. 
Since smart grid includes a broad range of solutions, there are 
many working definitions of smart grid, and just as many 
examples of initiatives that are underway that could be 
considered smart grid projects.
    In the simplest terms, smart grid is a dynamic, ubiquitous, 
two-way communication system that allows for greater choice by 
every stakeholder on the grid. A smart grid can look like a lot 
of different things, and it depends on the regional and local 
systems, as well as the goals of that system.
    We're delighted that Congress and the President identified 
smart grid as a priority and that it was funded significantly 
in the Recovery Act. We have projected with substantial Federal 
investment, smart grid could create as many as 280,000 jobs 
over 4 years. These jobs include retaining and retraining the 
current work force, as well as creating new jobs in software 
and communications, analyzing and engineering, manufacturing, 
and supplying goods and services. Those smart grid jobs are 
based on what we see as the intent of Congress in the Recovery 
Act, and that was that the $4.5 billion appropriated to smart 
grid would be allocated to demonstration projects and 
investment project matching funds.
    Investment projects, we think, are more likely to stimulate 
the economy, since they will be the first out of the chute, and 
they will accelerate the deployment and advancement of smart 
grid. We do not consider building transmission lines to be part 
of smart grid, but do expect some projects to be funded that 
include smarter transmission systems and technologies.
    Smart grid was included in the Recovery Act because we 
thought Congress correctly identified the smart grid as a key 
economic stimulator. We expect DOE to fund a variety of 
competitively solicited projects that can show scaled 
deployment of smart grid technologies all across the electric 
grid. We think these projects will stimulate economic growth, 
helping utilities retain jobs, spurring offshoot industries, 
and increasing jobs through installation of clean energy 
technologies.
    The GridWise Alliance is also pleased that the Recovery Act 
funded the NIST standards-making process. As you know, NIST was 
given an unfunded mandate to develop smart grid standards, but 
DOE was able to fund the Pacific Northwest National Lab and 
created the GridWise Architecture Council to bring industry 
together to work closely with NIST to develop the architecture 
for system interoperability. This process should continue and 
be aggressively supported.
    We understand the importance of developing standards and 
protocols, also realize that entrepreneurs, utilities, 
universities, and other businesses developing smart grid 
technologies will continue to implement smart grid. We do not 
want to hold up these efforts that can stimulate the economy by 
waiting for standards to be developed.
    The GridWise Alliance thinks of the smart grid 
holistically, as a means to an end, not an end in and of 
itself. A smart grid can increase reliability, heighten 
security, optimize the entire electricity system from the 
generation end to the consumption end, and contribute to the 
de-carbonization of the electric industry.
    A smarter grid enables integration of dynamic forecasting, 
energy storage, clean distributed generation, energy efficiency 
technologies, and plug-in hybrid vehicles. A smarter grid 
allows for the effective deployment of energy from renewable 
energy sources, reaping the full benefits of wind, solar, 
geothermal, hydropower, and biomass power.
    So, additional smart grid policies should be included when 
energy or climate legislation is considered that involves our 
electricity system. Smart grid, as a key enabler of integrating 
dynamic renewable energy generation, should become an element 
of an RPS. Smart grid, as an enabler of efficient distribution 
technologies, should be built into an energy efficiency 
standard. In a transmission bill, any additional transmission 
should perhaps be required to have smart grid technologies 
embedded to maximize the use of the grid.
    In conclusion, GridWise Alliance reiterates that it's 
important and critical that smart grid projects be funded 
through the Recovery Act and that smart grid should be 
considered an essential enabling component for any energy 
legislation.
    We can help Congress in defining what additional policies 
for incentivizing smart grid we should consider and how to 
integrate smart grid as a means to fulfilling many overarching 
goals.
    We thank you for allowing our collective industry voices to 
be taken into consideration as this committee moves forward on 
many energy fronts.
    [The prepared statement of Ms. Hamilton follows:]

         Prepared Statement of Katherine Hamilton, President, 
                         The GridWise Alliance

    Chairman Bingaman, Ranking Member Murkowski, members of the 
Committee, thank you for inviting me to testify on smart grid on behalf 
of the GridWise Alliance before the Senate Energy and Natural Resources 
Committee. The GridWise Alliance has worked closely with this Committee 
and its members since our inception in 2003, testifying before you on 
several occasions. On behalf of our membership, I would like to thank 
you all for your support and attention to our vision and goals, 
including creating the Smart Grid Title XIII in the Energy Independence 
and Security Act of 2007. With the enactment of the American Recovery 
and Reinvestment Act, we will have the opportunity to realize the 
impact of that smart grid title.
    The GridWise Alliance is a coalition of 78 organizations advocating 
for a smarter grid for the public good. Our members broadly represent 
the nation's interest in smart grid, including leading utilities, 
independent system operators, large IT and communications companies, 
small technology companies, consultants, universities, and research 
organizations. We operate on a consensus basis and remain technology 
neutral, focusing on the policy issues surrounding the deployment of a 
smarter grid. We believe the market should determine which technologies 
prevail.
    The GridWise Alliance advocates for making the entire grid 
smarter--from the power plant bus bar through the transmission lines 
and substations, all the way to the meter and appliances and equipment 
that consume electricity. We define a smart grid as a dynamic, 
ubiquitous two-way communication system involving the entire grid that 
allows for greater choice by every stakeholder on the grid. A smart 
grid will include a variety of technologies and solutions, depending on 
the regional and local systems as well as the goals of the system.
    The GridWise Alliance thinks of a smart grid as a means to an end--
not an end unto itself. A smart grid can increase reliability, heighten 
security, optimize the entire electricity system from generation to 
consumption, and contribute to the decarbonization of the electricity 
industry. A smarter grid can also enable the integration of dynamic 
forecasting, energy storage, clean distributed generation, and energy 
efficiency technologies, including plug in hybrid vehicles. A smarter 
grid allows for a more effective deployment of energy from renewable 
sources, reaping the full benefit of wind, solar, geothermal, 
hydropower, and biomass power.
    Speaking on behalf of the entire industry, we were delighted that 
Congress and the President identified smart grid as a top priority and 
that it was funded significantly in the American Recovery and 
Reinvestment Act of 2009 (Recovery Act). We projected that, with 
substantial Federal investment, creating a smarter grid could result in 
as many as 280,000 jobs over the next 4 years. With stimulus funding of 
$4.5 billion and 50 percent cost share for smart grid projects, we have 
determined, based on projects already in the hopper, that we could 
create nearly 75,000 jobs within the first year. These jobs range from 
technicians and new field installers, to new jobs in software and 
communications; from analysts and engineers, to manufacturers and 
suppliers. While the smart grid is clearly an evolving concept, we 
believe that deployment of existing technologies is the most effective 
way to encourage the development of the supply chain, to encourage 
redesign of existing appliances so that they may be incorporated into a 
smarter grid, and to familiarize consumers with the numerous benefits 
that a smart grid offers. Stated somewhat differently, commercial 
deployment is the most effective tool to encourage private sector 
product research and development.
    The GridWise Alliance jobs analysis conducted by our member 
company, KEMA, Inc., had a positive impact on the discussion around 
funding smart grid; however now we must answer the larger question 
about how this funding will be allocated. We believe that the majority 
of the $4.5 billion appropriated for smart grid in Recovery Act--that 
on which we based our jobs numbers--is to fund Title XIII of the Energy 
Independence and Security Act of 2007 (EISA). To that end, we have 
prepared a set of recommendations to the Department of Energy to 
provide guidance on the best way to spend those funds consistent with 
Title XIII. Because we focused on impacts and not specific 
technologies, we did not recommend numbers of meters or miles of 
transmission. Instead, we looked at a variety of quantitative and 
qualitative metrics. In our recommendations, we define the key metrics 
the DOE should use to assess smart grid project applications; we 
describe a process for achieving stakeholder buy-in to the metrics and 
for identifying weighting of metrics to feed into the application 
evaluation process; we suggest approaches for allocating funding to 
different categories of smart grid projects that cannot easily be 
compared to each other; and we recommend a process for monitoring and 
reporting on effective use of funding.
    The GridWise Alliance believes that critical issues for funding 
smart grid projects include: 1) establishing clear guidelines for 
applicant submittals, including a restatement of what types of projects 
are eligible for funding and clearly incorporates the language of EISA 
as amended in the Recovery Act; 2) establishing an expedited 
contracting process consistent with the OMB Initial Implementing 
Guidance for the Recovery Act; 3) establishing a rational approach 
which fully respects both pre-existing Intellectual Property rights and 
new intellectual property which emerge from the deployment of existing 
intellectual property in R&D, demonstration or investment projects ; 4) 
establishing minimum smart grid standards for other energy 
infrastructure projects that are undertaken pursuant to provisions of 
the Recovery Act apart from those that contain the specific smart grid 
language; and 5) establishing a transparent, but not onerous, process 
for monitoring allocations among different types of smart grid 
endeavors and altering new allocations to secure balance as seem 
appropriate in light of the overall Recovery Act and EISA objectives.
    As part of this process, the GridWise Alliance believes that the 
intent of Congress is clear: the $4.3 billion appropriated to smart 
grid in the Recovery Act should be allocated to large-scale 
demonstration projects and investment project matching funds as 
provided for in sections 1304b and 1306 of EISA as amended. Between the 
two, the investment projects should receive the larger funding overall 
as these projects in general are more likely to both stimulate the 
economy and accelerate the deployment and advancement of the smart 
grid. We do not consider building new transmission lines to be part of 
the smart grid, but certainly expect some projects to be funded that 
include smarter transmission systems.
    The GridWise Alliance is pleased that the Recovery Act also funded 
development of the NIST process. In EISA 2007, NIST was given an 
unfunded mandate to develop smart grid standards; DOE funded the 
Pacific Northwest National Laboratory to begin the process and created 
the GridWise Architecture Council to work closely with NIST and 
industry to develop the architecture for system interoperability that 
could be used as a foundation in developing standards. Much of the 
groundwork has begun and this process deserves to be aggressively 
supported. The GridWise Alliance prefers open standards and protocols 
so that all players are allowed to compete in the market. Because of 
cyber security issues, certain criteria in developing technology are 
critical. Industry has been engaged in this process collectively 
through several partnerships so that the security architecture for all 
smart grid technologies will be consistent. Developing standards and 
protocols for smart grid is important, yet entrepreneurs, utilities, 
universities, and other businesses developing smart grid technologies 
will continue to implement smart grid in the absence of NIST standards. 
We do not want to hold up these efforts that can stimulate the economy 
by waiting for standards to be developed.
    Smart grid can be implemented differently in different places. The 
simplest definition is a two-way communications, control and data 
system from power station to home load center. The design and 
implementation can vary, however, depending on the technologies and 
solutions deployed and the needs of the regional utility, transmission 
operator, and customer mix. For example, in some areas smart meters are 
a good first step in providing information to consumers who want 
increased choice in how they use their energy and for utilities who 
want more data on consumer loads. In other areas, it would be wiser to 
start developing the smart grid with transmission technologies like 
phase shifting transformers. The issue is not so much which specific 
technology application is better, but what improvements can be made to 
the entire system. The GridWise Alliance believes that implementing 
smart grid technologies on the current grid is just as important as 
planning for additional transmission. While we recognize the need for 
additional transmission to alleviate congestion and take renewable 
energy generation to load centers, we strongly believe that planning 
for this increase should include integrating smart grid technologies. 
We reiterate that smart grid funding in the Recovery Act should not be 
used to build those new lines, but rather to make the overall system 
smarter, including making any additional transmission lines smarter.
    While the electric grid has the same basic components everywhere, 
the entities operating and using the grid vary according to region, as 
do the goals of those systems. For example, a rural cooperative may 
have higher reliability needs because of the vast area it serves and 
the need to know who has electricity and where they have outages on 
their system. A municipality may need to contain costs and have 
consumers adjust demand given rate incentives and smart meter 
technologies. A data center may require redundancy and security 
measures. The stimulus funding will only go so far. Our government has 
additional resources that can assist in developing the smart grid. We 
have experts in state energy offices, Department of Commerce 
Manufacturing Extension Partnership, and Department of Energy 
Industrial Assessment Centers. Many universities--like Florida State, 
Northern New Mexico College, University of Colorado, Washington State 
University, and North Carolina State University--have smart grid 
technology research programs. Edison Electric Institute has worker 
training centers as does the IBEW. This technical expertise coupled 
with public utility commissions and regional planning authorities 
should enable this country to maximize the grid we have and make it 
smarter, stronger, more reliable, and freer of carbon.
    The real benefits of a smart grid will not be realized without 
including the consumer in making informed decisions on how they use 
electricity. Modern information technologies have transformed almost 
every other sector of our lives; many of those same technologies can 
change the way we use our electricity. Most consumers will not change 
behavior without price signals, education, and technological 
assistance. Because our electric system is so ubiquitous and robust, we 
take it for granted. Electricity has become an integral part of our 
lives and a necessity for businesses and homeowners. Most people don't 
think about where electricity comes from other than the outlet in their 
wall. They get their bill at the end of the month and react based on 
the size of the bill, but don't know what they did to make it go up or 
down. With increased information, and technological innovation, 
consumers could see in real time the impact of their electricity use 
and take action to reduce their bills. Utilities that have experimented 
with smart grid technologies have received positive results and 
feedback from their customers. As we move forward it is important that 
we not just deploy a smarter grid but build coalitions with consumers 
and other stakeholders so that they are fully engaged in the 
implementation of that smart grid.
     Smart grid was included in the Recovery Act because Congress 
correctly identified the smart grid as a key potential economic 
stimulator. The proof will be in the implementation, of course. We 
expect DOE to fund a variety of competitively solicited projects that 
can show a plethora of smart grid technologies and gather information 
about how smart grid affects the system operators, utilities, and 
consumers. The projects will be spread around the country to see how 
smart grid differs by location. Those projects will stimulate economic 
growth--by helping utilities retain jobs, by spurring offshoot 
industries, by increasing jobs through installation of clean energy 
technologies. But this is just the beginning. The GridWise Alliance 
believes that, since a smarter grid is a means to an end, additional 
smart grid policies need to be included when energy or climate 
legislation is considered that involves our electricity system. Smart 
grid is the great enabler of getting dynamic renewable energy 
generation on line; smart grid could become an element of an RPS. A 
smart grid enables integration of clean distributed generation 
including solar and plug in hybrids; smart grid could be built into an 
energy efficiency standard. In a transmission bill, any additional 
transmission could be required to have smart grid technologies imbedded 
to maximize the use of that grid. We are counting on this Committee to 
make sure that a smart grid is the foundation to fulfill our nation's 
energy independence, national security, and carbon mitigation goals.
    In conclusion, the GridWise Alliance reiterates that smart grid 
projects funded through the Recovery Act will create the cornerstone of 
a more reliable, affordable, and cleaner grid. In addition, smart grid 
provisions must be included as critical parts of future energy 
legislation. Our Alliance is always available to help define what 
policies are important and intend to keep you apprised of smart grid 
developments in the coming months. We thank you for allowing our voices 
to be taken into consideration as this Committee moves forward on many 
energy fronts.

    The Chairman. Thank you very much.
    Mr. Lu, go right ahead.

  STATEMENT OF EDWARD LU, ADVANCED PROJECTS PROGRAM MANAGER, 
                GOOGLE, INC., MOUNTAIN VIEW, CA

    Mr. Lu. Mr. Chairman and members of the committee, my name 
is Edward Lu, and today I would like to share my perspective on 
how to advance the deployment of smart grid technology, and, in 
particular, on the importance of energy information to 
consumers.
    I serve as a program manager in advanced projects at 
Google, and I lead several energy-related projects, including 
one that is developing an energy information software tool that 
will enable consumers to make informed choices about their 
energy use as they browse the Web, read their e-mail, or use a 
mobile phone.
    Prior to my position with Google, I served as a NASA 
astronaut for 12 years. I had the privilege of flying two Space 
Shuttle missions, a Russian Soyuz mission, and spent 6 months 
abroad the International Space Station. By training, I'm an 
electrical engineer, and I have a Ph.D. in applied physics.
    As you know, the United States is currently building out a 
smart grid that will bring our 1950s-era electricity 
infrastructure into the digital age. The main point I would 
like to make today is that we need to develop this grid in a 
way that spurs innovation, that drives competition, and 
supplies maximum information to consumers.
    First, we must not forget about the consumer. That means 
deploying smart grid technology that empowers consumers with 
greater information, tools, and choices about how they use 
electricity; and, second, that the energy information that the 
consumers get should be open. That means that it is in a 
nonproprietary format that spurs the development of products 
and services to help consumers save energy and money.
    Google is working in this space because this, 
fundamentally, is a large-scale information-delivery problem, 
and Google's strength is in bringing useful information to 
millions of consumers.
    So, why is energy information crucial? The way Americans 
buy electricity today is a bit like shopping for groceries in a 
store that has no prices and no cash register. Take what you 
want, you leave, and at the end of the month you get a bill. 
So, how could a family, like that, keep to a budget or make 
smart choices about what they're buying? It's very difficult.
    When it comes to electricity, how many consumers know how 
much electricity their house uses, what appliances cost the 
most to run, or how to even go about saving energy and money? 
How many of you have gotten a big electric 1 month and 
wondered, ``What caused it last month?'' I know I have.
    Studies show that when consumers can see, in realtime, how 
much energy they are using, they naturally save 5- to 15-
percent on their electricity use with simple behavioral 
changes. That's even before they make investments in energy 
efficiency. You manage what you measure.
    Energy information empowers consumers to make smart 
choices. The average United States residential consumer spends 
about $1200 a year on electricity, so savings, simply based on 
realtime feedback, could amount to $60 to $180 per year, per 
consumer. The real power of this is when you scale that up to 
millions of consumers. If just half of American households cut 
their demand by 10 percent, the CO2 emissions 
avoided would be equal to eliminating the emissions from about 
8 million cars.
    So, where's this data going to come from? A key step in 
establishing a smart grid is to equip homes with advanced 
electricity meters, or smart meters. These smart meters will 
enable utilities to provide better service and a more robust 
electricity delivery system, as we've heard already today. 
Already, utilities are in the process of deploying 40 million 
of these new meters, replacing the old-style electric meters.
    Alternatively, consumers could opt to put in their own 
energy monitoring devices into their own homes. So, the data is 
forthcoming. But, installing the smart meters themselves does 
not mean automatically that the data is either in realtime or 
that consumers will have access to the data in a convenient 
fashion. So, we encourage efforts by the utilities, and the 
public utility commissions in the States, to ensure that the 
data is as close to realtime as practical and is easily 
accessible by consumers.
    One open question is, Who owns the data? Google believes 
that this personal energy information rightfully belongs to 
consumers, and they should control who has access to it. But, 
in many States there is no clear statement on this. So, we're 
hoping that policymakers provide clarity on ownership of data 
as the smart grid is built out, because it will encourage 
entrepreneurs and businesses to get involved in this space.
    So, what form should this data take? We think it's 
important the consumer-facing data, that part that the consumer 
actually sees from the smart meter, should be available in an 
open, nonproprietary format. This will allow consumers to 
easily and conveniently share their data with third parties. 
The goal is to foster a thriving ecosystem of partners, where 
third parties develop products to help consumers decrease and 
manage their energy demand and save money. For example, a 
utility or a third party could offer service that analyzes the 
household's electricity usage data, identifies inefficient 
appliances or practices in the house, and offers tips on how to 
reduce energy, or even provide discounts on efficient 
appliances or electronic equipment.
    So, what are we doing at Google? We're partnering with 
utilities with smart meter deployments, and with companies that 
manufacture devices that measure the energies in your home, to 
give consumers access to their data. Our engineers have 
developed a simple and secure software tool, called Google 
Power Meter, that will allow users to monitor their own home 
electricity consumption, in realtime, on their computer or on 
their cell phone. I have my own house information on my phone, 
for instance. Our tool is free and scalable, and we plan to 
release the technical specifications so anyone can build 
applications on it.
    The Google Power Meter is not yet available to the public, 
since we're testing it out with Google employees first. We're 
busy collecting data on the impact, how much people are saving. 
The initial results are very promising.
    It's important to note that there's really no one-size- 
fits-all solution for providing consumers with this data. The 
challenge is going to be to provide this information at the 
scale of tens or even hundreds of millions of consumers. We 
look forward to working with utilities and other industry 
stakeholders to enable consumers to have a greater 
understanding of, and control over, their energy use.
    Thank you, Mr. Chairman, for the opportunity to testify 
today, and I look forward to answering any questions you have.
    [The prepared statement of Mr. Lu follows:]

  Prepared Statement of Edward Lu, Advanced Projects Program Manager, 
                    Google, Inc., Mountain View, CA

    Mr. Chairman and members of the Committee, my name is Edward Lu and 
I am pleased to share my perspective on how to advance the deployment 
of smart grid technology. I serve as a Program Manager in Advanced 
Projects at Google. I lead a number of energy-related projects 
including one that is developing an energy information software tool 
that will enable consumers to make informed choices about their energy 
use as they browse the web, read email, or use a mobile phone.
    Prior to my position with Google, I served as a NASA astronaut for 
twelve years. I had the privilege of flying two Space Shuttle missions, 
a Russian Soyuz mission, and a 6-month tour on-board the International 
Space Station. I am an electrical engineer and have a Ph.D. in applied 
physics.
    Google's mission is to organize the world's information and make it 
universally accessible and useful. We believe that access to 
information about personal energy consumption is critical to helping 
consumers save electricity and money, but unlocking this data requires 
upgrading the electricity grid to make it smarter. We are tackling this 
informational challenge on several fronts including developing consumer 
tools, investing in energy technology companies, and advocating for 
policies that advance a smarter grid.
    The United States can build a ``smart grid'' and bring our 1950's-
era electricity infrastructure into the digital age. The main point 
that I will make today is that we need to develop this grid in a way 
that spurs innovation, drives competition, and supplies maximum 
information to consumers.

   First, we must develop and deploy smart grid technology in a 
        manner that empowers consumers with greater information, tools 
        and choices about how they use electricity, including access to 
        real-time energy information.
   Second, energy information should be made available based on 
        open non-proprietary standards to spur the development of 
        products and services to help consumers save energy and money.

    I will also briefly describe a free software product that Google is 
developing to enable people to get better information about their home 
electricity consumption.

