128 FERC ¶ 61,060 

UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

18 CFR Chapter I 

[Docket No. PL09-4-000] 

Smart Grid Policy 

(Issued July 16, 2009) 

AGENCY: Federal Energy Regulatory Commission. 

ACTION: Policy Statement 

SUMMARY: This Policy Statement provides guidance regarding the development of a 

smart grid for the nation’s electric transmission system, focusing on the development of 

key standards to achieve interoperability and functionality of smart grid systems and 

devices. In response to the need for urgent action on potential challenges to the bulkpower system, in this Policy Statement the Commission provides additional guidance on 

standards to help to realize a smart grid. The Commission also adopts an Interim Rate 

Policy for the period until interoperability standards are adopted by the Commission, 

which will encourage investment in smart grid systems.

EFFECTIVE DATE: The Interim Rate Policy will become effective [Insert_Date 60 

days after publication in the FEDERAL REGISTER]. 
Docket No. PL09-4-000 - 2 - 

FOR FURTHER INFORMATION CONTACT: 

David Andrejcak 

Office of Electric Reliability 

888 First Street, N.E. 

Washington, D.C. 20426 

(202) 502-6721 

david.andrejcak@ferc.gov

Elizabeth H. Arnold 

Office of General Counsel 

888 First Street, N.E. 

Washington, D.C. 20426 

(202) 502-8818 

elizabeth.arnold@ferc.gov

 

Ray Palmer 

Office of Energy Policy and Innovation 

888 First Street, N.E. 

Washington, D.C. 20426 

(202) 502-6569 

ray.palmer@ferc.gov

Dennis Reardon 

Office of Energy Market Regulation 

888 First Street, N.E. 

Washington, D.C. 20426 

(202) 502-6719 

dennis.reardon@ferc.gov 

SUPPLEMENTARY INFORMATION:
UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

Smart Grid Policy Docket No. PL09-4-000 

TABLE OF CONTENTS

Paragraph Numbers

I. Background .................................................................................................................... 2.

II. Discussion..................................................................................................................... 9.

A. Jurisdictional Concerns .......................................................................................... 12.

B. Development of Key Standards.............................................................................. 29.

1. System Security .................................................................................................. 30.

2. Communication and Coordination Across Inter-System Interfaces................... 46.

3. Wide-Area Situational Awareness...................................................................... 55.

4. Demand Response .............................................................................................. 63.

5. Electric Storage................................................................................................... 78.

6. Electric Vehicles................................................................................................. 83.

7. Additional Priorities Suggested by Commenters ............................................... 92.

C. Interim Rate Policy................................................................................................. 95.

1. Scope and Duration............................................................................................. 96.

2. Additional Showings ........................................................................................ 109.

3. Incentives Under the Interim Rate Policy......................................................... 131.

a. Single Issue Ratemaking .............................................................................. 132.

b. Recovery of Stranded Costs for Legacy Systems ........................................ 138.

c. Additional Incentive Rate Treatments.......................................................... 142.

4. Potential Interplay with Department of Energy Funding Grants...................... 150.

III. Document Availability ............................................................................................ 157.

IV. Information Collection Statement .......................................................................... 160.

V. Effective Date and Congressional Notification........................................................ 169.

Appendix A List of Commenters and Short Names
 

128 FERC ¶ 61,060 

UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

Before Commissioners: Jon Wellinghoff, Chairman; 

 Suedeen G. Kelly, Marc Spitzer, 

 and Philip D. Moeller. 

Smart Grid Policy Docket No. PL09-4-000 

POLICY STATEMENT 

(Issued July 16, 2009) 

1. On March 19, 2009, the Commission issued a Proposed Policy Statement and 

Action Plan to guide the development of key standards for smart grid devices and 

systems.1

 Many companies in the electricity industry are designing and deploying such 

devices and systems with the objective of achieving greater interoperability and 

functionality of the nation’s electric transmission grid. In the Proposed Policy 

Statement, the Commission also put forth the notion of an interim rate policy to guide 

rate recovery while interoperability standards are adopted (Interim Rate Policy). 

Comments were invited on all aspects of the Proposed Policy Statement. On May 19, 

2009, the Commission issued a notice requesting supplemental comments on one 

additional feature of the Interim Rate Policy.2

1 Smart Grid Policy, 126 FERC ¶ 61,253 (2009) (Proposed Policy Statement). 

2 Smart Grid Policy, 127 FERC ¶ 61,139 (2009) (Notice Requesting Supplemental 

Comments). 
Docket No. PL09-4-000 - 2 - 

This Policy Statement generally adopts the proposals enumerated in the Proposed Policy 

Statement and provides additional guidance for standards that will help realize a smart 

grid. 

I. Background

2. As the Commission explained in the Proposed Policy Statement, the 

Commission’s jurisdiction over the transmission system derives from provisions of the 

Federal Power Act (FPA) relating to the transmission of electric energy in interstate 

commerce by public utilities, and to the reliable operation of the bulk-power system.3

 An 

additional responsibility was assigned by the Energy Independence and Security Act of 

2007 (EISA)4

 directing the Commission to initiate a rulemaking proceeding to adopt 

standards and protocols related to smart grid functionality and interoperability.5

3. EISA lays out the policy of the United States with regard to modernization of the 

nation’s electricity transmission and distribution system in order to maintain a reliable 

and secure electricity infrastructure that can meet future demand growth and achieve a 

number of goals characterizing a smart grid.6

 EISA also directs the National Institute of 

 

(continued...) 

3

 16 U.S.C. 824, 824o (2006). 

4

 Public Law No. 110-140, 121 Stat. 1492 (2007). 

5

 EISA sec. 1305(d), to be codified at 15 U.S.C. 17385(d). 

6

 EISA sec. 1301, to be codified at 15 U.S.C. 17381. Among these goals and 

characteristics are deployment or realization of: digital information and technology to 

improve reliability, security and efficiency; cybersecurity; distributed resources and 
Docket No. PL09-4-000 - 3 - 

 

Standards and Technology (the Institute) to coordinate the development of