          I. INFORMATION HELPS CONSUMERS SAVE ENERGY AND MONEY

    The way Americans currently buy electricity is like shopping for 
groceries every day but not getting the bill until the end of the 
month. How can a family keep to a budget or make smart choices? When it 
comes to electricity, how many consumers know how much electricity 
their house uses, what appliances cost the most to run, or how to go 
about saving energy or money?
    Studies show that when consumers can see in real time how much 
energy they are using, they save 5 to 15 percent on their electricity 
use with simple behavioral changes, and even more with investments in 
energy efficiency. The average U.S. residential customer spends about 
$1,200 a year on electricity, so savings simply based on a real-time 
feedback monitor could amount to $60 to $180 per year. In fact, if just 
half of American households cut their demand by 10 percent, the 
CO2 emissions avoided would be equal to taking approximately 
eight million cars off the road.
    As a first step to establishing a smart grid, homes must be 
equipped with advanced energy meters called ``smart meters'' that 
identify detailed real-time energy consumption information. With the 
help of state public utility commissions, utilities throughout the 
United States are working to replace 40 million old-style electric 
meters with digital smart meters that can be automatically read 
throughout the day. Congress also recently included a provision in the 
American Recovery and Reinvestment Act to speed the installation of 
smart meters and other smart grid technology. Google applauds these 
efforts, and encourages utilities, transmission operators, technology 
companies, and public utility commissions to continue to modernize our 
electricity infrastructure with the support of Congress.
    The benefits of energy information can be enhanced when combined 
with programmable appliances and dynamic energy pricing. A study 
conducted by the Department of Energy's Pacific Northwest National 
Laboratory (PNNL) gave customers access to energy consumption 
information, broken down by appliance, every fifteen minutes and 
allowed them to program their water heaters and thermostats to respond 
to changes in electricity prices. Participants in the PNNL study 
received cash when they operated their household loads in collaboration 
with the needs of the grid by reducing their energy usage at times of 
peak energy demand. Over the year of the study, peak load on the grid 
was reduced by approximately 15 percent and consumers saved 
approximately 10 percent on their electricity bills over the previous 
year. Based on these results, the authors determined that if all 
customers nationwide engaged in reducing peak loads, peak electricity 
prices would be substantially reduced and approximately $70 billion in 
new generation, transmission, and distribution systems could be 
avoided, with the savings passed along to ratepayers.

    II. CONSUMERS SHOULD HAVE ACCESS TO REAL-TIME ENERGY INFORMATION

    Google believes consumers should have access to real-time 
information about their home electricity use. This means that consumers 
should know how much energy they are paying for at the time of use. 
Personal energy information belongs to consumers and they should 
control who has access to it. Policymakers should provide clarity on 
ownership of data as the smart grid is built out.
    To access energy information in greater detail, homes must be 
equipped with smart meters or consumer-installed energy monitoring 
devices. Smart meters are a key part of the smart grid and will enable 
utilities to provide better service and a more robust electricity 
delivery system, in addition to enabling consumer access to 
information. However, installing smart meters does not automatically 
mean that consumers will receive real-time information about their 
electricity usage. While there are some limitations today on the 
ability of utilities to provide real-time data to consumers, we believe 
that there are substantial benefits to doing so. Utilities should be 
encouraged to provide consumers with real-time access to their energy 
information.

       III. OPEN STANDARDS SPUR INNOVATION AND DRIVE COMPETITION

    In order to achieve the greatest potential for energy savings, 
consumers should receive information as part of an open ecosystem of 
hardware and software for energy monitoring, home automation, and 
device control. For that to happen, the consumer-facing data from the 
smart meter needs to be available to the consumer in an open non-
proprietary format as well as in real time.
    Truly open standards would allow consumers to share their data with 
third parties in a format that is standardized, freely published, and 
unencumbered by a patent or proprietary claim. The goal is to foster a 
thriving ecosystem of partners where third-parties will develop and 
provide products to help consumers decrease and manage their energy 
demand and save money. For example, a utility or a third-party could 
offer a service that analyzes a household's electricity usage data, 
identifies inefficient appliances or practices in the home, and offers 
tips on how to reduce energy or provides special discounts on efficient 
appliances or electronic equipment.
    The Texas legislature and Public Utility Commission have taken a 
thoughtful approach to these issues and provides a useful example of a 
consumer-friendly energy information policy:

   Smart meters must be capable of providing consumers with 
        direct, near real-time access to electricity usage data.
   That data must be stored on the meter in a form that 
        complies with nationally recognized non-proprietary standards.
   Smart meters must also be capable of communicating with 
        other devices on the premises, such as monitoring devices, load 
        control devices, and prepayment systems.
   Consumers own their energy usage data.
   As smart meters are deployed in Texas, consumers will not 
        have to pay an additional fee or have to obtain special 
        permission to view their data.

     IV. WE'RE DEVELOPING A SOFTWARE TOOL CALLED GOOGLE POWERMETER

    Over the last year, our engineers have developed a simple and 
secure software tool called Google PowerMeter. This will give consumers 
a means to draw data from their utility or from devices they install 
themselves to see their own home electricity consumption in near real 
time, on their computer or cell phone. The default view shows the 
current day's energy consumption compared to the previous day's, but 
the graph can easily be extended further back in time to look for 
peaks, troughs and other outlying data points. Our tool is free and 
scalable, and we plan to release the technical specifications 
(application programming interfaces or ``APIs'') so anyone can build 
applications from it. Google PowerMeter is not yet available to the 
public since we are testing it out with Google employees first. 
Currently we are building partnerships with utilities and independent 
consumer device manufacturers to roll this tool out in pilot programs. 
We are busy collecting data regarding the impact that energy 
information provided by Google PowerMeter has on electricity savings 
and consumption, and preliminary results are promising.
    There is no one-size-fits-all solution to providing consumers with 
detailed energy information. It will take the combined efforts of 
Federal and state governments, utilities, device manufacturers, 
software engineers and non-governmental organizations to empower 
consumers to use electricity more wisely by giving them access to 
energy information. We look forward to working with utilities and other 
industry stakeholders to enable consumers to have a greater 
understanding of, and control over, their energy use.
    Thank you, Mr. Chairman, for the opportunity to testify today. I 
look forward to working with the Committee in its important examination 
of ways to build and deploy a smarter electrical grid.

    The Chairman. Thank you very much.
    Mr. Gaddis.

   STATEMENT OF EVAN R. GADDIS, PRESIDENT AND CEO, NATIONAL 
       ELECTRICAL MANUFACTURERS ASSOCIATION, ROSSLYN, VA

    Mr. Gaddis. Mr. Chairman, Ranking Member Murkowski, and 
members of the committee, thank you for the invitation to speak 
on behalf of the over 400 electrical manufacturers in NEMA. Our 
member companies represent the full spectrum of the grid, from 
transformers, switch gear, thermostats, wire meters, and energy 
storage, to lights and plugs. Better said, from the power plant 
to your living room and your business.
    Innovation and research is a constant driver in our 
companies, and their technologies would be on the market today 
if we had certainty of standards. I'll speak on the current 
obstacles to, and the proposals to, advance building the smart 
grid.
    Historically, utilities have made piecemeal investments, 
often resulting in customized solution; as we call them, 
stovepipes. In certain instances, manufacturers responded with 
proprietary systems; more stovepipes.
    As to the regulators, their objective is to ensure just and 
reasonable cost. Until recently, standardized systems was not a 
major cost factor. The current grid was designed for one 
purpose: to flow electricity downstream from nearby generators 
to our homes, offices, and factories. Today, we need a grid to 
do more. Our computers need constant reliable power. Our 
climate policy requires green generation. We want to charge our 
cars at home and at the office. Grids that were set up for 
steady one-way power flow must now become more nimble and more 
adaptable. Our smart grid must use new device communication 
strategies. Utilities and their customers must communicate. 
They must be interoperable.
    What we need is not just a common language, but a common 
alphabet. On the grid, this alphabet includes time, location, 
and measurement. We need agreement on how we will time-stamp 
events and commands. We need a standard for locating devices 
and disturbances, both geographically and electrically. We need 
to agree on how to record current and voltage, the fundamental 
measurements of electrical power. Simply said, we need common 
standards.
    We can build on existing efforts. For example, NIST 
maintains the official time of the United States. We already 
have widely used standards for geographic information systems. 
We, as an industry, need to adapt and adopt these existing 
methods. We need common standards from the turbine to the plug.
    In the 2007 energy bill, Congress recognized the need for 
common standards, and Congress entrusted NIST with this 
critical task. NEMA was named as a partner in this endeavor. 
The process is not working. I think we got the taskings 
backward. NIST was designated to provide guidance and 
coordinate the standards. In more than a year, we have not seen 
the first standard. NEMA and other standards development 
organizations should write the standards, NIST should be our 
navigator and approval authority.
    NEMA has extensive experience in writing standards. We 
administer over 50 U.S. technical advisory groups, and hold six 
secretariats from the International Electrical Technical 
Commission. We have over 240 ANSI-approved standards, including 
39 for power equipment products. Today, anyone who uses a wall 
outlet or a thermostat interacts with NEMA standards.
    In the grid, NEMA is already at work writing levels of 
intelligence which will provide decisionmakers with a quick and 
objective measure of the intelligence of the grid. We have 
worked hand in hand with NIST as we defined these levels of 
intelligence.
    Let me say it again. NIST should be the navigator and 
approval authority. NEMA and other standards development 
organizations should write the standards. Industry is ready 
now.
    From traffic signaling to baggage screening, NEMA has 
developed standards that enable commerce today. We want to 
accelerate our energy policy goals, your goals: independence, 
renewables, and reliability. We will need a smart grid.
    If we get grid standards in place before we start building, 
we will save time and money. NEMA and our member companies 
stand ready to deliver the grid technology compliant with 
consensus standards and--excuse me--compliant with consensus 
standards that regulators, utilities, and customers embrace. 
We're waiting on the green light from government to do just 
that.
    Thank you for your time. It's an honor to talk with you 
today.
    [The prepared statement of Mr. Gaddis follows:]

   Prepared Statement of Evan R. Gaddis, President and CEO, National 
           Electrical Manufacturers Association, Rosslyn, VA

    Good morning, Mr. Chairman and members of the committee. On behalf 
of the over four hundred NEMA member manufacturers, thank you for the 
invitation to speak. I would also like to thank Commissioner Kelly and 
Chairman Wellinghoff of the Federal Energy Regulatory Commission for 
inviting us to host a grid technology demonstration day in April. Our 
companies represent the full spectrum of the grid, from transformers 
and switchgear to thermostats and advanced meters, with a burgeoning 
energy storage section. Research and innovation is a constant driver in 
our companies, and for now, the world still looks to the U.S. for 
energy innovations. However, uncertainty on standards obstructs 
adoption of many beneficial technologies and threatens our technology 
leadership position. I will speak on the current obstacles to and 
proposals for accelerating smart grid implementation.
    Historically, utilities--NEMA member customers--have made piecemeal 
investments, often resulting in customized solutions. And in certain 
instances, manufacturers responded with proprietary systems. The 
regulators' objective has been to ensure just and reasonable cost, and 
until recently, standardized systems was not a major cost factor. The 
grid of the 1900's was designed for one purpose--to let electricity 
flow downstream from nearby generators to our homes, offices, and 
factories.
    Today, we need the grid to do more. Our computers need reliable 
power; our climate policy requires green generation; we want to charge 
our cars with domestic electrons. Grids that were set up for steady 
one-way power flow must now become more nimble and adaptable, which 
requires more communication among devices. Common sense suggests common 
languages simplify complex systems.
    In the 2007 Energy Independence and Security Act, Congress 
recognized the need for interoperability standards and entrusted the 
National Institute of Standards and Technology (NIST) with coordinating 
this critical task. Congress also named NEMA to assist NIST in this 
work.\1\
---------------------------------------------------------------------------
    \1\ PL 110-140 s. 1305
---------------------------------------------------------------------------
    Smart thermostats are an example of a device whose adoption today 
is hampered by the lack of standards. A user-friendly smart thermostat 
could intelligently talk to the utility to minimize your electric bill, 
maximize comfort, or both. These devices are available today and are 
incorporated into many demand response pilot programs, but do not 
necessarily communicate using the same protocols. We need national 
standards so that a thermostat or any equipment made for San Francisco 
will also work in Syracuse.
    The lack of adequate grid standards has already cost our nation 
dearly. After the 2003 blackout, a major obstacle to decoding the data 
was to determine if 2 pm recorded on one device meant 2:01 pm on 
another. Recommendation 24 from the blackout report notes that piecing 
together the events from the numerous logging devices would have been 
``significantly faster and easier'' if the devices were synchronized. A 
standard for time synchronization would have shaved months of data 
analysis, and we may have even had enough data to prevent the grid's 
problems from cascading across the country.\2\
---------------------------------------------------------------------------
    \2\ US-Canada Power System Outage Task Force, ``Final Report on the 
August 14, 2003 Blackout in the United States and Canada,'' April 2004.
---------------------------------------------------------------------------
    Before we can create a common language, we must assemble a common 
alphabet. On the grid, this alphabet includes time, location, and 
measurement. We need agreement on how we will time stamp events and 
commands, as we learned from the 2003 blackout. We need a standard for 
locating devices and disturbances, both geographically and 
electrically. Finally, we need to agree on how to record current and 
voltage--these are the fundamental measurements of electrical power.
    For each of these areas, we can build on existing efforts. NIST, of 
course, maintains the official time for the United States. We already 
have widely used standards for geographic information systems. And NIST 
and the Department of Energy (DOE) are working on the standards for 
sensors on the transmission system.\3\ For a smart grid framework, we 
as the industry need agreement to adapt or adopt existing methods for 
use on the entire electric system, from the plant to the plug.
---------------------------------------------------------------------------
    \3\ North American Syncro Phasor Initiative, materials posted at 
http://www.naspi.org/
---------------------------------------------------------------------------
    Once we have agreement on a fundamental alphabet, we can begin the 
process of harmonizing the languages. For example, once we have 
agreement on time precision and accuracy, we will need to revise 
substations or meter protocols to be readily interpretable to and from 
a common framework. Each further revision will lead to systems that 
require less and less customization.
    As DOE Secretary Chu has alluded, one way to get industry agreement 
is to lock the experts in a room until the right answer emerges. NEMA 
has extensive experience in accelerating standards for urgent needs. We 
administer more than 50 U.S. Technical Advisory Groups and hold 6 
secretariats for the International Electrotechnical Commission. We have 
over 240 ANSI-approved standards, including 39 for power equipment 
products. Today, anyone who uses a wall outlet or a thermostat 
interacts with NEMA standards.4}5
---------------------------------------------------------------------------
    \4\ NEMA WD-6, ``Dimensional Requirements for Wiring Devices,'' 
revised 2008. Available at http://www.nema.org/stds/wd6.cfm.
    \5\ NEMA DC-3, ``Electrical Wall-Mounted Room Thermostats,'' 
revised 2003. Available at http://www.nema.org/stds/dc3.cfm.
---------------------------------------------------------------------------
    In the smart grid, NEMA is already at work. Our companies have 
proposed a ``Levels of Intelligence'' rating system, which will provide 
decisionmakers with an objective measure of the intelligence of the 
grid.\6\ We are polling our companies on the protocols in use today to 
draw a map from where we are now to where we want to go. And as 
directed by Congress, our staff have assisted NIST since day one to get 
the interoperability framework up and running.
---------------------------------------------------------------------------
    \6\ NEMA Emerging Technologies Task Force, ``Standardizing the 
Classification of Intelligence Levels and Performance Of Electricity 
Supply Chains,'' December 2003. Available at http://www.nema.org/
smartgrid.
---------------------------------------------------------------------------
    The government has stepped in before and recommended that the 
industry adopt a standard. In the 1960's, there were many competing 
methods for encoding the alphabet on magnetic and paper tapes. IBM, 
NCR, and RCA accounted for eight different schemes. One proposal was 
the American Standard Code for Information Interchange, or ASCII. In 
1968, President Lyndon Johnson issued an executive order that directed 
the Federal Government to purchase only computers that complied with 
the ASCII standard ``to minimize costly incompatibility.''\7\
---------------------------------------------------------------------------
    \7\ Lyndon B. Johnson, Memorandum Approving the Adoption by the 
Federal Government of a Standard Code for Information Interchange, 
March 11, 1968). The American Presidency Project, Accessed 2009-02-27 
via Wikipedia. http://www.presidency.ucsb.edu/ws/index.php?pid=28724
---------------------------------------------------------------------------
    To establish a similar incentive today, Congress, NIST, or the DOE 
should direct accredited standards development organizations like NEMA 
to accelerate the priority standards of time, place, and quantity. Such 
an effort would be conducted in a consensus-based process, and NIST 
could then review and ``bless'' the final outcome. To create a further 
incentive to get the work done quickly, Congress should condition the 
release of the 50 percent smart grid matching fund on the development 
of NIST endorsed standards.\8\
---------------------------------------------------------------------------
    \8\ The matching fund was codified in PL 110-140 s. 1306 and 
amended by PL 111-5 s. 7002
---------------------------------------------------------------------------
    NIST is our navigator, and the industry is ready to row. From 
traffic signaling to baggage screening, NEMA has developed the 
standards that enable commerce and demonstrate world leadership in 
technology adoption. If we want to accelerate our energy policy goals--
independence, renewables, reliability--we will need a smart grid. If we 
get grid standards in place before we start building, we will save time 
and money.
    NEMA and our member companies stand ready to deliver the standards 
that will make the smart grid a national reality. What we need today is 
a green light from the government to get the consensus process 
underway, and assurances that our efforts would be fruitful and 
adopted.
    Thank you very much for the opportunity to testify.

    The Chairman. Thank you very much for your testimony.
    Senator Shaheen, why don't you go ahead. You haven't asked 
any questions yet.
    Senator Shaheen. Thank you, Mr. Chairman. Here I was 
waiting for all of you to ask the brilliant questions of the 
morning.
    Let me go back--I don't know who wants to respond to this, 
but there was an earlier session this morning, with former 
Prime Minister Tony Blair and a number of Governors, CEOs, and 
Senators, talking about the importance of addressing global 
warming. Several people suggested that we couldn't get to an 
energy revolution without dealing with global warming, because 
we needed to set a price on carbon that would make industry--
give industry some certainty about the cost, and therefore, 
create a willingness to invest.
    Now, many of us--and I think your comments speak to the 
fact that we're not going to be able to get to our energy 
revolution without dealing with our transmission issues. One 
suggestion, earlier, was that the private sector would be 
willing to be an investor as we look at what we need to do with 
our transmission system.
    So, how do we get the private sector to invest? What kinds 
of incentives--or do we need incentives to get the private 
sector to invest as we move to a smart grid and a new 
transmission system?
    Whoever would like to take that on.
    Mr. Gaddis. Senator, the companies will build the 
technologies if they have certainty that their product will be 
sold. The way you do that is, you develop a standard that they 
can build to.
    Mr. Butler. Senator, the issue of getting the private 
sector to invest, in terms of transmission, there are some 
merchant transmission companies that are working in this 
country, but mostly all of the local distribution transmission 
systems are owned by utilities. So, I think we need to create 
an environment where those utilities are going to invest in 
improving the outcome--the performance of those distribution 
systems, and making them smarter so that we can allow for 
addressing carbon issues and reducing carbon footprints of 
individual end-use customers, whether they're residential or 
large industrial, as well.
    So, I think it's all of--all of a piece--there's a whole 
range of things that we have to be addressing as we move 
forward.
    Senator Shaheen. Certainly I would agree that, in an ideal 
world, we would hope that the utilities would invest because 
they would benefit from that investment, but--we have an 
example, in northern New Hampshire, where we have a number of--
we have a wind project and two biomass projects that are ready 
to go, but there isn't the transmission capacity to bring them 
down to the southern part of the State and southern New 
England. The utility doesn't want to make the investment 
without passing that cost on to the ratepayers. The ratepayers 
obviously are not interested in paying for power that's going 
to go to somebody else. So, how do we share that burden and get 
everybody to invest in the way that's going to allow us to make 
this smart grid a reality?
    Mr. Butler. You've hit, exactly on the head, the issue 
here, and that's getting a source of funds, revenue--rates--
that actually goes to the people that are going to benefit from 
the increase in those rates. I think regional planning--New 
England regional planning, which has improved, is--and has 
improved in other regions of the country--is one of the 
approaches that needs to be taken.
    Then, you know, finding a way that you actually are passing 
the costs on to those who are benefiting. I think regional 
planning and RTOs can work on that score.
    The Chairman. Senator Murkowski.
    Senator Murkowski. Thank you, Mr. Chairman.
    Mr. Lu, I appreciated your comment the--your statement was, 
``The consumer will manage what we can measure.'' I think we 
recognize--and your example is pretty apt, about going into the 
grocery store and, if there's no prices and there's no 
checkout, but you just take what you want, and you get billed 
later, that's what we're facing as energy consumers. So, the 
effort to figure out how we measure is what we're all talking 
about here with the smart grid.
    I actually have a coffee cup that I drink out of every 
morning. I'm kind of a creature of habit. There's a saying on 
it that says, ``Before we can measure, we must first know the 
standard.'' That goes back to Mr. Gaddis's point here, that 
it's so imperative that we have these standards, because, 
without a standard that we can reference, we'll never get to 
that measure that will be helpful for us, as individuals and as 
families.
    I wanted to ask you, Mr. Lu, in the stimulus bill, there's 
a new requirement that demonstration projects must use, quote, 
``open protocols and standards, including Internet-based 
protocols and standards, if available and appropriate.'' Is 
this something that works for a company like Google, as you 
are--you're really moving out, in terms of your own power meter 
issues. The opponents of this requirement are arguing that the 
Internet-based standards can be slow and are perhaps not 
appropriate in addressing reliability concerns. Can you just 
speak to that aspect of what we have in the stimulus?
    Mr. Lu. Sure. The language, in particular--the key part of 
it is ``where appropriate.'' There are areas where Internet 
protocols are appropriate; in particular, for the aspects of it 
that face the consumer. When you deliver data to the consumers, 
the Internet protocol is a fine way to do that, because there 
is a host of platforms out there, almost everybody has a 
device, a computer or a phone or something like that, that can 
read that standard and can accept that data.
    Now, we recognize that there are parts of this that are 
involved--the--sort of, the back end of things, the guts of the 
transmission, and so on, or the data going back to utilities, 
that doesn't touch the consumers. So, again, the 
appropriateness of the--that there is something that needs to 
be discussed by the manufacturers of that equipment and the 
utilities.
    I don't want to give the impression that it's appropriate 
everywhere, because it's not.
    Senator Murkowski. Mr. Gaddis, you spoke to the concern of 
stove-piping if, in fact, we don't have the confidence that 
certain standards are in place there. You heard the testimony 
from first panel, where all three were in agreement that we 
don't need to be withholding stimulus moneys, at this point in 
time, in making certain that those standards and protocols are 
in place first, and then the money comes. The comment that was 
used was that there will be a suite of standards, and that the 
standards will not be static. Do you agree with this, or do we 
still have the stovepipe issues that you raised?
    Mr. Gaddis. I don't totally agree with it, Senator, but let 
me explain.
    First off, I do think we need to get these projects moving, 
so I do support that. We need to put people to work. I think if 
the government does its job--and that's NIST and FERC--and they 
quickly come out and they designate the standards-writing 
organizations--if they tell NEMA or--I believe Senator Cantwell 
brought up the IEEE--if you tell us, ``Start writing these 
standards,'' we will get them written quickly and----
    Senator Murkowski. How quick is quickly?
    Mr. Gaddis. You know, it really depends on the standard--
let me give you a good example. Homeland Security came to NEMA 
a few months ago and said, ``We need a standard written in 6 
months to be able to do baggage screening.'' We will have that 
standard done in 6 months. Now, I would say a normal timeframe 
is between 9 months and a year for a standard, but if we know 
what it is that we have to do, and we have the approval, the 
authorities given to us by the government--i.e., we're 
designated to do this particular thing--the companies will come 
together, everybody will come together, and we will start 
working on these things. So, I think we can do it; we just need 
to get on with it.
    Senator Murkowski. Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Senator Cantwell.
    Senator Cantwell. Thank you, Mr. Chairman.
    Mr. Gaddis, I didn't mean to--in mentioning the IEEE, to 
exclude your organization, because I do think it can play a 
very big role in the process. So, thank you for elaborating on 
it this morning in talking about the process and how the 
private-sector groups can move more quickly, because there is a 
great deal of competitiveness, but also cooperation. So, thank 
you for talking about that.
    Ms. Hamilton, you mentioned the job-creation elements of 
smart grid. I think you had a number, 280,000 over the next 4 
years. That sounds like a very robust number. Do you know how 
many of your member companies are hiring, today? Of the 
businesses? I know you have utilities in the GridWise Alliance. 
Do you know how many----
    Ms. Hamilton. I would say all of my member companies are 
either hiring or retraining on some level, and the stimulus 
funding will greatly advance that, because projects that are in 
the hopper, waiting for approval, will then get that extra 
boost from the government to enable them to get started on 
their projects that are, maybe, you know, waiting for PUC 
approval. Then, once we see that there's another investment 
stream coming in, that that will help get them out.
    But, I would say all of my 78 members are actively working 
in smart grid, and so, everyone is trying to look at where the 
jobs are and where they could increase their work force.
    Senator Cantwell. I know, for example, there's a couple of 
companies in Washington State, both have openings, one having 
openings for over 100 people. So, I think actually showing, 
today, the potential--I mean, this is even without further 
approval of projects; this is what--where people are looking 
for jobs--I mean, where there are jobs right now, where people 
are looking for a work force. I think the 280,000 probably, to 
a lot of people, sounds like down the road. It sounds very 
enticing, but I think the reality is, is that this is producing 
jobs right now, one sector that is producing jobs, and a lot of 
jobs.
    Ms. Hamilton. That's absolutely right, Senator Cantwell. 
There is actually going to be a work force issue in the utility 
industry, because of an aging work force. So, we will need new 
people to come online, we will need new people to build new 
high-voltage transformers, because a lot of those folks have 
retired or are retiring. So, yes, there's a huge work force 
issue.
    Senator Cantwell. I think Chairman Bingaman is looking at 
the work force issue for the larger energy bill, which I 
appreciate, because I think it is a key issue to matching up.
    But, I wanted to ask you about depreciation rates on smart 
meters, as well, because I think it was 2001 when I first 
introduced legislation saying we ought to have a better 
depreciation rate. We actually got it down, you know, from the 
20-year period. Now everybody is kind of at a plateau, if you 
will. I mean, they're so glad we got it down, but, in my 
opinion, it should be treated like all computerized equipment, 
because that's really--I mean, it shouldn't be discriminated 
against. I mean, it basically is in that same category. A 
faster depreciation rate is one of the ways to help make these 
projects more cost-affordable.
    I'm going to get to Mr. Butler in a second about rate 
recovery, which I'm sure--I don't know whether we're going to 
agree or not, but would you--on this particular issue, it is 
one remedy that we have at our hands right now to give a 5-year 
computerized depreciation across the board, including smart 
meters.
    Ms. Hamilton. That's absolutely right. We appreciate you 
putting it in the stimulus for a period of time there. We 
definitely agree, 5 years is the right amount, because it is 
computer equipment; we would extend it to all energy management 
devices, so not just meters, but extend it to all of those 
technologies that would be operated just as, you know, data 
could be----
    Senator Cantwell. If GridWise has any information about 
what that would do in the acceleration or advancement of 
projects, that would be very helpful.
    Ms. Hamilton. OK.
    Senator Cantwell. Because, again, I think people think, 
``Well, we just passed this policy, so why not just keep it 
where it is?'' But, the fact that we made some progress, you 
know, is--there's no reason why we shouldn't make more 
progress, when there's so much job opportunity at hand here.
    Commissioner Butler, I wanted to talk to you about the, 
obviously, rate-of-recovery issue. I know that you are talking 
about consumer groups and consumer interest. I don't if you 
have a thought about the depreciation rate of smart meters, but 
do you know if anybody's taken advantage of the language that 
we had in the--you know, the directive that we had in the 2007 
energy bill, to utilities?
    Mr. Butler. I'm sure they are, utilities, Commissioner--
Senator. We have 20 States that are involved in the smart grid 
collaborative now, including your own, and eight others that 
showed up at the last meeting, after the stimulus money was 
announced. It's amazing how $4 and a half billion can incent 
some interest among some people. So, there is interest in 
reducing the depreciation time period. That's one of the silver 
buckshot items, I think, that I was talking about earlier.
    States are anxious to get approval for these as quickly as 
possible, while, at the same time, protecting the interests of 
ratepayers. No State commissioner wants to be the one that 
approves something that proves, later on, to be the wrong 
project, or a project that's not open architecture, that cannot 
be easily improved by plugging in some new components. So, I 
think there is this great interest out there, and we're going 
to try to move as quickly as is reasonable. At the same time, 
educating our ratepayers so that they know the benefits that 
can accrue to them.
    Senator Cantwell. So, do you think--so, utilities have used 
that, recovering remaining book-value cost of equipment?
    Mr. Butler. They have certainly asked for it, and I know 
that, in certain place, I think that it's been approved.
    Senator Cantwell. Yes, I think having more information 
about that--what else do you think we should do about stranded 
costs?
    Mr. Butler. Stranded costs is always an issue. I think it 
has to be discussed with the utilities, in terms of what the 
danger of stranded costs might be, so that they can be 
addressed as part of a--an agreement of a--an agreement that is 
reached by the utility and the public utility commission, in 
terms of moving forward, that if there is a potential for 
stranded costs, that that be worked into the process.
    I know, when you go back to restructuring, when utilities 
were divesting themselves of their generation assets, there 
were provisions for stranded costs worked into those agreements 
between those utilities and their State commission. So, it's 
not something that hasn't been done before, and it certainly 
would be something that commissioners would be willing to 
discuss.
    Senator Cantwell. I see my time is expired, Mr. Chairman, 
but, yeah, I'd love to ask--to follow up more about that 
particular policy, because I think--without more robust 
discussion of rate recovery on these projects, I think the 
incentive here, for job creation and energy savings, whether we 
get a--some sort of more fair cost on carbon or not, is going 
to keep pushing this technology out there. Otherwise, the 
Federal Government will look at a larger role. So, I'd love to 
explore that later with you, Mr. Butler.
    Mr. Butler. Yes.
    Senator Cantwell. Thank you, Mr. Chairman.
    The Chairman. Let me ask Mr. Gaddis--you say, at the end of 
your testimony here, ``What we need today is a green light from 
the government to get the consensus process underway and 
assurances that our efforts would be fruitful and adopted.'' 
What you're saying, more precisely, is, you want some agency in 
the government--either NIST or FERC, I guess; and you can 
clarify that--to tell you that NEMA should go ahead and develop 
certain standards, and give you a timeframe for the development 
of those. Is that right?
    Mr. Gaddis. Yes, Senator, that's--I would say, Department 
of Energy or NIST. Yes, once you designate the standards-
writing organization--we're one of them--you'll find that the 
companies will rally around this. All the stakeholders will 
rally around this, and they'll come together so that we can 
write that standard and begin building whatever the product is.
    The Chairman. Now, do you have a list of the standards that 
you believe NEMA is most appropriately situated to establish?
    Mr. Gaddis. Oh, I could easily provide that for you, but 
obviously we're experts in the electrical industry. Some of the 
things that come to mind are meters, energy storage, plug-in 
cars. So, the answer is, we have a wide array, but I'd be happy 
to, before----
    The Chairman. If you could give us that, that would be 
useful, because then we could perhaps go to Dr. Gallagher or to 
Secretary Chu, if those are the two people in the government, 
and say, What do they think? I mean, is it appropriate for them 
to designate NEMA to do that, or is there somebody they think 
is better? Maybe you could also indicate how long you think it 
would take to establish some of those standards.
    Mr. Gaddis. Yes, sir. I should say that I've already had 
talks with Dr. Gallagher, and I think he agrees that NEMA and 
other standards-writing organizations should be writing these 
things. It really depends on the standard, how long it would 
take; but, I would say, on average, 9 months to a year, 
depending on what the standard is, to get a standard out. I'll 
be happy to submit, for the record, a list of the things that 
NEMA would recommend.
    The Chairman. You also say in your testimony that, 
``Congress should condition the release of the 50-percent smart 
grid matching fund on the development of NIST-endorsed 
standards.'' Now, one of the drumbeats around here when we were 
passing the so-called stimulus bill was that we needed to get 
jobs created right away, and that we weren't interested in 
things that were going to take a lot of planning and a lot of 
delay. How does that concern square with what you're suggesting 
here? You're saying that, of the money that was provided, we 
should say, ``Hold on, don't spend any of that until we get 
these NIST-endorsed standards established,'' as I'm 
understanding what you're saying. Is that right?
    Mr. Gaddis. Mr. Chairman, what I'm saying is--you know, I 
realize, like everybody else, NEMA realizes, like everybody 
else--we've got to get jobs going. I believe we could do this 
process much quicker. Over a year ago, in EISA 2007, NIST was 
designated to put this roadwork out there and to start writing 
the standards. In fact, NEMA has been pushing this, quite 
honestly, to get that done. We should have it done right now. 
We should be able to get these standards out in very quick 
time. At least the ones we need to start so that we've got 
interoperability, the really important standards. We can do 
this, and we can start building at the same time.
    The Chairman. OK.
    Mr. Lu, let me just ask about the device that you folks 
have developed, or the software that you folks have developed, 
to allow people to monitor their energy use--the power meter. I 
would think that if you have this on this Google Power Meter, 
it would be appropriate to have all the smart meters that we 
are paying for getting installed all around the country here as 
part of this stimulus effort, have them contain some device to 
communicate with the Google Power Meter so that anyone who's 
got a smart meter could access that smart meter by looking at 
their cell phone or their computer or whatever. Am I thinking 
about that right?
    Mr. Lu. There's two ways to get the data, either directly 
off the meter, if you're at home; and then you can get very, 
very high-quality data, because you're close to the meter, and 
the meter can send data to you very, very frequently. Now, the 
other way to get the data is through a partnership with your 
utility, who is pulling the data back anyhow for their purposes 
of running the grid. That's how it operates today.
    We'd like to see various ways of getting the data. In fact, 
we actually are--we want to be sort of somewhat agnostic about 
this. This is our solution; it isn't necessarily the best 
solution, and we'd like to encourage that the data be made 
available. We think that the consumers have a right to see 
their data. We have a way that we think is very good to do 
that, but, you know, we certainly don't want to say that this 
is, far and away, the best, or this is the only way to do that, 
because more competition is better.
    The Chairman. But, you're basically saying that--I guess, 
that utilities, perhaps, should--if they put in these various 
systems, they should have this on the Internet so that it is 
compatible with your power meter software.
    Mr. Lu. Yes, we'd like to see it be compatible. We'd like 
to see it be in an open format, an open, nonproprietary format, 
so that anyone can use it, and we could use it, too.
    The Chairman. Right. OK. All right.
    Senator Murkowski, do you have additional questions?
    Senator Murkowski. Not necessarily a question, Mr. 
Chairman, just a comment about where we are.
    I was just looking through the background memo here and 
appreciating what we did under EISA-07 in outlining the 
expectations at that time as to what we anticipated with a 
smart grid. We created a Smart Grid Advisory Committee to 
advise the government on the deployment, created the Smart Grid 
Task Force of Federal Agencies to coordinate the grid policies, 
established an R&D and demonstration program, tasked NIST with 
the development of an interoperability framework, established 
Federal Matching Grant Program, directed States to do smart 
grid considerations. A number of reporters, none of which I 
understand, have actually been released. We did this back in 
2007.
    Now, I appreciate that it's--always comes down to money and 
the fact that NIST wasn't given the dollars to do it, but now 
that we're at ``go,'' and we've got $4 and a half billion out 
there on the table, it seems like we're playing more than just 
a little bit of catch-up, here. This is too important for us to 
get it wrong. So, I would just urge expediency at the same time 
as, just, real oversight and review that we are getting as 
close to where we need to get as possible. I think we saw the 
vision several years ago, and now we're moving with it, but we 
haven't laid that framework quite yet.
    The Chairman. Senator Shaheen, did you have additional 
questions?
    Let me thank this panel. I think this has been a useful 
hearing, and very useful testimony. Thank you very much.
    [Whereupon, at 12:02 p.m., the hearing was adjourned.]

    [The following statement was received for the record.]

Statement of Thomas R. Standish, Group President, Regulated Operations, 
                        CenterPoint Energy, Inc.

    Mr. Chairman and Members of the Committee. My name is Tom Standish 
and I am submitting this statement on behalf of CenterPoint Energy, 
Inc., an investor-owned utility which includes an electric transmission 
and distribution subsidiary serving the metropolitan area of Houston, 
Texas. CenterPoint, in collaboration with other industry leaders, has 
been actively pursuing a Smart Grid strategy entitled the ``Intelligent 
Utility Network,'' which links electricity with communications and 
computer controls to create a highly automated, responsive and 
resilient power system.
    In the American Recovery and Reinvestment Act of 2009 (``ARRA''), 
the Congress allocated $4.5 billion to the Department of Energy's 
``Electricity Delivery and Energy Reliability'' account. The ARRA 
provides that approximately $200 million of this amount should be used 
for certain worker training, resource assessment, and technical 
development activities. We recommend that a substantial majority, if 
not all, of the remaining funds should be used to make grants to enable 
the commercial deployment of projects under Section 1306 of the 
existing Smart Grid Program which the Congress created in the Energy 
Independence and Security Act of 2007.
    The Smart Grid Program supports a combination of technologies 
deployed throughout the electricity generation, transmission and 
distribution systems that will turn today's antiquated electric 
transmission and distribution grid into a more modern, efficient, 
technologically advanced, economically smart, and environmentally 
focused infrastructure, with real-time, two-way communication 
capabilities throughout. The technology, including devices and 
communication networks that can make this happen, exists today and is 
awaiting immediate commercial deployment.
    The Smart Grid is, and always will be, an evolving concept. The 
question is how best to encourage it to evolve more rapidly and 
efficiently. We submit that the best way is to rapidly get into the 
field those Smart Grid elements which are in existence today. 
CenterPoint is a perfect example of the benefits of this approach. As 
we deploy our smart meter system, we encourage the development of a 
technological supply chain. As we begin operation of that system, we 
encourage the development of complementary technologies--both IT and 
smart appliances. And as we enhance that system with our Intelligent 
Grid system, we will facilitate the wider use of renewable energy and 
advanced technologies like plug-in electric hybrid vehicles 
(``PHEVs'').
    There are four reasons why use of ARRA funds for the commercial 
deployment of eligible Smart Grid projects and investments should be 
encouraged.
    First, the physical deployment of commercial Smart Grid 
infrastructure will preserve and create jobs, inside and outside the 
electricity sector. Commercial Smart Grid implementation requires 
numerous hardware products that must be manufactured and installed at 
every end-user's facility or home. When implemented at the commercial 
level, this will require a vast, labor-intensive work force. The 
evolution of these products will create a sustainable job market. Smart 
Grid also utilizes computer hardware and innovative software. The 
development, implementation, and technical assistance required for this 
advanced technology will create many sustainable positions throughout 
the IT sector. Only the large-scale, commercial deployment of Smart 
Grid--not isolated research and development--has the ability to create 
these direct and indirect employment benefits. For instance, we 
estimate that implementation of CenterPoint's proposed Smart Grid 
initiative on its current schedule will create up to 8,000 new jobs 
over the next 5 to 7 years. Our obtaining a DOE grant could accelerate 
the creation of these 8,000 jobs in a much shorter timeframe, which has 
the dual benefit of creating jobs now and speeding up the 
implementation of a key component of our new energy future. These jobs 
will fall across a broad spectrum of the labor force--factory employees 
will be hired or retained to manufacture more meters and transmission 
switching gear, software and computer hardware output will increase in 
sales, and a large number of new employees will be needed in a very 
short amount of time to install these meters and new relay systems for 
the transmission grid.
    Second, the commercial deployment of a modern and expanded Smart 
Grid will provide the enabling technology necessary for inventing, 
developing, and implementing renewable energy systems and PHEVs. The 
two-way electricity transfer capability of Smart Grid is vital to the 
expansion and use of renewable energy systems such as solar and 
windpower. Smart Grid will also provide the technological change needed 
to accommodate the battery storage and energy redistribution potential 
that is vital to efficient utilization of distributed renewable energy. 
If PHEVs are to be used as a source of power to discharge the batteries 
during peak times, then a Smart Grid will be needed to control and 
account for power flows. Thus, the Smart Grid enables the use of PHEVs 
to contribute both to demand reduction and peak energy production, with 
environmental benefits resulting from both. Furthermore, the mere 
commercial availability of Smart Grid is likely to spur the creation 
and development of future technologies that will serve to further the 
nation's electricity delivery efficiency and energy reliability. There 
is simply no way with the existing grid to fully exploit these 
renewable sources of energy because the grid as currently designed and 
operated cannot readily accommodate and measure the two way flow of 
electricity.
    Third, the commercial deployment of smart metering systems, capable 
of two-way communication, will lead to more efficient electricity 
generation, transmission, and demand-side use, which will create 
electricity cost savings for all end-use consumers. Computerized 
metering systems measure, collect, and analyze energy usage for each 
individual consumer. The two-way communication capability of the smart 
metering system allows for the distribution of real time information to 
customers, service providers, utility companies, and electricity 
generators. This enables electricity providers to efficiently manage 
their energy supplies, provides customers with information on how to 
alter their energy consumption to achieve more efficient and cost-
effective energy usage habits and allows the power provider and the 
consumer to communicate directly as to the consumer's consumption 
choices. Thus, by connecting smart metering systems to the Internet, 
consumers will have the ability to immediately increase the efficiency 
of their energy use by remotely accessing and controlling their homes' 
energy intensive appliances. The commercial deployment of these smart 
metering systems will also increase the number of end-use consumers who 
are able to alter their energy consumption habits through time-of-day 
pricing, thereby increasing the Nation's overall energy efficiency and 
cutting into the demand for new power plants.
    Fourth, directing ARRA funds to immediately deployable commercial 
Smart Grid projects will allow DOE to obligate and expend funds 
promptly, with full transparency, to projects that can obtain specific, 
tangible results. Several energy providers are either in the process of 
implementing or are ready to implement Smart Grid projects. No further 
research is needed for this implementation to occur. Smart Grid is 
ready for commercial deployment and its benefits are known, obvious, 
and desired. Investor owned energy providers also operate under the 
financial monitoring of Public Utility Commissions, which can assure 
that the funds will be spent prudently and directed as intended.
    In summary, the Smart Grid provides THE enabling technology that 
must be commercially available if the Nation hopes to increase its 
utilization of clean, secure, and reliable renewable energy. By 
financially supporting immediately deployable Smart Grid projects, DOE 
can accelerate the attainment of the Congress's and the 
Administration's goals that are set forth in the ARRA. The Committee 
should encourage DOE to prioritize its award of grants to those 
commercially deployable Smart Grid Projects that are immediately ready 
to be implemented.

                                APPENDIX

                   Responses to Additional Questions

                              ----------                              

     Responses of Evan R. Gaddis to Questions From Senator Bingaman

    Question 1. One of the often stated key benefits of Smart Grid is 
in its ability to integrate large quantities of intermittent renewable 
resources into the grid and to efficiently route this power where it is 
needed. To achieve this will clearly require both the build-out of new 
transmission to renewable resource rich locations as well as upgrading 
our current grid to have the intelligence to handle these intermittent 
resources. In order to achieve the benefits that we want from Smart 
Grid, how much new transmission do you foresee being needed? And how do 
we prioritize the building of new transmission vs. upgrading our 
current grid?
    Answer. Reliability and efficiency benefits can be achieved within 
existing transmission corridors. Reliability, in terms of reduced 
outage duration and occurrences, can be improved through monitoring 
devices and replacement of mechanical controls with digital controls. 
Smart appliances and controls can shut down or delay usage with minimal 
inconvenience to the consumer, resulting in lower energy bills. Demand 
response technologies can optimize use of existing transmission by 
reducing peak demand. Real time transmission line rating technologies 
and high temperature conductors can be used to expand capacity along 
existing transmission corridors.
    Integration of renewables will require both new transmission 
corridors and a grid that can adapt to their intermittent nature, 
including incorporation of storage. The amount of transmission will 
increase in relation to the quantity of renewables or carbon reduction 
required.

    Question 2. ``Smart Metering'' projects for residential consumers 
have become the poster-child of the Smart Grid. However, some studies 
have found that the majority of the benefits of the Smart Grid will 
result from investments in grid transmission and distribution system 
upgrades and optimization, with only a small percentage of energy 
savings and emission reductions coming from smart metering programs. 
Could you comment on this? And how should we take these findings into 
consideration when prioritizing which Smart Grid demonstration projects 
to fund?
    Answer. NOTE: as a data point, the Climate Group SMART 2020 Report 
estimates that 85 percent of the carbon reduction benefits of a Smart 
Grid come from Grid Optimization and Renewables Integration, and only 
15 percent will come from End-User Energy Management.
    Policy objectives must be clearly articulated in order to 
prioritize correctly the demonstration projects. For example, if the 
primary objective is carbon reduction, then transmission and 
distribution systems should receive substantial funding. These systems 
need upgrades to handle new intermittent resources. However, if the 
primary objective is to reduce consumer utility bills, then smart meter 
projects would be more applicable than transmission projects. Many 
advanced meter pilot projects have already demonstrated substantial 
savings for end users. Since there are likely to be multiple 
objectives, including reduced carbon emissions, reduced utility bills, 
and reduced dependence on foreign energy, it is likely that projects in 
all domains will need to be pursued.

    Question 3. After the Department of Energy has spent out its nearly 
$4.5 billion on Smart Grid Investments, how do we measure whether that 
money has been spent effectively? How soon and what improvements in our 
grid should we expect to see?
    Answer. NEMA has proposed a metric called the ``Levels of 
Intelligence,'' which measures the integration of logic and 
communication into grid devices. The Department of Energy has also 
developed its seven smart grid characteristics, which can be used to 
measure the outcomes or capabilities of a modernized grid as a whole. 
Both measures could be used to determine how much modernization has 
occurred as a result of the stimulus investment.
    We are already beginning to see service quality improvements as a 
result of advanced meter deployments. Improvements throughout the 
system will be continuous as new technologies are developed, 
demonstrated, standardized, and deployed across the nation.

    Responses of Evan R. Gaddis to Questions From Senator Murkowski

    Question 1. Is NIST the right agency to develop consensus-based 
standards and protocols?
    Answer. NIST is an objective and technically capable organization 
to develop a Smart Grid roadmap and to coordinate the development of 
consensus-based standards. However, NIST itself should not develop 
standards. The tasks of developing new standards or assembling 
consensus on existing standards should be delegated to accredited 
standards development organizations.

    Question 2. What is a realistic time-frame for establishing an 
Interoperability Framework?
    Answer. Based on the work over the last year, NEMA is hopeful that 
NIST can establish the framework, which includes prioritization of 
standards areas, by June 2009. The NIST framework may also incorporate 
specifications or requirements of standards changes that need to be 
incorporated into existing standards by various standards development 
organizations. Once standards development organizations are identified 
to establish consensus around a new or existing standard area, NEMA 
anticipates the process taking from 9-12 months.

    Question 3. Do you agree with NEMA that Congress should condition 
the release of Smart Grid funds on the development of NIST endorsed 
standards? If we proceed without an Interoperability Framework are we 
just building ``custom projects''--which is really just a nice way of 
saying projects that will soon become obsolete?
    Answer. To clarify, NEMA advocates conditioning only the 50 percent 
investment matching fund on the NIST standards, with the understanding 
that NIST will produce the standards framework in a timely fashion. 
Demonstration projects can and should be put into place immediately, 
which will generate both jobs and technical expertise. The information 
from these demonstrations will help the industry refine and improve 
standards in preparation for widespread deployment. The matching funds 
should be used to encourage the regulators, utilities, and 
manufacturers to follow a nationwide approach.
    There are some standards that are ready or almost ready for 
implementation today. The industry needs a recommendation from NIST for 
FERC to make those standards the law. Projects that use these standards 
would be eligible for the matching fund immediately.

    Question 4. A smarter grid is supposed to enhance our system's 
security but technologies like smart meters, sensors and advanced 
communications networks can actually increase the vulnerability of the 
grid to cyber attacks. How do we address these cyber security concerns? 
Do the agencies have sufficient authority or is additional Federal 
legislation needed?
    Answer. Communications protocols must incorporate security concerns 
from the ground up, and the standards development organizations are 
aware of this concern. For example, smart meter standards already 
incorporate mechanisms for authentication and encryption. Equally 
important is ensuring that operational practices incorporate security 
criteria. Even the most hardened grid device is vulnerable if the 
installer does not change the default password. In this arena, NERC has 
the appropriate lead on cyber security.

    Question 5. In your testimony, you note that in 1968 President 
Lyndon Johnson issued an Executive Order that directed the Federal 
Government to purchase only computers that complied with a certain 
standard in order to `` minimize costly incompatibility.'' Are you 
suggesting an Executive Order for Smart Grid standards?
    Answer. Certainly, the President could order that the Federal 
Government only purchase energy systems that complied with the NIST 
framework. The example was given to show that the government can use 
multiple policy levers to encourage the industry to converge on one or 
a suite of standards. In addition to an Executive Order, the current 
policy incentives of matching funds and potential FERC mandates are 
suitable mechanisms to encourage interoperability.
    Question 6. How far away are we from so-called ``smart'' appliances 
that can interface with the grid? Do you need standards and protocols 
in place first?
    Answer. At the level of individual components, smart appliances and 
end user controls, such as thermostats, are already here. It is not 
difficult to design a thermostat that shuts off during certain periods 
of the day. It is not difficult to design a system that communicates 
with the thermostat. The difficulty lies in the non-uniform nature of 
the utility industry. It is difficult to design one communicating 
thermostat that will talk to every utility system in the country, 
because not every utility uses the same communications methods.
    We could install smart appliances today, as many pilot projects 
have done. But each pilot has involved some degree of customization to 
the host utility, and we do not yet have a common home area network 
standard. If we want to attract businesses to fund research, product 
development, and manufacturing of smart appliances, we must create a 
market large enough to offset the upfront investment costs. We need 
nationwide standards in order to create nationwide markets.

     Responses of Evan R. Gaddis to Questions From Senator Stabenow

    Question 1. As we know, Smart Grid can promote electric 
transportation technologies, particularly plug-in hybrid electric 
vehicles (PHEVs). A PHEV connected to the grid will enable consumers to 
charge up during the overnight hours when electricity is cheaper, and 
then wake up to a car ready for their morning and evening commutes. 
Some people have proposed that the smart grid (someday) could allow 
energy providers to draw power from a PHEV battery during the day. Do 
you think this is possible? If so, what timeframe would you forecast 
that it is possible?
    Answer. Yes. We will see mass deployment of one-way smart charging 
(i.e. only drawing power during low-cost periods) within a few years. 
However, mass deployment of charging and discharging technologies in 
plug-in hybrids will take some time. Two-way energy flow to and from 
stationary batteries is possible and is in commercial operation in 
several markets across the nation. Two-way energy flow with mobile 
automotive batteries has been demonstrated, but there are unresolved 
questions over battery wear and end user safety. In addition, the 
utility's distribution system must also be reconfigured to handle two-
way power flows. Many protective devices are only set up to detect 
short circuits and faults when power flows toward the home. We are 
likely several years away from a national system that can support two-
way charging and discharging from PHEVs.
    Question 2. What can we be doing to ensure that the manufacturing 
of this equipment leverages as many American jobs as possible?
    Answer. Congress can start by establishing steady funding for 
domestic energy research and demonstration programs to attract the 
brightest scientists and engineers. Businesses that commercialize new 
technologies tend to locate near their inventors. Congress should also 
promptly establish long term policies, such as renewable energy 
standards, carbon pricing, or production tax credits, which demonstrate 
a predictable market for clean technologies. If there is domestic 
demand for new domestic technologies, those products will tend to be 
made in the U.S.
                                 ______
                                 
       Responses of Edward Lu to Questions From Senator Bingaman

    Question 1. One of the often stated key benefits of Smart Grid is 
its ability to integrate large quantities of intermittent renewable 
resources into the grid and to efficiently route this power where it is 
needed. To achieve this will clearly require both the build-out of new 
transmission to renewable resource rich locations as well as upgrading 
our current grid to have the intelligence to handle these intermittent 
resources.
    In order to achieve the benefits that we want from Smart Grid, how 
much new transmission do you foresee being needed? And how do we 
prioritize the building of new transmission vs. upgrading our current 
grid?
    Answer. A broad smart grid vision includes new transmission lines 
able to carry clean, renewable power from remote areas to population 
centers where it is needed. Google has developed a ``Clean Energy 
2030'' proposal that envisions 300 GW of onshore wind and 80 GW of 
concentrating solar power generation, an amount that would require 
20,000 miles of new transmission lines to support (currently there are 
200,000 miles of high-voltage lines in the U.S.). Our Clean Energy 2030 
plan is available at: http://knol.google.com/k/-/-/15x31uzlqeo5n/
1#Electricity_Sector.

    Question 2. ``Smart Metering'' projects for residential consumers 
have become the poster-child of the Smart Grid. However, some studies 
have found that the majority of the benefits of the Smart Grid will 
result from investments in grid transmission and distribution system 
upgrades and optimization, with only a small percentage of energy 
savings and emission reductions coming from smart metering programs. 
Could you comment on this? And how should we take these findings into 
consideration when prioritizing which Smart Grid demonstration projects 
to fund? NOTE: as a data point, the Climate Group SMART 2020 Report 
estimates that 85 percent of the carbon reduction benefits of a Smart 
Grid come from Grid Optimization and Renewables Integration, and only 
15 percent will come from End-User Energy Management.
    Answer. Significant energy savings can result from smart metering 
programs--studies show that just being aware of energy consumption in 
real-time can lead to individual reductions of 5 to 15 percent. If just 
half of U.S households cut their demand by 10 percent, the electricity 
savings would be greater than today's total U.S. wind and solar power 
output. The CO2 emissions avoided would be equal to taking 
approximately off the road. Moreover, additional savings would result 
if real-time, consumer-centric smart meters are combined with real-time 
pricing incentives that reward consumers for reducing their consumption 
during peak demand. Of course, if smart meters are not enabled to 
provide real-time information to consumers then their benefits could be 
small indeed. Smart meters should provide information to consumers in a 
timely fashion and useful format.

    Question 3. After the Department of Energy has spent out its nearly 
$4.5 billion on Smart Grid Investments, how do we measure whether that 
money has been spent effectively? How soon and what improvements in our 
grid should we expect to see?
    Answer. We should consider actual reductions in electricity 
consumption that can be measured with deployed smart grid equipment, 
including smart meters and home energy management devices. We should 
expect to see more accurate projections of future demand requirements, 
which will mean more cost-effective planning and likely deferrals of 
investments in new generation before it is actually needed. President 
Obama has said he wants to jump start the deployment of 40 million 
smart meters in American homes.

       Responses of Edward Lu to Questions From Senator Murkowski

    Question 1. Is NIST the right agency to develop consensus-based 
standards and protocols?
    Answer. NIST has a role, but it should not delay the private sector 
from reaching a consensus on standards and protocols, a risk to keep in 
mind given NIST's former lack of funding and time required to act.

    Question 2. What is a realistic time-frame for establishing an 
Interoperability Framework?
    Answer. We have no position on the time-frame for the 
Interoperability Framework generally (except that it should be 
established as soon as possible), but we do think that consumer-facing 
data formats specifically could be developed very quickly.

    Question 3. Do you agree with NEMA that Congress should condition 
the release of Smart Grid funds on the development of NIST endorsed 
standards? If we proceed without an Interoperability Framework are we 
just building ``custom projects''--which is really just a nice way of 
saying projects that will soon become obsolete?
    Answer. No, Smart Grid funds should not be thus delayed--
particularly since Congress clearly addressed the issue of standards 
for funds when it required that stimulus projects utilize ``open 
protocols and standards (including Internet-based protocols and 
standards) if available and appropriate'' a precondition for winning 
stimulus dollars. (ARRA, Sec. 405). This provision in the American 
Recovery and Reinvestment Act also removes the danger that proceeding 
without a NIST-blessed Interoperability Framework will lead to Federal 
funding of projects that will soon become obsolete. To the extent that 
utilities move forward with large scale meter deployments based on open 
standards and protocols, such delay will not be necessary. Moreover, to 
the extent that the meters deployed have a way to communicate with 
devices inside of consumers homes (as contemplated by Section 1301 of 
EISA-07) that is based on open standards and protocols there will be 
less reason to be concerned about obsolescence.

    Question 4. A smarter grid is supposed to enhance our system's 
security but technologies like smart meters, sensors and advanced 
communications networks can actually increase the vulnerability of the 
grid to cyber attacks. How do we address these cyber security concerns? 
Do the agencies have sufficient authority or is additional Federal 
legislation needed?
    Answer. Agencies have authority now as well as direction provided 
in Title 13 of the Energy Independence and Security Act of 2007 (EISA-
07). The smart grid should be deployed with cyber security in mind.

    Question 5. You tout the potential cost-saving benefits of Smart 
Grid but isn't it true that customers will need to act in response to 
their price signals in order to realize the benefits?
    Answer. The benefits of having information about electricity 
consumption do not depend on price signals. An increasing awareness of 
consumption will help consumers find ways to reduce consumption. One 
review of research on the effects of providing immediate feedback on 
electricity usage found that overall demand reductions generally ranged 
from 5 to 15 percent. See Sarah Darby, The Effectiveness of Feedback on 
Energy Consumption: A Review for DEFRA of the Literature on Metering, 
Billing and Direct Displays (2006), available online at: http://
www.defra.gov.uk/environment/climatechange/uk/energy/research/pdf/
energyconsump-feedback.pdf. Price signals will further increase the 
benefits of simply having realtime information about electricity 
consumption, which is possible if smart meters are required to provide 
consumers with such information (or if consumers otherwise have access 
to such consumption information, for example through a home energy 
management device).

    Question 6. Do we need to do some kind of public outreach or 
marketing to get consumers comfortable with this new technology? Do you 
see any particular problems associated with Smart Grid technology for 
low-income consumers?
    Answer. Yes, public outreach or marketing may be important but the 
need for such efforts can be reduced if meter deployments support 
robust Home Area Networks that give consumers information and easy to 
use tools. This could be as simple as a display on the kitchen counter, 
or a software tool on a computer or telephone. With low income 
consumers, the importance of communicating the value of Smart Grid may 
require special efforts but all consumers should be given as many 
options as possible when it comes to information and tools. Google and 
others in the private sector (for example, our Smart Grid policy 
partner General Electric) are engaging in such educational efforts 
concerning smart meters and the smart grid more generally--our 
PowerMeter announcement is part of that effort.

    Question 7. I understand Google is currently developing a 
PowerMeter that will provide consumers with the ability to monitor 
their energy consumption in a meaningful way. When do you expect this 
to be released in the market?
    Answer. Yes, we're working on a home energy monitoring tool called 
Google PowerMeter that provides near real-time energy information right 
on your computer. This is an internal project only at this time, but we 
are working with utilities and device manufacturers around the world to 
gradually roll out programs for their customers sometime this year.

       Responses of Edward Lu to Questions From Senator Stabenow

    Question 1. A number of utilities already have begun modernizing 
their grids by installing digital electric meters and technologies that 
enable two-way communication capabilities between the utilities and 
their customers. This transformation to a ``smart grid'' should benefit 
the companies and their customers. How will the smart grid enable 
entities to detect and repair outages faster, hookup customers quicker, 
and give consumers the capability to manage their homes' appliances 
more efficiently?
    Answer. The Smart Grid is essentially an Energy Internet and 
consists of three things: sensors, software and two-way communications. 
The more high-speed the communications component of a smart grid, the 
more capable it will be. In fact, Title 13 of the Energy Independence 
and Security Act of 2007 (EISA-07) suggests that to qualify as a smart 
grid communications should be capable of real-time connection with 
consumers. For example, Section 1301 of the EISA-07 states lists among 
the characteristics of a Smart Grid: ``Deployment of `smart' 
technologies (real-time, automated, interactive technologies that 
optimize the physical operation of appliances and consumer devices) for 
metering, communications concerning grid operations and status, and 
distribution automation.'' The same section also lists, ``Provision to 
consumers of timely information and control options.'' (emphasis 
added).

    Question 2. Although Smart Grid does not require new transmission 
lines, utilities will still need to implement lots of changes and 
upgrades, the costs of which will be borne ultimately by ratepayers. 
In-home devices will also be expensive up-front investments, although 
their long-term value for energy savings is clear. When will these 
investments in Smart Grid become cost effective for consumers and what 
can government do to help?
    Answer. Given the potential energy savings, smart grid investments 
will be cost effective. Moreover, investments in Smart Grid will also 
become more cost-effective as the cost of in home devices fall as a 
result of more purchases and the inevitable improvements in information 
and communications technology reduce costs, just as has happened with 
other consumer electronics like mobile phones. Also, stimulus funds 
will help to make some investments in Smart Grid cost-effective that 
would not otherwise have been at this time.

                                 ______
                                 
   Responses of Katherine Hamilton to Questions From Senator Bingaman

    Question 1. One of the often stated key benefits of Smart Grid is 
in its ability to integrate large quantities of intermittent renewable 
resources into the grid and to efficiently route this power where it is 
needed. To achieve this will clearly require both the build-out of new 
transmission to renewable resource rich locations as well as upgrading 
our current grid to have the intelligence to handle these intermittent 
resources. In order to achieve the benefits that we want from Smart 
Grid, how much new transmission do you foresee being needed? And how do 
we prioritize the building of new transmission vs. upgrading our 
current grid?
    Answer. The GridWise Alliance as an organization advocates for 
deploying smart grid technologies holistically on the existing grid to 
improve the efficiency, reliability, and security of the grid. We 
understand, however, that even with a fully optimized grid, additional 
transmission lines will be needed to access remote renewable energy 
resources and integrate those resources onto the existing grid. We 
defer to experts in utilities and Regional Transmission Organizations 
to quantify the amount of new transmission needed to fully access areas 
rich in renewable resources.
    While we do not take a position on how many of these new lines will 
need to be built, we do advocate that, wherever feasible, smart grid 
technology be embedded into additions to the transmission system. 
Different approaches should be taken for transmission and distribution 
since the priorities of each are different (for example, on the 
transmission side, regional operations and renewables access may be the 
highest priorities). Extending the use of existing transmission could 
mean upgrading existing lines to carry additional capacity offered to 
the transmission system. This upgrading could occur more quickly and 
would not require new rights of way.
    Once smart grid technologies are considered best practice for 
building and optimizing both transmission and distribution, we can 
achieve benefits from both central and distributed renewable energy, 
system and consumer energy efficiency, power reliability, and 
operational cost reduction.

    Question 2. ``Smart Metering'' projects for residential consumers 
have become the poster-child of the Smart Grid. However, some studies 
have found that the majority of the benefits of the Smart Grid will 
result from investments in grid transmission and distribution system 
upgrades and optimization, with only a small percentage of energy 
savings and emission reductions coming from smart metering programs. 
Could you comment on this? And how should we take these findings into 
consideration when prioritizing which Smart Grid demonstration projects 
to fund?
    Answer. The GridWise Alliance as an organization does not advocate 
for specific technologies, but rather for a host of technologies and 
applications that will make our electric grid smarter. The benefits of 
each component of the smart grid--advanced metering, infrastructure and 
smart meters, distribution and transmission grid operations, demand 
response programs, distributed energy resources--must be fully 
integrated to provide the greatest benefits.
    Smart metering is one such technology that, with accompanying 
customer data and interaction, can help in determining distribution 
system upgrade and optimization needs. More frequent time-based 
information at the service delivery point provides data that can assist 
in determining distribution system upgrade and optimization needs. Data 
from smart meters can help assess deployment maintenance schedules, 
demand response, asset utilization, and work force management. 
Delivering this information to end users will allow them to understand 
and interact with the grid in real time so they can make informed 
choices to control their carbon footprint and employ energy efficiency 
and demand response technologies. Even more importantly, the marriage 
of smart metering to Home Area Networks (HAN) portends a future where 
demand reductions can occur automatically when intermittent renewable 
generation ceases, increasing the value of renewables and reducing the 
need for fossil-based generation to act as ``back-up''. While smart 
metering is only part of the smart grid, a metering program in 
combination with distribution smart grid technologies can generate more 
benefits than any one program individually.
    Additionally, smart grid technologies can support improved 
reliability and help mitigate the societal impact from severe weather 
damage to transmission and distribution systems. Societal impacts are 
generally measured in the billions of dollars; for example, in Houston 
the societal cost of Hurricane Ike was estimated at $5.4 billion. With 
smart grid communication, restoring power 2 days sooner could have 
saved the city millions of dollars. A challenge utilities and customers 
face is the inability to have real time data regarding the actual 
condition of the system; a smart grid can provide that data.
    Thus, the GridWise Alliance advocates that demonstration funding 
should go to a variety of technologies and applications without 
singling out any one as having higher preference.

    Question 3. After the Department of Energy has spent out its nearly 
$4.5 billion on Smart Grid Investments, how do we measure whether that 
money has been spent effectively? How soon and what improvements in our 
grid should we expect to see?
    Answer. Projects selected for funding should readily provide data 
on a variety of benefits including economic stimulus (including, but 
not limited to, job creation and/or retention), increased renewable 
energy integration, increased clean distributed energy systems, 
increased energy efficiency, demand response, overall system 
optimization, better reliability and increased security. The GridWise 
Alliance is prepared to collaborate with the Department of Energy to 
recommend specific metrics that would be a suitable proxy by which 
benefits can be ascertained. Indeed, developing the relative certainty 
of these metrics today would enable more effective disbursement of the 
funds currently available. GridWise Alliance may be providing input to 
the Department of Energy's Notice of Intent for investment grant 
projects during the public comment period. If the funding is disbursed 
efficiently and effectively, depending on the specific application, we 
should begin to see immediate results from smart grid applications on 
our electricity system.

    Question 4. Ms. Hamilton, you state in your testimony that a 
critical issue for funding of smart grid projects is establishing 
minimum smart grid standards for other energy infrastructure projects 
that are undertaken pursuant to provisions of the Recovery Act apart 
from those that contain specific smart grid language. Could you expand 
on this point and suggest how we in Congress might address this?
    Answer. In my testimony I was referring to transmission system 
expansion. Any transmission bill should include language that such 
expansion incorporates smart grid capabilities where feasible and cost 
effective. In addition, it is important for Congress to encourage the 
continual integration of smart grid technologies through energy policy. 
Smart grid applications are critical to enable stable and effective 
management of intermittent sources. Without the integration of smart 
grid technologies we will not realize the full potential of energy 
produced from renewable resources, even to the levels being discussed 
in many of the proposed renewable portfolio standards. Congress should 
consider how smart grid deployment could enhance the implementation of 
a renewable portfolio standard, an energy efficiency standard, or a 
reliability standard.

  Responses of Katherine Hamilton to Questions From Senator Murkowski

    Question 1. Is NIST the right agency to develop consensus-based 
standards and protocols?
    Answer. As the National Institute of Standards and Technology, NIST 
has the appropriate mission, experience, and skills for coordinating 
the development of consensus-based standards and protocols in domains 
like building systems automation. These skills should transfer easily 
to smart grid interoperability standards with the funding now in place. 
NIST has coordinated well with the DOE GridWise Architecture Council as 
well as other organizations and individuals during this first year of 
activity. NIST has received no funding for this mandate prior to the 
stimulus bill and, as a result, is just now able to devote more 
resources to focus on the standards. While NIST has coordinated well 
with the DOE GridWise Architecture Council as well as other 
organizations, NIST needs to accelerate its outreach efforts to bring 
in the work of these groups and drive convergence in the industry. 
Although we believe that continued oversight is important, simply 
removing the activity from NIST would only delay the process.

    Question 2. What is a realistic time-frame for establishing an 
Interoperability Framework?
    Answer. Once NIST's outreach to the existing efforts is completed, 
it should support work like that of the GridWise Architecture Council 
that is already underway, while initiating any new efforts within the 
context of standards development organizations. With the communities 
working in parallel, the mapping of each point of interoperability 
between the various smart grid systems should between 3-6 months of 
focused effort. NIST's domain expert work groups are a positive start 
to this activity. Once the mapping is complete, development and 
approval of consensus standards for each point of interoperability 
could take anywhere from 2 months to 2 years, depending on the 
technical complexity of the issues.

    Question 3. Do you agree with NEMA that Congress should condition 
the release of Smart Grid funds on the development of NIST endorsed 
standards? If we proceed without an Interoperability Framework are we 
just building ``custom projects''--which is really just a nice way of 
saying projects that will soon become obsolete?
    Answer. The GridWise Alliance does not agree with NEMA that 
Congress should condition release of the smart grid stimulus funds. We 
can make significant progress on making our grid smarter prior to the 
completion of the standards process. Much of the work is already quite 
far along-or even complete--on achieving interoperability between 
systems that make up the smart grid. Emphasis should be placed on rapid 
progress of work in areas that will benefit smart grid projects that 
are already being proposed by industry.
    The interoperability process will benefit from and be accelerated 
by stimulus funding for projects. Since utilities and others deploying 
smart grid technologies do not want stranded assets, they are driving 
early interoperability standards development in work groups that can 
feed into the NIST process. They are also designing deployment such 
that software could be revised rather than entire equipment investments 
changed out. This is common practice for other industries and is an 
effective means of driving deployment without excessive redeployment 
cost once the standards are finalized.
    Moreover, the stimulus bill requires that demonstration initiatives 
and Federal matching grants use open protocols and standards if 
available and appropriate. We feel that this direction from Congress, 
as well as the activities listed above, will ensure that expeditious 
disbursement of stimulus funds is money well-spent.

    Question 4. A smarter grid is supposed to enhance our system's 
security but technologies like smart meters, sensors and advanced 
communications networks can actually increase the vulnerability of the 
grid to cyber attacks. How do we address these cyber security concerns? 
Do the agencies have sufficient authority or is additional Federal 
legislation needed?
    Answer. We agree that cyber-security issues are paramount when 
installing intelligent two-way communication devices on the grid. Best 
practices exist for segmenting different business functions such as 
generation, transmission, distribution, customer operations, and 
corporate IT to ensure grid reliability. Strong access control, secure 
authentication and confidentiality mechanisms have existed for many 
years and can be applied to securing the smart grid.
    Utilities and other industry partners are developing a consensus 
process around specifications for security around some technologies 
that should be applicable to other smart grid technologies across the 
grid. Further, security for smart grid technologies is being ``baked-
in'' from the start instead of ``bolted on'' as in the past; the 
security of the grid will benefit from this up-front, holistic 
approach. Digital devices exist already in transmission substations; 
smart grid investments will serve to upgrade cyber security for these 
systems. The GridWise Alliance supports the coordination of FERC, NERC, 
and NARUC with the Department of Homeland Security and industry efforts 
as critical to the development of cyber security standards.

    Question 5. You testified that commercial deployment of Smart Grid 
technologies is the most effective tool to encourage private sector 
product research and development. In our rush to spend the money 
provided in the Stimulus bill, are we getting ahead of ourselves by 
putting the ``cart before the horse'' like Commissioner Butler claims?
    Answer. As with all technology development, the business case 
associated with commercial success often drives continued research and 
development. While we have substantial smart grid technology today that 
creates benefits for our grid, we can continue to enhance these 
applications through research and development. Research and development 
does not end when commercialization begins, but can continually improve 
performance, price, and other benefits from any given technology. The 
smart grid demonstration projects could serve to both spur widespread 
investment in these technologies as well as to provide greater clarity 
of the need for any additional research and development.

    Question 6. The recent Stimulus bill imposing a new requirement 
that demonstration projects must use ``open protocols and standards 
(including Internet-based protocols and standards) if available and 
appropriate.'' Please explain this new requirement and tell the 
Committee whether or not you support it. Opponents of this requirement 
argue that internet-based standards can be slow and therefore are not 
appropriate to address reliability concerns.
    Answer. The GridWise Alliance is fully supportive of open protocols 
and standards which would allow all technologies to compete without 
picking a winner at this stage. Technology choice should not be 
legislated, but should be left to the industry to make choices based on 
the best technology for the situation as well as the interoperability 
standards enforced by the appropriate Federal and state regulators. We 
believe legislative language should maintain technology neutrality--
that open interface specifications are important, that competition 
between solution providers encourages innovation while driving down 
cost, and that performance-based measures can remain technology-
neutral.

    Question 7. You testified that since a smarter grid is a ``means to 
an end, additional smart grid policies need to be included when energy 
or climate legislation is considered that involves our electricity 
system.'' For example, you suggest that smart grid could become an 
element of an RPS. Please elaborate.
    Answer. The GridWise Alliance strongly believes that smart grid 
technologies enable the rapid and effective deployment of other clean 
energy technologies and, as such, should be considered when policies to 
incentivize those technologies are developed. The electric system and 
all of its components need to be thought of holistically and 
interactively when designing energy or climate legislation. In an 
energy efficiency standard, for example, smart grid could be included 
in the definition of distribution efficiency (by specifying reduced 
line losses, for example). In climate legislation, smart grid bonus 
allowances could be included much the way bonus allowances for demand 
response activities were included in the Clean Air Act Amendments of 
1990.

    Question 8. In your written testimony, you note that ``most 
consumers will not change behavior without price signals, education, 
and technological assistance. Despite GE's Smart Grid Superbowl ad, 
what do consumers know about Smart Grid today?
    Answer. Consumers have varying degrees of understanding of smart 
grid based on whether they live in an area served by a utility that has 
started to deploy those technologies. To a large percentage of the 
population, the concept of smart grid may be misunderstood; they will 
equate the grid with transmission towers and high voltage lines but 
will have little sense that these elements need to be made more 
intelligent. With first-hand knowledge, consumers will begin to 
understand what a smart meter is and how this technology impacts their 
life and their pocketbook. For the majority of the people in this 
country, however, a scarecrow on a power line, while creative, does not 
help them understand what the smart grid will do for them. It will take 
an increased level of education on the part of all stakeholders--our 
businesses, government, utility commissions, and consumer groups--to 
help consumers understand how they can benefit from more information 
about and control over their energy use. The GridWise Alliance is in a 
position to provide much of that education. We are already working with 
the National Energy Education Project to develop curriculum materials 
for K-12. We are also working with states--through state energy 
offices, utilities, and Governors--to provide information for 
commissioners and state legislators.

    Response of Katherine Hamilton to Question From Senator Stabenow

    Question 1. We understand that smart grid will give customers more 
choices--and during certain times in the summer for example, a customer 
may be able to opt in or opt out and get certain benefits from their 
providers. Would low-income customers be able to plug-in the amount of 
energy that they want to spend and how would the smart grid benefit low 
income customers or residents on fixed incomes?
    Answer. Low or fixed income consumers certainly stand to benefit 
from smart metering applications. Ultimately, a consumer could set up 
the amount he or she could spend in a given month and the energy 
management program would then indicate how the consumer should use 
their energy to meet that goal (for example, thermostat setting, plug 
load management, etc.). As the month unfolds, the system would alert 
them to high demand times and give them opportunities to adjust their 
use and prevent increased bills, eliminating surprises at the end of 
the month. By utilizing the smart grid and smart metering technologies, 
many creative programs could be formed to address this market. For 
example, customers unable to make these decisions could elect to have 
their energy consumption sent to caretakers or other support groups. 
Those consumers who are able to make lifestyle changes based on smart 
grid information defer capacity requirements which benefit all 
consumers, regardless of their desire or ability to participate in or 
opt out of a specific program.
                                 ______
                                 
    Responses of Suedeen G. Kelly to Questions From Senator Bingaman

    Question 1. One of the often stated key benefits of Smart Grid is 
in its ability to integrate large quantities of intermittent renewable 
resources into the grid and to efficiently route this power where it is 
needed. To achieve this will clearly require both the build-out of new 
transmission to renewable resource rich locations as well as upgrading 
our current grid to have the intelligence to handle these intermittent 
resources. In order to achieve the benefits that we want from Smart 
Grid, how much new transmission do you foresee being needed? And how do 
we prioritize the building of new transmission vs. upgrading our 
current grid?
    Answer. In response to your first question, the North American 
Electric Reliability Corporation (NERC) has determined that significant 
new, extra high-voltage transmission facilities are essential in order 
to deliver power from the remote renewable resources. This 
``transmission superhighway'' would be overlaid on the existing grid. 
NERC does not estimate the amount of new transmission facilities that 
are necessary, and FERC has not undertaken any study to identify an 
amount. The Department of Energy (DOE), in 2008, issued a study titled, 
``20 percent Wind Energy by 2030.'' This study referred to a conceptual 
plan by AEP, a large utility and transmission owner/operator, that 
estimated that 19,000 miles of new 765 kV transmission line would be 
required to meet the ``20 percent'' goal. FERC has not undertaken any 
study to confirm or dispute the reasonableness of AEP's estimate. (NB: 
AEP's estimate was only targeted to wind.) It is impossible to gauge 
how much or the type of transmission (upgrades vs. new) is needed to 
bring America's renewable resources to market without a sophisticated 
transmission planning effort to analyze numerous alternatives. This 
planning process must take into account the locations of the resources, 
the locations of load centers, the nature of the demand for the 
renewable resources, siting and cost allocation. Transmission planning, 
siting, and cost allocation are interwoven and affect what actually 
gets built. The Nation will require new transmission facilities. 
However, to the extent the current grid is sited appropriately for the 
transmission of renewables to load, and it can be upgraded cost-
effectively, that should be given priority over the building of new 
transmission lines.

    Question 2. ``Smart Metering'' projects for residential consumers 
have become the poster-child of the Smart Grid. However, some studies 
have found that the majority of the benefits of the Smart Grid will 
result from investments in grid transmission and distribution system 
upgrades and optimization, with only a small percentage of energy 
savings and emission reductions coming from smart metering programs. 
Could you comment on this? And how should we take these findings into 
consideration when prioritizing which Smart Grid demonstration projects 
to fund?

    NOTE: as a data point, the Climate Group SMART 2020 Report 
estimates that 85 percent of the carbon reduction benefits of a Smart 
Grid come from Grid Optimization and Renewables Integration, and only 
15 percent will come from End-User Energy Management.
    Answer. Smart Grid involves a comprehensive plan of adding 
intelligence to all aspects of the electricity system, from the 
transmission operator's control room down to customer systems and 
equipment, including household appliances. As such, application of 
Smart Grid at all levels of the power system has the potential to 
generate great benefits, bringing efficiency to utility operations, and 
helping to manage the bulk power system, as well as enabling customers 
to have more options in managing their electricity. FERC believes that 
the portfolio of demonstration projects funded by DOE should include 
projects on both the transmission and distribution system and should 
include a range of technologies-not just meter installation. FERC would 
like to see the funded demonstration projects include technologies such 
as sensors on transmission and/or distribution equipment, digital 
communications in substations, and/or high-speed communications 
equipment. FERC would also like to see equipment that can accommodate a 
variety of different communications protocols in order to increase the 
range of devices that can participate in this effort, thereby 
increasing the overall functionality of the smart grid system. Neither 
smart metering nor grid optimization and renewables integration alone 
will leverage all the potential benefits of a smart grid.

    Question 3. After the Department of Energy has spent out its nearly 
$4.5 billion on Smart Grid Investments, how do we measure whether that 
money has been spent effectively? How soon and what improvements in our 
grid should we expect to see?
    Answer. FERC is hopeful that the information that DOE will require 
from the smart grid grantees will show how effectively the money has 
been spent. DOE is developing an Information Clearinghouse to be 
populated with lessons learned from the Smart Grid pilot and 
demonstration projects. Indeed, the American Recovery and Reinvestment 
Act of 2009 (ARRA) authorizes DOE to require the grantees of these 
projects to provide it with information to be put into the 
Clearinghouse. FERC, along with the state members of the FERC-NARUC 
Smart Grid Collaborative, has provided DOE with a proposed set of 
information/data requirements that grantees should be required to 
provide to DOE, including the following information:

          a. Any internal or third party evaluations, ratings, and/or 
        reviews including all primary source material used in the 
        evaluation;
          b. Detailed data and documentation explaining any improvement 
        in the accurate measurement of energy efficiency, energy 
        conservation or demand response resources;
          c. Detailed data and documentation explaining the expansion 
        of the quantity of energy efficiency, energy conservation or 
        demand response resources that resulted from the project and 
        the resulting economic effects;
          d. Detailed data and documentation for any improvements in 
        the ability to reliably integrate variable renewable generation 
        resources;
          e. Detailed data and documentation that shows any achievement 
        of greater system efficiency through a reduction of 
        transmission congestion and loop flow;
          f. Detailed data and documentation showing how the 
        information infrastructure supports distributed resources such 
        as plug-in electric vehicles;
          g. Detailed data and documentation that shows how the project 
        resulted in enhanced utilization of energy storage;
          h. Detailed data and documentation that shows reductions in 
        energy and demand associated with the project, and,
          i. Detailed data and documentation that shows how the project 
        encouraged new business models, market innovation, and third 
        party and private capital participation.

    FERC and the state members of the Collaborative also proposed to 
DOE that the grantees be required to independently monitor and measure 
customer response to the project and that this information be included 
in the Clearinghouse. If the above information is required and 
reported, FERC believes it will go far toward helping DOE measure 
whether the money has been spent effectively.
    Regarding how soon we can expect to see grid improvements, within 
the past year, FERC has acted on several rate applications that 
involved the deployment of transmission-level Smart Grid equipment. For 
example, several utilities have identified the deployment of Phasor 
Measurement Units (PMU), which, together with the dedicated 
communications infrastructure and advanced microprocessor-based 
controls needed to appropriately make use of high-quality PMU data, 
will increase the accuracy and availability of critical system 
information. This information is expected to lead to improved planning 
and operations of the system as well as increased efficiency of the 
relevant transmission facilities. These technologies are fairly well 
developed and these proposals were not contingent upon ARRA grant 
funding. Accordingly, some of the improvements envisioned for the Smart 
Grid, particularly in the area of improved use of grid resources, 
should begin to manifest themselves in the very near future. The more 
ambitious improvements that will likely be the subject of ARRA grant 
funded pilot projects will likely take longer to realize, depending 
upon the lessons learned from each pilot/demonstration project.

   Responses of Suedeen G. Kelly to Questions From Senator Murkowski

    1. What does Smart Grid technology promise in terms of reliability? 
A smarter grid is supposed to enhance our system's security but 
technologies like smart meters, sensors and advanced communications 
networks can actually increase the vulnerability of the gird to cyber 
attacks. How do we address these cyber security concerns? Do the 
agencies have sufficient authority or is additional Federal legislation 
needed?
    Answer. Cyber threats have been growing and continuously changing. 
Currently, FERC's main tools for increasing cyber security are 
reliability standards. In early 2008, FERC approved eight cyber and 
physical security-related reliability standards as part of its 
authority under section 215 of the Federal Power Act (FPA). These 
mandatory reliability standards apply to the bulk power system in most 
of the United States and will impose approximately 160 requirements and 
subrequirements. The provisions of these standards phase-in over an 
implementation period that ends by 2010. However, upon approval, FERC 
found that the standards required significant modifications and 
therefore directed the Electric Reliability Organization (ERO) to make 
changes to the approved standards. The drafting of those modifications 
is currently under way through the standards development process of the 
ERO, NERC. Although NERC is expected to complete an interim filing that 
addresses some of FERC's directives within the next few months, the 
majority of FERC's directives are not scheduled to be revised until 
sometime in 2010. Even though FERC gave considerable guidance on its 
expectations for improved cyber security standards in January 2008, at 
this point, we cannot predict the quality or timing of the revised 
cyber security standards industry is currently working on. It should 
also be noted that cyber security reliability standards are likely to 
evolve over time as technology and threats change. Achieving cyber 
security is not a one-time effort. However, at the very least, every 
standard that is developed as part of NIST's interoperability framework 
must be consistent with the overarching cyber security and reliability 
provisions of the EISA as well as the existing FERC-approved 
reliability standards.
    Regarding the second part of this question, section 1305 of the 
EISA, which is a stand-alone provision and does not amend the FPA, 
requires FERC to promulgate interoperability standards, but does not 
provide that the standards will be mandatory or provide any authority 
or procedures for enforcing such standards. FERC's existing FPA 
authority applies only to certain entities (i.e., public utilities 
under its ratemaking authority in sections 205 and 206, or users, 
owners and operators of the bulk power system under its reliability 
authority in section 215). However, FERC's FPA authority excludes local 
distribution facilities unless specifically provided. Its authority 
under sections 205 and 206 applies only to public utilities, and its 
section 215 authority does not authorize it to mandate standards but 
rather only to refer a matter to NERC's standard-setting process. If 
the intent of Congress is for the Smart Grid standards to be mandatory 
beyond the scope of the, FPA, then additional legislation should be 
considered.
    FERC's legal authority is inadequate to respond quickly to protect 
the grid against a cyber attack. Because of the tremendous disruption 
that could result from a cyber attack, legislation should be considered 
to allow the Federal Government to act promptly to protect against 
cyber threats or other national security threats.

    Question 2. The Stimulus bill provided an unprecedented $4.5 
billion in Federal funds for smart grid activities. In your opinion, 
what is the best way to allocate these funds--matching grants for 
technology investments; research and development; pilot programs? Over 
what timeframe? What are the necessary first steps?
    Answer. Most Smart Grid technologies have moved beyond the pure R&D 
stage, though not all to the same extent. Many transmission-level Smart 
Grid technologies appear to be close to commercial viability already. 
Other more ambitious Smart Grid technologies, particularly those at the 
customer end, appear to require further testing through pilot projects. 
The Department of Energy should remain flexible enough in its approach 
to permit well-developed technologies to receive matching grants for 
deployment while other less-developed technologies receive funding for 
pilot programs. An important first step would be to survey the range of 
Smart Grid technologies to determine their respective levels of 
developmental maturity.
    There is an urgent need to move forward quickly on developing Smart 
Grid capabilities. The bulk power system faces reliability challenges 
that Smart Grid technologies could address. Among these challenges are 
the need to reliably and economically integrate large volumes of 
variable generation, deal with the changes in fuel mix and generation 
location that are likely to result from greenhouse gas control 
measures, and possibly the advent of a potentially large new load class 
in the form of electric vehicles.

    Question 3. What capabilities and expertise in this area does each 
of your agencies bring to the table?
    Answer. One of FERC's primary responsibilities under the FPA is to 
ensure that the rates, terms and conditions of transmission and sales 
of electric energy at wholesale by public utilities in interstate 
commerce are just, reasonable and not unduly discriminatory or 
preferential. Thus, FERC has decades of experience regulating wholesale 
energy transactions and markets and transmission. FERC also has a major 
role under the FPA in the reliable operation of the bulk power system 
in most of the Nation. FERC exercises this latter authority, which was 
enacted as part of the Energy Policy Act of 2005, by approving and 
enforcing mandatory reliability standards for the bulk power system 
applicable to the United States other than Alaska and Hawaii. More 
recently, EISA gave FERC the additional responsibility of instituting a 
rulemaking proceeding to adopt standards and protocols to ensure Smart 
Grid functionality and interoperability in interstate transmission of 
electric power and in regional and wholesale electric markets.

    Question 4. In your opinion, is additional legislative authority in 
the Smart Grid area needed? In particular, is additional legislation 
needed to address cost-effectiveness, upgradeability, and cyber 
security concerns?
    Answer. As discussed above in response to Question 1, Congress may 
wish to consider additional legislation with respect to the enforcement 
of Smart Grid standards if the standards are intended to be broadly 
applicable, mandatory, and enforceable. A separate area in which 
legislation is needed is with respect to authority to respond to an 
emergency related to a cyber or other national security threat to the 
transmission system.

    Question 5. In order to realize the benefits of a smarter grid, 
what rate structure changes need to be made at both the wholesale and 
retail level?
    Answer. Some Smart Grid capabilities, such as the efficiency gains 
that should come from deploying advanced sensors and controls on the 
transmission grid, likely need no rate structure changes at the 
wholesale level to be realized. The efficiency and operational benefits 
coupled with cost recovery through transmission rates, in some cases 
including rate incentives, should be sufficient. The FPA provides FERC 
needed flexibility to institute any rate structure changes necessary to 
support Smart Grid development. For example, FERC just issued a 
proposed Smart Grid Policy that would allow utilities to seek to 
recover the costs of smart grid deployments that demonstrate system 
security and compliance with FERC-approved Reliability Standards and 
other criteria. The issue of rate structure changes at the retail level 
is a major issue being addressed among the states and is being 
discussed in the FERC-NARUC Smart Grid Collaborative.

    Question 6. How can Smart Grid technologies reduce the need for 
massive transmission infrastructure investments? What kind of savings 
are we talking about? What are the impacts on transmission if we don't 
get the Federal Smart Grid program right?
    Answer. Smart Grid technologies can allow more efficient use of 
existing and new transmission capacity thereby delaying the need for 
improvements to existing infrastructure and for the construction of new 
facilities. However, because most renewable generation will likely be 
located far from load and from the existing grid, new and upgraded 
lines will be needed. Smart Grid is unlikely to significantly reduce 
the need for a large build-out of the interstate transmission grid.
    It is important to get the Federal Smart Grid program right because 
optimizing the design and operation of our transmission and 
distribution system can yield great efficiencies in the use of 
electricity, and enhance the ability to ensure the reliability of the 
bulk power system. Ultimately, a smart grid will facilitate consumer 
transactions and allow consumers to better manage their electric energy 
costs. For these reasons, FERC, along with other Federal and state 
agencies, as well as industry, is committed to developing and deploying 
a smart grid for the Nation's electric transmission system.

    Question 7. Pursuant to the 2007 energy bill, once NIST has reached 
a sufficient consensus on an Interoperability Framework, FERC will 
begin a rulemaking process for adopting standards and protocols. How 
long do you expect that process to take? Should Congress legislate the 
standards and protocols instead? Is an Executive Order an option?
    Answer. Pursuant to ARRA, Congress has provided important measures 
to move the process forward, including funding provisions, and a Smart 
Grid Clearinghouse for information exchange. In addition, as referenced 
above, FERC just issued a proposed Smart Grid Policy Statement which 
prioritizes the development of key interoperability standards, provides 
direction to the electric industry regarding cybersecurity requirements 
for Smart Grid projects, and proposes that utilities be eligible to 
seek to recover the costs of smart grid deployments under certain 
circumstances. In setting these ``rules of the road,'' and providing 
encouragement for utilities and industry to deploy cutting-edge 
technology, coupled with the key provisions in ARRA, we are developing 
much-needed traction to accelerate the rulemaking proceeding.
                                 ______
                                 
  Responses of Frederick F. Butler to Questions From Senator Bingaman

    Question 1. One of the often stated key benefits of Smart Grid is 
in its ability to integrate large quantities of intermittent renewable 
resources into the grid and to efficiently route this power where it is 
needed. To achieve this will clearly require both the build-out of new 
transmission to renewable resource rich locations as well as upgrading 
our current grid to have the intelligence to handle these intermittent 
resources.
    In order to achieve the benefits that we want from Smart Grid, how 
much new transmission do you foresee being needed? And how do we 
prioritize the building of new transmission vs. upgrading our current 
grid?
    Answer. To me, one of the benefits of the Smart Grid is to make the 
system as a whole more efficient, thereby reducing the need to build 
more transmission. I don't think there is a ``magic number'' in terms 
of how much new transmission is needed; while improvements to the 
electric grid are certainly needed, ideally the less we need to build, 
the better. This begs the importance of a smart planning and siting 
process that gives ample consideration to non-wires alternatives to new 
transmission, particularly if the grid becomes more efficient. One of 
the most promising areas of potential for a ``smart'' grid is that it 
improves the performance of the system already in place; from there 
regulators and transmission providers can explore what new transmission 
might be needed. You don't build first and plan later; we must 
implement a bottom-up process that gives the States and regions the 
lead in determining where we go: without this type of smart planning, 
the Smart Grid may not look so smart after all.

    Question 2. ``Smart Metering'' projects for residential consumers 
have become the poster-child of the Smart Grid. However, some studies 
have found that the majority of the benefits of the Smart Grid will 
result from investments in grid transmission and distribution system 
upgrades and optimization, with only a small percentage of energy 
savings and emission reductions coming from smart metering programs. 
Could you comment on this? And how should we take these findings into 
consideration when prioritizing which Smart Grid demonstration projects 
to fund?

    NOTE: as a data point, the Climate Group SMART 2020 Report 
estimates that 85% of the carbon reduction benefits of a Smart Grid 
come from Grid Optimization and Renewables Integration, and only 15% 
will come from End-User Energy Management.
    Answer. As I said in my testimony, the smart meter should be one of 
the last elements of the utility-deployed Smart Grid. That doesn't mean 
it isn't important, but until we do the work on the back end of the 
system, the smart meter will be meaningless. It may even be the case 
that the smart meter is optional, but the updates and upgrades to the 
backbone are most essential to the smart grid. I think we'll get a 
better idea how customers respond to their smart meters when we see the 
results of the Boulder, Colo., demonstration project. We need to see 
how end-use consumers utilize these meters and build a ``buzz'' so 
others will participate. If we can't prove the benefits of the smart 
meter to the consumer, then we have an uphill battle.
    At the end of the day, we may find out that the meter is not only 
the last piece, but just an extra piece that is not an essential aspect 
of the Smart Grid.

    Question 3. After the Department of Energy has spent out its nearly 
$4.5 billion on Smart Grid Investments, how do we measure whether that 
money has been spent effectively? How soon and what improvements in our 
grid should we expect to see?
    Answer. The FERC-NARUC Smart Grid Collaborative is in the process 
of drafting criteria that outline suggestions for how the Department of 
Energy can best spend the ARRA money. We met on March 19, 2009 to 
review and revise our draft and we submitted our criteria to the 
Department of Energy on March 26, 2009. The list of criteria is 
attached.
    However, it's clear that measuring effectiveness will vary by what 
kind of projects the money goes to. There is a continuum from 
demonstration to deployment that may have varying levels of cost-
effectiveness. Without allowing for some demonstration projects to make 
mistakes, we won't learn the lessons from those mistakes.
    It is important to remember that the areas that are most likely to 
bring benefits for consumers and the electric sector more broadly deal 
with transforming the efficiency and operability of the distribution 
system. If mass smart meter rollouts are not supported by other 
improvements to the system that allow for these kinds of efficiency 
improvements through omni-directional communications and control on the 
grid, it is less likely that these investments will maximize the 
benefits possible.

  Responses of Frederick F. Butler to Questions From Senator Murkowski

    Question 1. Is NIST the right agency to develop consensus-based 
standards and protocols?
    Answer. No response. While the establishment of one set of 
consistent and implementable standards is of the highest importance, 
numerous standard-setting bodies exist; State regulators must leave the 
standard-setting process to those operating in that area of expertise.

    Question 2. What is a realistic time-frame for establishing an 
Interoperability Framework?
    Answer. Again, no response. Those directly involved have the 
expertise to respond.

    Question 3. Do you agree with NEMA that Congress should condition 
the release of Smart Grid funds on the development of NIST endorsed 
standards? If we proceed without an Interoperability Framework are we 
just building ``custom projects''--which is really just a nice way of 
saying projects that will soon become obsolete?
    Answer. First and foremost, interoperability should be built in as 
much as possible to every deployment of Smart Grid technology. System 
obsolescence creates higher costs for ratepayers that State regulators 
are first in line to prevent. However, depending on the development of 
the system being demonstrated or deployed, it is important to allow 
some systems and approaches to succeed or fail in order to learn what 
works best. Software and firmware upgradability should help bridge 
improvements in interoperability, and that is a feature that is in the 
interests of everyone. It will be important to balance room for 
innovation with ensuring that our investments will have the longest 
effective usefulness feasible. Moreover, many Smart Grid investments do 
not require universal interoperability to improve the effectiveness and 
efficiency of grid operation--particularly those operating on the 
distribution system side of the meter.

    Question 4. A smarter grid is supposed to enhance our system's 
security but technologies like smart meters, sensors, and advanced 
communications networks can actually increase the vulnerability of the 
grid to cyber attacks. How do we address these cyber security concerns? 
Do the agencies have sufficient authority or is additional federal 
legislation needed?
    Answer. Our Committee on Critical Infrastructure has begun to 
investigate this issue, and it is of the highest importance. We need to 
move beyond the guns-gates-and-guards analogs of password protection 
and ``security through obscurity'' and move into a framework of maximum 
system resilience and next-generation safeguards that allows the 
network to be impregnable, even if devices connected to it are 
compromised. Three areas are worth considering in principle:

          Hardware improvements in performance shouldn't be mistaken 
        for improvements in security; likewise obscurity does not 
        provide security. Firmware must be updateable to prevent quick 
        obsolescence, but must be protected, for example with 
        encryption, certification and authentication; and software must 
        be deployed in a way so that even if an attack is successful, 
        it will be unproductive, unappealing, unprofitable, and 
        traceable. Even with these protections, the network must be 
        designed to assume data is interceptable, and have an overall 
        design with resilience as a core principle.
          NERC has been setting cybersecurity standards for some time. 
        FERC has also asked for authority to set standards on an 
        emergency basis. While I would support action to close any 
        existing vulnerabilities arising from the integration of 
        communications networks with the electric grid, it is my sense 
        that greater authority at the federal level is not a panacea 
        for solving this issue. Improved communications within the 
        sector and with stakeholders that puts greater emphasis on the 
        network--the ``smart'' side of the Smart Grid--is even more 
        critical.

    Question 5. Mr. Butler, in your written testimony you note that 
within the next 3-10 years all electricity consumers will face higher 
costs, in part due to an increase in fuel prices, but also due to the 
``initial sticker shock of federal and State initiatives to increase 
renewable generation and the anticipated costs associated with climate 
change legislation.'' As you know, Xcel is currently undertaking a $100 
million Smart City project in Boulder, CO and Southern California 
Edison is moving out with $1.6 billion in Smart Grid initiatives--much 
to the dismay of some consumer groups.
    Given the current economic crisis, is it fair to ask consumers to 
bear the costs of a nationwide RPS, climate change initiatives, and 
advanced Smart Grid technologies? What is the impact to low-income 
consumers?
    Answer. This is certainly a fair question, which is why I suggested 
that we start with the backbone of the transmission grid first and let 
the companies pay for it before we start giving smart meters to 
consumers along with the associated higher price tag. We are not 
advocating that smart-grid developments be delayed because of the 
economy, but rather that these developments be borne by those who 
benefit.
    We can avoid much of the consumer backlash if we take this route, 
at least as far as it relates to the Smart Grid.
    In terms of climate policy, NARUC supports federal action because 
it will actually bring the financial and regulatory certainty that, 
over time, will help reduce the cost of reducing carbon emissions. If 
we do not act soon, the costs of compliance will only increase, and the 
industry needs to know the rules of the road so we can finance the next 
round of energy infrastructure.
    Energy costs are going up regardless of whether we tackle climate 
change or the Smart Grid. It is our hope that if we do this 
deliberately and ensure that consumers can actually benefit, we can 
stem the tide of these rising costs and share the benefits with end-use 
customers.

    Question 6. You caution that we need to get consumers on board with 
Smart Grid in order for it to work or we could face a potential 
backlash from consumers forced to pay for the privilege of getting new 
gadgets installed in their homes that they don't necessarily know how 
to use. How can we best move toward public acceptance of Smart Grid 
technologies? Should we undertake some kind of public education or 
outreach program?
    Answer. Yes, public outreach is key. We can't order consumers to 
take these smart meters and walk away. Doing so is a recipe for 
ratepayer revolt. In my view, we need volunteers to participate in 
pilots so they can be excited about the opportunity to see how the 
Smart Grid works. If we see success, hopefully those consumers will 
talk with their neighbors about it, and they'll demand to participate 
as well. This really has to be a grassroots effort. The federal 
government can use its bully pulpit and help fund this.
    My main point here is that we want to bring consumers on board in a 
way that they will feel like they are benefiting. No one benefits if 
consumers don't know how to or want to use their smart meters.

    Question 7. In order to realize Smart Grid benefits, States will 
need to impose new rate structures, such as time-of-use rates. What are 
the pros and cons to this type of retail rate structure? What other 
models could be utilized?
    Answer. I don't believe that States will need to impose time-of-use 
rates to see benefits from Smart Grid deployments. In fact, while 
demand response among consumers is touted as one of the key benefit-
drivers of Smart Grid adoption, more important is the value coming from 
vastly improved outage detection and management, which does not require 
rate changes.
    With that in mind, time of use rates have some documented benefits 
and some potential drawbacks. The benefits are well-described: pricing 
electricity based on the value set by supply and demand uses price to 
send a conservation signal when conservation is most needed, at times 
of peak usage. Demand response facilitated by these rates could have a 
large effect in mitigating high wholesale market prices by shaving the 
most expensive peaks. Time-of-use charges may also free customers from 
hidden charges and premiums paid by utilities to mitigate risk.
    However, savings under time of use rates depends on consumer 
response: during high price periods, consumers are expected to respond 
to prices by conserving, either manually cutting back or by using 
appliances and devices to automatically cut back on electricity 
consumption. However, for a decent proportion of the population, 
behavioral change is not an option (such as turning off the air 
conditioning on the hottest days); and purchasing new appliances or 
price-responsive devices adds new costs to already-strained bills, 
simply to avoid the costs of higher peak prices under time of use 
rates. Even inexpensive, high value, off-the-shelf devices such as 
programmable thermostats generally only work for houses with central 
HVAC systems, and only around 60% of houses have this in the United 
States, disproportionately among middle-and upper-income ratepayers.
    Under any circumstances, prices are rising for consumers, and 
energy efficiency programs that target low-income communities are of 
paramount importance. This is even more the case with time-of use-
rates. These rates may be an important piece of the puzzle, but a range 
of technology options should be paired with existing or proposed rate 
designs that are consistent with the needs of the projects proposed. 
This may include dynamic rates along with other rate designs.

    Question 8. IEEE 1547 describes how to connect distributed 
generators to the grid, and under the 2005 Energy Policy Act, Congress 
recommended that standard be adopted by all States. How many States 
have fully adopted this interconnection standard? How can States 
promote a nationwide Smart Grid if after four years, we still do not 
have nationwide standard for small-scale connections?
    Answer. By 2008, 33 States had adopted or had been in the process 
of adopting an interconnection standard for distributed resources. 
While a national standard may be helpful, it is important to allow for 
States to have the flexibility to adopt the standards that work in 
their situation, and IEEE 1547 is a very good and adaptable standard.
    It's worth remembering that our electricity markets and 
transmission systems are not nation-wide systems, they are regional 
systems, and there are no national utilities. More important than a 
nationwide Smart Grid is one that improves the efficiency and 
resiliency of the local distribution systems that make up 85% of the 
total grid infrastructure. As such, more than adopting national 
standards, an approach that best serves distribution-level, State-
level, and regional-level systems, in a way that reflects the make-up 
of the electric grid, is the key.

  Responses of Frederick F. Butler to Questions From Senator Stabenow

    Question 1. We understand that Smart Grid will give customers more 
choices--and during certain times in the summer for example, a customer 
may be able to opt in or opt out and get certain benefits from their 
providers. Would low-income customers be able to plug-in the amount of 
energy that they want to spend and how would the Smart Grid benefit low 
income customers or residents on fixed incomes?
    Answer. As I stated before, prices are rising for consumers, and 
energy efficiency programs that target low-income communities are of 
paramount importance whether the Smart Grid deploys successfully or 
not. However, by focusing on components of Smart Grid that improve 
system efficiency, outage management, network optimization and grid 
resiliency, the cost of operating the system can be reduced and prices 
can be lowered for all consumers. That is why the most urgent 
investments are those made on the utility distribution-system side of 
the meter, rather than on the customer side of the meter. Once we have 
these components in place, greater focus can be placed on systems on 
the customer-side of the meter that provide greater customer choice and 
empowerment, without forcing ratepayers into new expenditures, 
behaviors, and technology adoption that we may not have, as a society, 
properly prepared ourselves for.

    Question 2. A number of utilities already have begun modernizing 
their grids by installing digital electric meters and technologies that 
enable two-way communication capabilities between the utilities and 
their customers. This transformation to a ``Smart Grid'' should benefit 
the companies and their customers. How will the Smart Grid enable 
entities to detect and repair outages faster, hook-up customers 
quicker, and give consumers the capability to manage their homes' 
appliances more efficiently?
    Answer. This will benefit consumers by making the whole system more 
efficient. But we can't lose sight of the fact that this will also 
benefit utilities, and that is why we should start here, because they 
can pay for it at first. If utilities have a real-time view of their 
grid, they can identify problems before they get out of hand. They can 
also prioritize repair efforts and have instant information on how many 
houses have been restored after a damaging storm.
    If a utility can see online that a specific transformer appears 
irregular, but is not necessarily malfunctioning, they can determine if 
that problem will become a bigger issue remotely before something 
physically goes wrong.
    Utilities can streamline their operations and save money. Consumers 
can have the knowledge that reliability is improved and take heart in 
knowing that utilities' response times will be faster.

    Mr. Chairman and members of the committee, I wish to thank you for 
giving me the opportunity to answer these questions. In addition, I'd 
like to submit the following document for the record. It is a list of 
criteria generated by the FERC-NARUC Smart Grid Collaborative for the 
Department of Energy to consider when it starts providing grant and 
other funding for Smart Grid projects under ARRA.

 NARUC/FERC SMART GRID COLLABORATIVE PROPOSED FUNDING CRITERIA FOR THE 
   ARRA SMART GRID MATCHING GRANT PROGRAM\1\ AND THE ARRA SMART GRID 
                       DEMONSTRATION PROJECTS\2\
---------------------------------------------------------------------------
    \1\ 42 USC 17386, Energy Independence and Security Act (EISA) Sec. 
1306, Federal Matching Fund for Smart Grid Investment Costs, as amended 
by American Recovery and Reinvestment Act of 2009 (ARRA).
    \2\ 42 USC 17384, EISA Sec. 1304, Smart Grid Technology Research, 
Development, And Demonstration, as amended by ARRA.
---------------------------------------------------------------------------
    The American Recovery and Reinvestment Act of 2009 (ARRA)\3\ 
includes the following language:
---------------------------------------------------------------------------
    \3\ See, ARRA, http://frwebgate.access.gpo.gov/cgi-bin/
getdoc.cgi?dbname=111_cong_bills
&docid=f:h1enr.txt.pdf.

          `(e) Procedures and Rules-(1) The Secretary shall, within 60 
        days after the enactment of the American Recovery and 
        Reinvestment Act of 2009, by means of a notice of intent and 
        subsequent solicitation of grant proposals----
          `(A) establish procedures by which applicants can obtain 
        grants of not more than one-half of their documented costs;

    The Collaborative submits the following funding criteria that the 
Collaborative members would find helpful in carrying out their legal 
responsibilities as they relate to Smart Grid. The Collaborative asks 
the Department of Energy (DOE) to consider these criteria when 
establishing procedures under which applicants can receive ARRA funding 
for Smart Grid Matching Grants and for ARRA Smart Grid Demonstration 
Projects.
FUNDING CRITERIA
          1. Preconditions for Grants--Any application for grant 
        funding must address the following issues:

                  a. How the project will provide for interoperability 
                in the absence of approved standards (e.g., adherence 
                to existing open standards, secure upgradeability once 
                standards approved);
                  b. How the project will address cyber security issues 
                and ensure that it maintains compliance with Federal 
                Energy Regulatory Commission-approved reliability 
                standards during and after the installation of Smart 
                Grid technologies;
                  c. How the project has minimized the possibility of 
                stranded investment in Smart Grid equipment by 
                designing for the ability to be upgraded;
                  d. How the applicant proposes to share information 
                with the Department of Energy Smart Grid Clearinghouse, 
                as further described in the FERC Policy Statement;
                  e. How the project will maintain the reliability of 
                the grid;
                  f. How the project will preserve the integrity of 
                data communicated (whether the data is correct);
                  g. How the project will provide for authentication of 
                communications (whether the communication is between 
                the intended Smart Grid device and an authorized device 
                or person);
                  h. How the project will prevent unauthorized 
                modifications to Smart Grid devices and the logging of 
                all modifications made;
                  i. How the project will ensure the physical 
                protection of Smart Grid devices; and
                  j. How the project will address the potential impact 
                of unauthorized use of Smart Grid devices on the bulk-
                power system.

          2. Overarching Criteria:

                  a. The DOE funded portfolio of projects should 
                include projects on both the transmission and 
                distribution system, and on the customer side of the 
                meter;
                  b. The DOE funded portfolio of projects should 
                include a range of technologies--not just advanced 
                meter installation (e.g., programmable communicating 
                thermostats, smart appliances, and other technologies 
                controlled by the end-use customer);
                  c. The DOE funded portfolio of projects should be 
                broad reaching and with broad application potential;
                  d. The DOE funded portfolio of projects should be of 
                sufficient scale that it will be able to apply 
                statistical tests on where and how it impacts 
                consumers, the grid, and technologies;
                  e. The DOE funded portfolio of projects should be 
                geographically diverse to the extent practicable. All 
                regions should be represented as well as projects in 
                urban, rural and suburban settings;
                  f. The DOE may consider providing a waiver from some 
                of the grant preconditions for a modest portion of the 
                funds (say 10%), or for applicants with sales below a 
                certain sales threshold (say 1-4 million MWH a year) in 
                order to provide funds to small utilities who would not 
                otherwise be able to comply with application 
                requirements in a timely manner;
                  g. The DOE funded portfolio of projects should intend 
                to provide benefits--which may include both customer 
                and system-wide benefits; and
                  h. Early-adopter States should not be disadvantaged--
                existing projects can be eligible if they can show 
                additional benefits or expansion of knowledge that are 
                unique and not likely to be realized by other proposed 
                projects.

          3. Technologies--must first meet the preconditions above

                  a. A range of technologies should be included such 
                as, but not limited to, sensors on transmission and/or 
                distribution equipment, digital communications in 
                substations, and/or communications equipment not just 
                focused on AMI (e.g., programmable communicating 
                thermostats, smart appliances, and other technologies 
                controlled by the end-use customer).
                  b. Projects can include replacement of legacy 
                equipment and systems such as old bulk meters and 
                capacitor banks with intelligent, Smart Grid capable 
                equipment and/or systems.
                  c. Different communications protocols should be 
                tested.
                  d. Physical and cybersecurity attributes of the range 
                of technologies should be highlighted and tested.
                  e. System integration performed as part of the 
                project should be based, to the extent practicable, on 
                existing broadly accepted industry standards.
                  f. Priority should be given to projects that have an 
                open architecture base that can become the basis for 
                interoperability with multiple applications.

          4. Rate Designs

    A range of technology options should be paired with existing or 
proposed rate designs, including dynamic rates, consistent with the 
purposes for which the project is designed.

          5. Regulatory issues

                  a. Consider the regulatory climate in the State where 
                a project is proposed--is there legislative authority 
                for dynamic rates?
                  b. Is there coordination between a given project and 
                the RTO and/or system operator?

          6. Information/data requirements.--to be eligible for funding 
        a grantee must agree to provide detailed data and documentation 
        of project results, including the following information, as 
        applicable to the project, to the DOE Clearinghouse\4\ [not 
        every project will deal with all the items listed]:
---------------------------------------------------------------------------
    \4\ See, ARRA Sec. 405(3), amending EISA Sec. 1304(b)(3), 42 USC 
17381.

                  a. Any internal or third party evaluations, ratings, 
                and/or reviews including all primary source material 
                used in the evaluation;
                  b. Detailed data and documentation explaining any 
                improvement in the accurate measurement of energy 
                efficiency, energy conservation, price responsive 
                demand, or demand response resources;
                  c. Detailed data and documentation explaining the 
                expansion of the quantity of energy efficiency, energy 
                conservation, price responsive demand, or demand 
                response resources that resulted from the project and 
                the resulting economic effects;
                  d. Detailed data and documentation that shows 
                reduction in both electric demand and energy 
                consumption associated with the project;
                  e. Detailed data and documentation for any 
                improvements in the ability to integrate non-
                dispatchable renewable generation resources;
                  f. Detailed data and documentation that shows any 
                achievement of greater system efficiency through a 
                reduction of transmission congestion and loop flow;
                  g. Detailed data and documentation showing how the 
                information infrastructure supports distributed 
                resources such as plug-in electric vehicles;
                  h. Detailed data and documentation that shows how the 
                project resulted in enhanced utilization of energy 
                storage; and
                  i. Detailed data and documentation that shows how the 
                project encouraged new business models, market 
                innovation, and third party and private capital 
                participation.
                  j. All data on project results must be publicly 
                available while protecting individual customer privacy 
                and commercially sensitive data (See Below).

          7. Protection of individual customer privacy and commercially 
        sensitive data. The fund recipient must provide a detailed 
        explanation of:

                  a. The types of customer-specific data it proposes to 
                collect;
                  b. How it plans to protect this data from unintended 
                disclosure;
                  c. The extent to which this data can be provided to 
                the DOE in summary or aggregate form and still be 
                responsive to report preparation requirements and the 
                policy of public transparency;
                  d. The process proposed for obtaining customer 
                permission to disclose private or commercially 
                sensitive data, if such data must be disclosed; and
                  e. Any State or local requirements that are relevant 
                to the disclosure of data specific to individual 
                electric customers.

          8. Mechanisms to measure customer response must be included 
        as a requirement for funding

                  a. Grantees must include independent monitoring and 
                measurement of customer receptivity to the project.
                    1. This information must be made available to the 
                DOE Clearinghouse.
                    2. The DOE Clearinghouse will develop guidelines 
                for gathering and reporting this information
                                 ______
                                 
  Responses of Patrick D. Gallagher to Questions From Senator Bingaman

    Question 1. One of the often stated key benefits of Smart Grid is 
in its ability to integrate large quantities of intermittent renewable 
resources into the grid and to efficiently route this power where it is 
needed. To achieve this will clearly require both the build-out of new 
transmission to renewable resource rich locations as well as upgrading 
our current grid to have the intelligence to handle these intermittent 
resources.
    In order to achieve the benefits that we want from Smart Grid, how 
much new transmission do you foresee being needed? And how do we 
prioritize the building of new transmission vs. upgrading our current 
grid?
    Answer. NIST will defer to DOE and FERC on estimating ``how much 
new transmission'' is needed. However, it is clear that there is a need 
to build out new transmission to renewable resource-rich locations and 
to upgrade the grid to better handle these resources if our nation is 
to fully realize the benefits of Smart Grid. In addition, better and 
more storage and power conversion technologies are needed to make best 
use of these large-scale intermittent resources. NIST is working to 
develop the interoperability framework to coordinate and prioritize 
standards development to ensure that the Smart Grid devices and systems 
that will accommodate these large renewable power sources will be 
interoperable, and beyond that, allow for and encourage customers to 
adjust their energy usage.

    Question 2. ``Smart Metering'' projects for residential consumers 
have become the poster child of the Smart Grid. However, some studies 
have found that the majority of the benefits of the Smart Grid will 
result from investments in grid transmission and distribution system 
upgrades and optimization, with only a small percentage of energy 
savings and emission reductions coming from smart metering programs. 
Could you comment on this? And how should we take these findings into 
consideration when prioritizing which Smart Grid demonstration projects 
to fund?

          NOTE: as a data point, the Climate Group SMART 2020 Report 
        estimates that 85% of the carbon reduction benefits of a Smart 
        Grid come from Grid Optimization and Renewables Integration, 
        and only 15% will come from End-User Energy Management.

    Answer. The Smart Grid addresses several goals, each of which is 
important. Renewable energy generation leads to the greatest impact for 
carbon reduction, and efficiency improvements in transmission and 
distribution lead to less wasted energy and greater reliability. Smart 
Metering addresses a different goal, reducing energy use by customers 
and smoothing load shape to improve grid utilization. Testing and 
validating Smart Grid standards interoperability is a key aspect of 
NIST's program. We are working closely with DOE, and anticipate testing 
and validation will be a key aspect as the Smart Grid standards move 
forward.

    Question 3. After the Department of Energy has spent out its nearly 
$4.5 billion on Smart Grid Investments, how do we measure whether that 
money has been spent effectively? How soon and what improvements in our 
grid should we expect to see?
    Answer. We defer to the Department of Energy on this question.

    Question 4. Dr. Gallagher, in your testimony you state that NIST, 
as directed by EISA, will develop suites of standards for different 
Smart Grid aspects, including distributed energy resources, demand 
response devices/appliances, electric vehicles, wide area measurement 
systems, and other parts of the Smart Grid vision. Furthermore, during 
the hearing you stated that you expect that by this summer, NIST will 
have completed a road map to prioritize the order in which Smart Grid 
standards need to be developed.
    As Senator Bingaman requested in the hearing, please submit to us:

          1) an inventory of the suites of standards to be developed;
          2) Each standard, that to the best of your current knowledge, 
        will need to be developed; and
          3) For each standard, a list of the standards development 
        organizations that would logically be involved in the 
        development of such standard.

    Answer. To clarify, I stated at the hearing that NIST would, by 
this summer, have completed an initial version of a roadmap to 
prioritize the selection and/or development of standards. The roadmap 
will include an architecture and framework that will evolve to 
incorporate new technologies and requirements. Once this initial 
version of the roadmap is developed, it will be continuously updated 
and be used as a basis for developing priority actions in support of 
developing the standards framework.
    The appended document lists suites of Smart Grid standards under 
development in different organizations.
    It is important to note that there are several ``suites'' of 
standards as well as hundreds of individual standards that are key for 
Smart Grid interoperability. These suites are in different stages of 
maturity and cover many Smart Grid devices and functionality. There are 
also overlaps among them that require harmonization, some of which are 
already being addressed.
    Some of the existing standards have not yet undergone extensive use 
and conformity testing that would reveal whether they are truly 
interoperable, so it is not fully known what the weaknesses are in 
these standards and where they may need to be modified.
    As the roadmap is developed and evolves and as new standards are 
published, more of these standards issues will be identified and 
addressed. The attached document lists some of the suites of Smart Grid 
standards under development in the various Standards Developing 
Organizations (SDOs). The list is not prioritized, nor is it exhaustive 
since NIST is continuing to develop the roadmap and standards from 
other industries such as networking, telecommunications and end use 
equipment are expected to play key roles in the development of the 
Smart Grid infrastructure. Input from these industries will be included 
as the interim roadmap and Smart Grid standards move forward.

    Question 5. Dr. Gallagher, we have heard from many parties, most 
recently Secretary Chu, that standards and protocols development is 
lagging behind industry needs, and may soon hinder Smart Grid 
deployment. While I understand that your agency has lacked appropriated 
funds up until very recently (when $10 million was appropriated in the 
American Recovery and Reinvestment Act), how do you plan to ensure that 
you now will move expeditiously? Can you provide us an approximate 
timeline for when you expect to begin releasing consensus standards?
    Answer. Standards are developed for industry, by industry, through 
an established consensus process in which government participates. 
Thus, NIST as an organization will not be releasing consensus 
standards. However, NIST has and will play an important role, working 
alongside industry participants, providing both technical expertise and 
coordination to facilitate the development of consensus standards by 
the appropriate standards organizations. The recognition of Smart Grid 
as an urgent national priority, and especially the funding provided by 
the American Reinvestment and Recovery Act, makes it imperative to 
develop the standards more rapidly, requiring new approaches. NIST has 
recently taken several steps to accelerate progress.
    We have committed to delivering an interim interoperability 
standards roadmap by June and are working to expedite this effort using 
ARRA funding. We are also planning to use the ARRA funding to 
accelerate the establishment of a public-private partnership, modeled 
on the most successful elements of the Health Care IT interoperability 
effort, to select and/or coordinate the development of new standards 
based on the roadmap. We will focus initially on the selection of 
existing standards to meet the highest priority needs, while working to 
develop new or harmonized standards where necessary to meet other 
needs. We anticipate that initial standards will be selected in 2009.

    Question 6. Dr. Gallagher, in your opinion, is it a hindrance to 
industry and to Smart Grid evelopment that NIST has not yet begun 
releasing consensus standards andprotocols? At what point would you 
consider a lack of NIST approved standards a indrance?
    Answer. To clarify, consensus standards in the U.S. are developed 
by the private sector through standards development organizations 
(SDOs) and do not normally require formal recognition or approval by 
NIST. For example, the internet, a network about as complex as the 
Smart Grid, was established and continues to evolve based entirely on 
private-sector, voluntary standards. NIST's role is to support this 
process by working closely with industry and stakeholders as a third 
party technical expert. NIST and industry believe that this process 
produces the most effective and widely accepted standards. From that 
perspective, lack of NIST-approved standards for Smart Grid is not a 
hindrance to industry.
    However, some standards for the Smart Grid may need to be mandated 
via adoption in regulation to ensure the reliability and security of 
the Smart Grid, which is one of the nation's critical infrastructures. 
Please note that even if standards were adopted in regulation, the 
private sector would continue to play a crucial role in their 
development, since OMB Circular A-119 and the National Technology 
Transfer and Investment Act oblige agencies to use existing private 
sector, voluntary standards as the basis for regulations. EISA 
specifically tasks NIST to coordinate development of an 
interoperability framework including protocols and model standards, 
which is appropriate for this reason. The steps NIST is taking will 
accelerate the availability of NIST-approved standards to support 
regulation so that they do not become a hindrance to industry.

 Responses of Patrick D. Gallagher to Questions From Senator Murkowski

    Question 1a. What does Smart Grid technology promise in terms of 
reliability? A smarter grid is supposed to enhance our system's 
security but technologies like smart meters, sensors and advanced 
communications networks can actually increase the vulnerability of the 
grid to cyber attacks.
    Answer. There are many ways that Smart Grid technologies will 
improve the overall reliability of the Nation's electric distribution 
system, including greatly increased capabilities for controlling, 
monitoring and restoring system performance. While it is true that some 
aspects of Smart Grid technologies involve greater interconnectivity 
and potential vulnerability, proactive measures will be implemented to 
ensure cyber security. Currently, many components of the grid are 
interconnected to the Internet, either directly, or via the business 
component of a company. This has increased the potential for cyber 
attacks that could compromise the availability and/or integrity of the 
existing grid. This requirement to address potential vulnerabilities 
has been acknowledged by the Department of Homeland Security (DHS), 
through the Critical Infrastructure Protection (CIP) Program. They have 
a vulnerability assessment program that is available to critical 
infrastructures. Also, DHS is working with the critical infrastructures 
to promote reporting of potential incidents through the US--Computer 
Emergency Readiness Team (US-CERT) program. In addition, the Department 
of Energy, as the Sector Specific Agency for Energy, has a cyber 
vulnerability assessment program specifically for the electric grid. 
There are also several current initiatives to develop cyber security 
standards for components of the existing grid. These standards are 
intended to address existing vulnerabilities. Finally, the IT and 
telecom sectors have cyber security standards to address 
vulnerabilities, conformity assessment programs to evaluate cyber 
security products, and assessment programs to identify known 
vulnerabilities in systems.

    Question 1b. How do we address these cyber security concerns?
    Answer. One of the important lessons from the IT and telecom 
sectors is that network security must be inherently designed into the 
architecture of the network; it cannot be ``bolted on'' later. NIST is 
applying its extensive expertise in both computer security and advanced 
network technology to systematically assess risk and ascertain security 
requirements for the Smart Grid architecture.
    There are a number of cyber security standards that are being 
developed that are applicable to the Smart Grid:

   The North American Electric Reliability Corporation (NERC) 
        Critical Infrastructure Protection (CIP) Cyber Security 
        Standards CIP-002 through CIP-009 provide a cyber security 
        framework for the identification and protection of Critical 
        Cyber Assets to support reliable operation of the Bulk Power 
        System
   The ANSI/ISA-99/IEC 62443 suite of standards for Industrial 
        Automation and Control System Security
   The Advanced Metering Infrastructure (AMI) has formed a 
        Security task force (AMI-SEC) to define common requirements and 
        produce standardized specifications for securing AMI system 
        elements
   NIST Special Publication (SP) 800-53, Recommended Security 
        Controls for Federal Information Systems, which provides 
        security controls for Federal agencies, including those who are 
        part of the Bulk Power System (e.g., Tennessee Valley 
        Authority, Bonneville Power Authority). This Special 
        Publication is incorporated by reference in Federal Information 
        Processing Standards (FIPS) 200, Minimum Security Requirements, 
        making it mandatory for Federal agencies.

    Although these standards are being developed by different standards 
bodies, there is significant interaction among the working groups. For 
example, there are current efforts to harmonize the NERC CIP, ISA99/IEC 
62443, and NIST Special Publication 800-53, Recommended Security 
Controls for Federal Information Systems.
    The important objective is to assess the standards for 
applicability and interoperability across the domains of the Smart 
Grid, rather than develop a single set of cyber security requirements 
that is applicable to all elements of the Smart Grid. That is, the 
cyber security requirements of different domains, such as home-to-grid 
or transmission and distribution, may not be the same. There are 
significant cyber security requirements to ensure the confidentiality 
of Personally Identifiable Information (PII) that may not be required 
at the transmission and distribution domain.
    In addition, the cyber security standards will require conformance 
testing. Conformance testing verifies that products adhere to the 
specifications defined in the standards. NIST intends to develop a 
conformance testing framework for the Smart Grid.

    Question 1c. Do the agencies have sufficient authority or is 
additional ederal legislation needed?
    Answer. NIST has the necessary authority under the National 
Technology Transfer and Advancement Act (PL 104-113), the Energy 
Independence and Security Act (EISA), and other legislation, to carry 
out its role to coordinate the development of an interoperability 
framework for the Smart Grid.

    Question 2. The Stimulus bill provided an unprecedented $4.5 
billion in federal funds for Smart Grid activities. In your opinion, 
what is the best way to allocate these funds--matching grants for 
technology investments; research and development; pilot programs? Over 
what timeframe? What are the necessary first steps?
    Answer. NIST defers to the Department of Energy on this question.

    Question 3. What capabilities and expertise in this area does each 
of your agencies bring to the table?
    Answer. Ensuring interoperability of the Smart Grid requires 
capabilities in numerous disciplines. NIST brings 1) extensive 
knowledge of the electric utility industry through its research in 
supporting measurement technology and testing; 2) expertise in advanced 
networking technology; 3) expertise in computer and network security; 
4) expertise in industrial controls and their interfaces to the 
electrical infrastructure; 5) expertise in the technology of buildings 
and their interfaces to the electric grid; 6) expertise in the 
consensus standards development process; and 7) expertise in conformity 
assessment.

    Question 4. What is the role of the Standards Development 
Organizations (SDOs), such as NEMA, in the NIST framework? When will 
NIST be ready to utilize the expertise that the SDOs have available?
    Answer. SDOs have an essential role in the NIST framework, as 
standards are developed by SDOs. The large majority of Smart Grid 
standards are already under development in an SDO. SDOs bring the 
stakeholder community together (via company supported volunteers and 
representatives of other stakeholder groups working in standards 
committees) to develop standards. NIST is already working with the 
technical experts who are developing Smart Grid standards, and already 
actively engaged with SDOs in developing the Smart Grid roadmap. 
National Electrical Manufacturers Association (NEMA) was named in the 
2007 EISA for NIST to coordinate with and plays an important role 
representing a large vendor community. NIST will continue to work with 
NEMA and other stakeholders to coordinate the development of the 
interoperability framework.

    Question 5. You testified that there should be no single standard 
for Smart Grid devices and systems because a smarter grid needs to be 
evolutionary. How can we best ensure that interoperability standards 
continue to evolve?
    Answer. EISA requires the interoperability framework ``to be 
flexible to incorporate regional and organizational differences, and 
technological innovations.'' Attributes which will support this goal 
include, among others, technology neutrality, standards which are 
performance based rather than design specific, and a layered 
architecture. The ``public-private partnership'' entity (referred to in 
my answer to Senator Bingaman's question) will provide an ongoing 
mechanism to evolve the interoperability standards.

    Question 6. When will NIST have a Director in place?
    Answer. The process to fill the NIST Director position is ongoing.

    Question 7. You caution that it is difficult and time consuming to 
create good consensus-based standard--particularly if the resulting 
standards need to be applicable domestically and internationally. Don't 
standards need to be applied nationwide, in a seamless fashion, or are 
you suggesting we could consider a more regional approach?
    Answer. The standards absolutely need to be applied nationwide to 
ensure interoperability and they should ultimately be harmonized with 
international standards. The ability to dynamically move load to match 
demand and utilize distributed energy sources on a national electrical 
grid demands a national solution. Furthermore, the interconnection of 
the US grid with Canada and Mexico requires North American, not just 
U.S. standards. Finally, the equipment in the network is produced by 
global suppliers who want international standards so they can address 
multiple markets around the world.

                                Addendum
                    Smart Grid Families of Standards
                    (response to sen. bingaman q#4)

    The following list contains leading industry families of standards 
that will enable the vision of the Smart Grid. The NIST roadmapping 
process is intended to reveal areas in the standards where weaknesses, 
gaps, and overlaps exist and will evolve as new standards are developed 
and new implementations deployed and tested. The list is not exhaustive 
since standards from other industries such as networking, 
telecommunications and end use equipment are expected to play key roles 
in the development of the Smart Grid infrastructure.
    The families listed below include some standards that are have not 
yet been completed, released, or published. These families will have to 
be further developed to ensure that gaps covering additional Smart Grid 
functions, devices, and systems are addressed. Further analysis is 
needed to ensure that the standards are harmonized and conformance 
testing of implementations of these standards is needed to reveal where 
interoperability issues exist.

    INTERNATIONAL ELECTROTECHNICAL COMMISSION (IEC) 61968 FAMILY OF 
                   STANDARDS FOR DISTRIBUTION SYSTEMS

   IEC 61968-1 (2003-10) Application integration at electric 
        utilities--System interfaces for distribution management--Part 
        1: Interface architecture and general requirements
   IEC/TS 61968-2 (2003-11) Application integration at electric 
        utilities--System interfaces for distribution management--Part 
        2: Glossary
   IEC 61968-3 (2004-03) Application integration at electric 
        utilities--System interfaces for distribution management--Part 
        3: Interface for network operations
   IEC 61968-4 (2007-07) Application integration at electric 
        utilities--System interfaces for distribution management--Part 
        4: Interfaces for records and asset management
   IEC 61968-14-1: Mapping between MultiSpeak 4.0 and IEC 
        61968, parts 3 through 10
   IEC 61968-14-2: A CIM profile for MultiSpeak 4.0, one 
        profile for IEC 61968 parts 3 through10
    international electrotechnical commission (iec) 61970 family of 
                       standards for transmission
   IEC 61970 Energy management system application program 
        interface (EMS-API)--Part 301: Common Information Model (CIM) 
        Base'', IEC, Edition 1.0, November 2003
   IEC 61970-1 (2005-12) Energy management system application 
        program interface (EMS-API)--Part 1: Guidelines and general 
        requirements
   IEC/TS 61970-2 (2004-07) Energy management system 
        application program interface (EMS-API)--Part 2: Glossary
   IEC 61970-301 (2005-03) Energy management system application 
        program interface (EMS-API)--Part 301: Common Information Model 
        (CIM) base
   IEC/TS 61970-401 (2005-09) Energy management system 
        application program interface (EMS-API)--Part 401: Component 
        interface specification (CIS) framework
   IEC 61970-404 (2007-08) Energy management system application 
        program interface (EMS-API)--Part 404: High Speed Data Access 
        (HSDA)
   IEC 61970-405 (2007-08) Energy management system application 
        program interface (EMS-API)--Part 405: Generic Eventing and 
        Subscription (GES)
   IEC 61970-407 (2007-08) Energy management system application 
        program interface (EMS-API)--Part 407: Time Series Data Access 
        (TSDA)
   IEC 61970-501 (2006-03) Energy management system application 
        program interface (EMS-API)--Part 501: Common Information Model 
        Resource Description Framework (CIM RDF) schema
  american national standards institute (ansi)--c12 metering standards
   ANSI C12.19 2008: Utility Industry End Device Data Tables 
        (Revenue Metering) (note: not yet formally released)
   ANSI C12.22 2008: Protocol Specification for Data 
        Communication Networks (note: not yet formally released)

    AMERICAN SOCIETY OF HEATING, REFRIGERATING, ND AIR-CONDITIONING 
                  ENGINEERS (ASHRAE)--BACNET STANDARD

   ANSI/ASHRAE Standard 135-2004: BACnet--A Data Communication 
        Protocol for Building Automation and Control Networks
   international electrotechnical commission (iec)--61850 family of 
                      standards for field devices
   IEC/TR 61850-1 (2003-04) Communication networks and systems 
        in substations--Part 1: Introduction and overview
   IEC/TS 61850-2 (2003-08) Communication networks and systems 
        in substations--Part 2: Glossary
   IEC 61850-3 (2002-01) Communication networks and systems in 
        substations--Part 3: General requirements
   IEC 61850-4 (2002-01) Communication networks and systems in 
        substations--Part 4: System and project management
   IEC 61850-5 (2003-07) Communication networks and systems in 
        substations--Part 5: Communication requirements for functions 
        and device models
   IEC 61850-6 (2004-03) Communication networks and systems in 
        substations--Part 6: Configuration description language for 
        communication in electrical substations related to IEDs
   IEC 61850-7-1 (2003-07) Communication networks and systems 
        in substations--Part 7-1: Basic communication structure for 
        substation and feeder equipment--Principles and models
   IEC 61850-7-2 (2003-05) Communication networks and systems 
        in substations--Part 7-2: Basic communication structure for 
        substation and feeder equipment--Abstract communication service 
        interface (ACSI)
   IEC 61850-7-3 (2003-05) Communication networks and systems 
        in substations--Part 7-3: Basic communication structure for 
        substation and feeder equipment--Common data classes
   IEC 61850-7-4 (2003-05) Communication networks and systems 
        in substations--Part 7-4: Basic communication structure for 
        substation and feeder equipment--Compatible logical node 
        classes and data classes
   IEC 61850-7-410 (2007-08) Communication networks and systems 
        for power utility automation--Part 7-410: Hydroelectric power 
        plants--Communication for monitoring and control
   IEC 61850-7-420 (2008-02) DER Logical Nodes, Final Draft 
        International Standard (FDIS)
   IEC 61850-8-1 (2004-05) Communication networks and systems 
        in substations--Part 8-1: Specific Communication Service 
        Mapping (SCSM)--Mappings to MMS (ISO 9506-1 and ISO 9506-2) and 
        to ISO/IEC 8802-3
   IEC 61850-9-1 (2003-05) Communication networks and systems 
        in substations--Part 9-1: Specific Communication Service 
        Mapping (SCSM)--Sampled values over serial unidirectional 
        multidrop point to point link
   IEC 61850-9-2 (2004-04) Communication networks and systems 
        in substations--Part 9-2: Specific Communication Service 
        Mapping (SCSM)--Sampled values over ISO/IEC 8802-3
   IEC 61850-10 (2005-05) Communication networks and systems in 
        substations--Part 10: Conformance testing
   IEEE 1547 Family of Standards for Distributed Energy 
        Resources

IEEE 1547 STANDARD FOR INTEGRATING DISTRIBUTED ENERGY RESOURCES WITHIN 
                       THE ELECTRIC POWER SYSTEM

   IEEE-P1547.1 standard for interconnection test procedures
   IEEE-P1547.2 guide to 1547 standard
   IEEE-P1547.3 guide for information exchange for DR 
        interconnected with EPS
   IEEE-P1547.4 guide for DR island systems
             zigbee specification (based on ieee 802.15.4)
   Zigbee Smart Energy

                        CYBER SECURITY STANDARDS

Advanced Metering Infrastructure (AMI) System Security Requirements
   ANSI/ISA-99/IEC 62443 suite of standards for Industrial 
        Automation and Control System Security
   FIPS PUB 140-2, Security Requirements for Cryptographic 
        Modules (also ISO ISO/IEC 19790:2006)
   FIPS PUB 180, Secure Hash Standard
   FIPS PUB 186, Digital Signature Standard (DSS)
   FIPS PUB 197, Advanced Encryption Standard (AES)
   FIPS PUB 199, Standards for Security Categorization of 
        Federal Information and Information Systems
   IEC/TS 62351-1 (2007-05) Power systems management and 
        associated information exchange--Data and communications 
        security--Part 1: Communication network and system security--
        Introduction to security issues
   IEC/TS 62351-2 Power systems management and associated 
        information exchange--Data and communication security--Part 2: 
        Glossary of terms
   IEC/TS 62351-3 (2007-06) Power systems management and 
        associated information exchange--Data and communications 
        security--Part 3: Communication network and system security--
        Profiles including TCP/IP
   IEC/TS 62351-4 (2007-06) Power systems management and 
        associated information exchange--Data and communications 
        security--Part 4: Profiles including MMS
   IEC TS 62351-5 Power systems management and associated 
        information exchange--Data and Communication Security--Part 5: 
        Security for IEC 60870-5 and Derivatives
   IEC/TS 62351-6 (2007-06) Power systems management and 
        associated information exchange--Data and communications 
        security--Part 6: Security for IEC 61850
   IEC 62443 Industrial communication networks--Network and 
        system security (DRAFT)

     IEC 62443-1 Terminology, concepts and models
     IEC 62443-2 Establishing an industrial automation and 
        control system security program
     IEC 62443-3 Operating a manufacturing and control systems 
        security program
     IEC 62443-4 Specific security requirements for 
        manufacturing and control systems
     IEC 62443-5 Security technologies for industrial 
        automation and control systems

   ISA-99: Manufacturing and Control Systems Security
   IEEE P1689 Trial Use Standard for Retrofit Cyber Security of 
        Serial SCADA Links and IED Remote Access
   ISO 27001 information security management system (an ISMS) 
        which replaced the old BS7799-2 standard
   ISO 27002 This is the 27000 series standard number of what 
        was originally the ISO 17799 standard (which itself was 
        formerly known as BS7799-1)
   ISO 27003 guidance for the implementation of an ISMS (IS 
        Management System)
   ISO 27004 information security system management measurement 
        and metrics
   ISO 27005 This is the methodology independent ISO standard 
        for information security risk management
   ISO 27006 guidelines for the accreditation of organizations 
        offering ISMS certification
   North American Electric Reliability Corporation (NERC) 
        Critical Infrastructure Protection (CIP) CIP-001-1 Sabotage 
        Reporting
   NERC CIP-002-1 Critical Cyber Asset Identification
   NERC CIP-003-1 Security Management Controls
   NERC CIP-004-1 Personnel & Training
   NERC CIP-005-1 Electronic Security Perimeter(s)
   NERC CIP-006-1 Physical Security of Critical Cyber Assets
   NERC CIP-007-1 Systems Security Management
   NERC CIP-008-1 Incident Reporting and Response Planning
   NERC CIP-009-1 Recovery Plans for Critical Cyber Assets
   NIST Special Publication (SP) 800-53, Recommend Security 
        Controls for Federal Information Systems NIST SP 800-82, DRAFT 
        Guide to Industrial Control Systems (ICS) Security
   The role concept in SCL: 2nd draft, ABB AN-PSTD07002WW, 29 
        August 2007
  international electrotechnical commission (iec) and ieee standards 
               integration for synchrophasor measurements
   IEC and IEEE are proposing ``Dual Logo'' standards 
        development in this area that anticipates integrating related 
        standards from both organizations. These include:

     IEEE C37.118-2005 Standard for Synchrophasors for Power 
        Systems and IEC 61850.
  sae best practices and use cases for electric vehicle communications
   SAE J2836, Recommended Practice for Communication between 
        Plug-in Vehicles and the Utility Grid (2009 ballot)
   SAE J2847--Information Report for Use Cases for J2836 (2009 
        ballot)

GLOSSARY OF SMART GRID PRIVATE SECTORTANDARDS DEVELOPMENT ORGANIZATIONS 
                              LISTED ABOVE

ANSI--The American National Standards Institute
    ANSI is a private non-profit organization that oversees the 
development of voluntary consensus standards for products, services, 
processes, systems, and personnel in the United States. The 
organization also coordinates U.S. standards with international 
standards so that American products can be used worldwide. ANSI 
accredits standards that are developed by representatives of standards 
developing organizations, government agencies, consumer groups, 
companies, and others. These standards ensure that the characteristics 
and performance of products are consistent, that people use the same 
definitions and terms, and that products are tested the same way.

ASHRAE--American Society of Heating, Refrigerating, nd Air-Conditioning 
        Engineers
    ASHRAE is an international technical society for all individuals 
and organizations interested in heating, ventilation, air-conditioning, 
and refrigeration (HVAC&R). The Society allows exchange of HVAC&R 
knowledge and experiences for the benefit of the field's practitioners 
and the public. ASHRAE provides many opportunities to participate in 
the development of new knowledge via, for example, research and its 
many Technical Committees.

IEC--International Electrotechnical Commission
    The IEC is a not-for-profit, non-governmental international 
standards organization that prepares and publishes International 
Standards for all electrical, electronic and related technologies--
collectively known as ``electrotechnology''. IEC standards cover a vast 
range of technologies from power generation, transmission and 
distribution to home appliances and office equipment, semiconductors, 
fiber optics, batteries, solar energy, nanotechnology and marine energy 
as well as many others. The IEC also manages three global conformity 
assessment systems that certify whether equipment, system or components 
conform to its International Standards.

IEEE--(IEEE does not use a associated name)
    IEEE is an international non-profit, professional organization for 
the advancement of technology related to electricity. It has the most 
members of any technical professional organization in the world, with 
more than 365,000 members in around 150 countries.

NERC--North American Electric Reliability Corporation
    NERC oversees eight regional reliability entities and encompasses 
all of the interconnected power systems of the contiguous United 
States, Canada and a portion of Baja California in Mexico. NERC's major 
responsibilities include working with all stakeholders to develop 
standards for power system operation, monitoring and enforcing 
compliance with those standards, assessing resource adequacy, and 
providing educational and training resources as part of an 
accreditation program to ensure power system operators remain qualified 
and proficient. NERC also investigates and analyzes the causes of 
significant power system disturbances in order to help prevent future 
events.

SAE--Society of Automotive Engineers
    SAE is a professional organization for mobility engineering 
professionals in the aerospace, automotive, and commercial vehicle 
industries. The Society is a standards development organization for the 
engineering of powered vehicles of all kinds, including cars, trucks, 
boats, and aircraft.
                                 ______
                                 
    Responses of Patricia Hoffman to Questions From Senator Bingaman

    Question 1. One of the often stated key benefits of Smart Grid is 
in its ability to integrate large quantities of intermittent renewable 
resources into the grid and to efficiently route this power where it is 
needed. To achieve this will clearly require both the build-out of new 
transmission to renewable resource rich locations as well as upgrading 
our current grid to have the intelligence to handle these intermittent 
resources.
    In order to achieve the benefits that we want from Smart Grid, how 
much new transmission do you foresee being needed? And how do we 
prioritize the building of new transmission vs. upgrading our current 
grid?
    Answer. Integrating large quantities of intermittent renewable 
resources into the grid and efficiently routing the power where it is 
needed can be accomplished in a number of ways. Methods currently being 
used to successfully integrate increasingly larger amounts of wind and 
solar include geographic diversity, which includes expanding the 
geographic size of utility balancing areas; improving markets for grid 
ancillary services; using storage or flexible low carbon generation 
such as existing hydro or natural gas plants; improving regional 
planning and grid operations; and better wind and solar forecasting.
    The Department has been working diligently to facilitate the 
discussion and development of regional transmission interconnection-
wide planning. In the coming year, the various transmission planning 
efforts in the West, such as that by the DOE-funded Western Renewable 
Energy Zone process of the Western Governors Association at the 
Interconnection level, are likely to provide realistic estimates of 
needed new transmission for renewables. Furthermore, the 2009 American 
Recovery and Reinvestment Act provides $80 million to conduct a 
resource assessment and analysis of future demand and transmission 
requirements that will help accelerate the and better enable the 
nation's transition to a clean energy future in the electricity sector.

    Question 2. ``Smart Metering'' projects for residential consumers 
have become the poster-child of the Smart Grid. However, some studies 
have found that the majority of the benefits of the Smart Grid will 
result from investments in grid transmission and distribution system 
upgrades and optimization, with only a small percentage of energy 
savings and emission reductions coming from smart metering programs. 
Could you comment on this? And how should we take these findings into 
consideration when prioritizing which Smart Grid demonstration projects 
to fund?

    NOTE: as a data point, the Climate Group SMART 2020 Report 
estimates that 85% of the carbon reduction benefits of a Smart Grid 
come from Grid Optimization and Renewables Integration, and only 15% 
will come from End-User Energy Management.
    Answer. The Smart Grid involves a number of technologies and 
functionalities with various levels of benefits. The Department is 
interested in conducting a comprehensive evaluation of the Smart Grid, 
including applications on the customer-side-of-the meter, within the 
distribution system, and at the transmission level. One of the primary 
objectives of the regional demonstrations is to collect the data that 
is needed to make such an assessment and the Department will request a 
benefits analysis from applicants applying for Recovery Act funding.

    Question 3. After the Department of Energy has spent out it's 
nearly $4.5 billion on Smart Grid Investments, how do we measure 
whether that money has been spent effectively? How soon and what 
improvements in our grid should we expect to see?
    Answer. The Department recognizes the importance of measuring the 
outcomes and resulting benefits of the investments made with Recovery 
Act dollars. DOE is working closely within the Administration to 
develop meaningful performance measures and sound methodologies to 
evaluate the effectiveness of our investments, focusing in particular 
on the smart grid initiatives that will receive most of the $4.5 
billion. We hope to see improvements immediately as smart grid 
technologies are deployed, but will need to measure progress to 
determine actual improvements in performance of the transmission and 
distribution system.

    Question 4. Ms. Hoffman, during the past several years, the Office 
of Electricity Delivery and Energy Reliability has subsisted on a 
budget of roughly $130-$180 million. We have just given the Office over 
an order of magnitude increase in their budget to roughly $4.5 billion. 
What are DOE's plans regarding scaling up the size and expertise of the 
Office in order to spend these funds judiciously?
    Answer. Managing the increase in appropriations is a significant 
challenge for the Office of Electricity Delivery and Energy Reliability 
(OE), given the current program level. Moreover, we understand that 
this is a one-time increase for the program, and therefore are 
cognizant that any growth in the program to administer the funds must 
be short-term, or accommodated within much lower program funding levels 
in the outyears.
    OE has been evaluating its requirements for administering the 
distribution of funds and overseeing implementation of the Recovery Act 
funding. We plan to hire additional Federal employees on a limited-term 
basis to assist in implementation, emphasizing areas such as contract 
management that are uniquely Federal activities, and have already 
posted several job announcements. We will supplement Federal staff 
through technical support contractors that will perform less sensitive 
tasks. OE also plans to leverage expertise and resources within the 
Department and the national labs. For example, OE will use contract 
administration resources in Headquarters procurement and at the 
National Energy Technology Laboratory to manage grant solicitations and 
awards and plans to make use of expertise at the National labs to 
evaluate grant proposals.

    Question 5. How does the office plan to allocate, percentage-wise, 
the funds provided in ARRA towards smart grid R&D and energy storage 
R&D vs. simply maintaining the integrity of our current grid?
    Answer. The Department will evaluate the benefits provided by smart 
grid projects and energy storage projects applicable to Section 1306 of 
the Energy Independence and Security Act of 2007 (EISA), the smart grid 
regional demonstrations provision in Section 1304 (b), and smart grid 
R&D activities, including energy storage, demand response, and wide 
area measurement and control, as authorized in Section 1304 (a). 
Funding for these activities will be administered through a competitive 
procurement.
    Question 6. Ms. Hoffman, do you foresee the current lack of 
protocols and standards hindering your timely funding of Smart Grid 
investments and demonstration projects and their progress?
    Answer. At this time the Department believes there is sufficient 
effort underway to develop cyber security safeguards and 
interoperability standards to begin smart grid deployments without 
delay. The Department is proceeding with implementing smart grid 
deployments and standards development in parallel.

   Responses of Patricia Hoffman to Questions From Senator Murkowski

    Question 1. What does Smart Grid technology promise in terms of 
reliability? A smart grid is supposed to increase our system's security 
but technology like smart meters and advanced communication networks 
can actually increase the vulnerability of our grid to cyber attacks. 
How do you plan to address these cyber security concerns? Do the 
agencies have sufficient authority or is additional federal legislation 
needed?
    Answer. The Smart Grid offers a number of opportunities to improve 
grid reliability. For example, through the use of AMI (advanced 
metering infrastructure) with two-way communications at the 
distribution level, utilities can remotely identify, locate, isolate, 
and restore power outages more quickly without having to send field 
crews on trouble calls. At the transmission level, phasor measurement 
units synchronized with global-position systems can provide enhanced 
situational awareness across wide areas of the power grid to detect and 
deter grid disturbances much faster than existing systems. In addition, 
the Smart Grid will enable greater use of distributed resources and 
technologies to control load to enhance reliability.
    The Department has been working with the private sector for several 
years to enhance cyber security in the energy sector through the 
implementation of the Roadmap to Secure Control Systems in the Energy 
Sector. The Department has conducted cyber security assessments of more 
than 20 supervisory control and data acquisition (SCADA) systems, which 
represent over 90 percent of the current market offerings in the 
electricity sector. As a result, vendors have developed next-generation 
``hardened'' systems that are now being deployed in the market.
    In addition, the Department is partnering with the AMI Security 
Task Force organized under the UCA International User's Group to 
develop cyber security requirements for AMI--a foundational smart grid 
application. The Task Force is comprised of utilities, security domain 
experts, standards body representatives and industry vendors. On March 
10, 2009, the Task Force published the AMI System Security 
Requirements, which provides critical guidance for vendors and 
utilities to help design and procure secure and reliable AMI systems. 
The Task Force will also produce a vendor catalog of smart meters, an 
implementation guide, and procurement guidelines. Because of the 
success of this industry-government partnership, the Department is 
expanding the scope of the project to develop comprehensive cyber 
security specifications (including penetration testing) for all 
critical Smart Grid applications.
    At this time, we do not foresee the need for additional federal 
legislation to accomplish our goal through public-private partnerships. 
The Department will continue to work with the National Institute of 
Standards and Technology to accelerate the development of a framework 
for the complete suite of interoperability standards. Once a standard 
is completed by the applicable standards development organization, the 
Federal Energy Regulatory Commission will issue a rulemaking to adopt 
the standard as required under the Energy Independence and Security Act 
of 2007.

    Question 2. The Stimulus bill provided an unprecedented $4.5 
billion in federal funds for smart grid activities. In your opinion, 
what is the best way to allocate these funds--matching grants for 
technology investments; research and development; pilot programs? Over 
what timeframe? What are the necessary first steps?
    Answer. The Department is in the process of finalizing the 
allocation of funds it received in the American Recovery and 
Reinvestment Act of 2009 to initiatives that will most effectively 
achieve the Act's objectives of modernizing the electricity grid, 
enhancing energy security, conducting energy storage R&D, improving 
grid resiliency and efficiency, and implementing the Smart Grid 
programs authorized under Title XIII of Energy Independence and 
Security Act of 2007 (P.L.110-140) (EISA).
    We anticipate that the bulk of the $4.5 billion for Electricity 
Delivery and Energy Reliability will support programs authorized by the 
EISA. This includes the Smart Grid Investment program that provides 
matching federal funds for qualifying investments (Section 1306) and 
Smart Grid Regional Demonstration projects (Section 1304), as well as 
the development of the interoperability framework that is so critical 
to the effective application of smart grid technologies. We will also 
support initiatives that assist regional transmission planning and 
analysis, as well as workforce development.
    Almost all of the funds will be distributed through a competitive 
process, generally through competitive grants or other financial 
assistance vehicle. The process begins with publication of a Notice of 
Intent alerting potentially interested parties of an upcoming 
opportunity, followed by a solicitation for proposals. The proposals we 
receive go through a structured evaluation process, and then grants are 
awarded.
    We are working to expedite the distribution of funds so that the 
dollars can go where they are most needed and support the creation of 
jobs. That being said, a competitive process takes more time than a 
formula or block grant process, since proposals must be solicited and 
evaluated.

    Question 3. What capabilities and expertise in this area does each 
of your agencies bring to the table?
    Answer. The Department brings extensive capabilities to conduct R&D 
in grid modernization and advanced electric transmission and 
distribution technologies. For example, the Department has been 
conducting studies, analysis, and technology development activities for 
about a decade in advanced measurement, communications, and control 
systems to determine the potential for strengthening the integration of 
information technologies with the electric power system. The Department 
also has considerable experience, expertise, and capabilities in the 
development and analysis of cyber security technologies for power grid 
applications.
    Since 2007, we have taken initial steps to begin implement our new 
smart grid responsibilities under Title XIII of the Energy Independence 
and Security Act of 2007 (EISA) by planning research and development 
for the next generation of smart grid technologies, establishing a 
Federal Smart Grid Task Force and Advisory Committee, providing 
assistance to the National Institutes of Standards and Technologies 
(NIST) and the Federal Energy Regulatory Commission (FERC) in the 
development of a national framework for smart grid interoperability 
standards, and planning for potential programs in regional 
demonstrations and Federal matching grants. In addition, Title XIII 
requires that we conduct a ``Smart Grid System'' report which is to be 
published every two year and provide information on the status of smart 
grid deployments nationwide and any regulatory or government barriers 
to continued deployment and a study of the security attributes of smart 
grid systems including a determination of smart grid deployments on the 
security of the electric system.
    The Department is implementing a comprehensive approach to the 
integration of renewable and distributed resources with the electric 
transmission and distribution system. For example, studies and analysis 
have been conducted to assess the technical and economic issues 
associated with operating large numbers of wind turbines, 
interconnecting them with the grid, and integrating their operations 
with system planning and operations. These studies have pointed to the 
need for expanding the capacity of the electric transmission system to 
accommodate greater numbers of wind installations, and to develop 
better operating data on system conditions and wide-area visibility so 
grid operators can address fluctuations in the wind and match them to 
system requirements.

    Question 4. Your office has received an unprecedented amount of 
funding in the Stimulus Bill. Does your office have the ability to 
utilize these funds in a targeted and meaningful way? How will DOE 
undertake its work? Will all the money be spent on matching grants or 
will DOE use some of the funding to perform R&D work and undertake 
demonstration projects?
    Answer. Managing the increase in appropriations is a challenge for 
the Office of Electricity Delivery and Energy Reliability (OE), given 
the current program level but we are committed to applying the funds to 
initiatives that will most effectively achieve the Recovery Act's 
objectives of modernizing the electricity grid, enhancing energy 
security, and improving grid resiliency and efficiency. Recognizing 
that this is a one-time increase for the program, we plan to increase 
Federal staff on a limited-term basis, supplementing with technical 
support contractors as appropriate. OE also plans to leverage expertise 
and resources within the Department and the national labs as much as 
possible.
    Almost all of the funds will be distributed through a competitive 
process, generally through competitive grants or other financial 
assistance vehicle. While the bulk of the funding will support Smart 
Grid Investment and Regional Demonstration projects, we will also 
support initiatives that assist regional transmission planning and 
workforce development.

    Question 5. Energy storage technologies (plug-in-hybrid electric 
vehicles, large scale lithium ion batteries, flywheels, etc.) can 
provide many benefits: improved grid reliability, increased utilization 
of intermittent renewables, and deferred transmission investments. 
Unfortunately, market rules and interconnection requirements for 
storage devices are far from standardized. How can your agency 
accelerate the integration and the benefits of energy storage as part 
of the Smart Grid?
    Answer. The Department's Office of Electricity Delivery and Energy 
Reliability (OE) will continue to provide national leadership in the 
development and deployment of a wide range of energy storage 
technologies and applications for the power grid. Current work includes 
cost-shared projects with the California Energy Commission, the New 
York State Energy Research and Development Authority, and utilities. 
These projects will help determine the feasibility, efficiency, and 
carbon footprint of storage technologies. OE will also continue to work 
with the Federal Energy Regulatory Commission (FERC), Independent 
Systems Operators, State Agencies, utilities, and vendors to accelerate 
acceptance of energy storage as an essential tool of smart grid 
technology and adoption of appropriate market rules to enable 
widespread application. Since energy storage is an integral part of a 
smart grid, we anticipate supporting applications for a wide range of 
energy storage technologies under the American Recovery and 
Reinvestment Act. These demonstrations with integration into the grid 
infrastructure will greatly accelerate the development and widespread 
adoption of energy storage. With respect to standards, the Department 
works closely with organizations such as the National Electric 
Manufacturers Association to establish standardization and 
interconnection requirements.

     Response of Patricia Hoffman to Question From Senator Stabenow

    Question 1. I am very pleased that the Recovery Package includes 
$100 million for workforce training. Could you explain how these funds 
may be used to start and leverage private investments? Also, will 
workforce training programs be necessary and at what point could we 
begin implementing training programs?
    Answer. The Department is still in the process of defining how the 
$100 million for workforce training provided in the American 
Reinvestment and Recovery Act will be implemented to build America's 
energy workforce in support of the Nation's grid modernization. DOE 
expects to release a solicitations to support the workforce training 
initiative within the next few months.


```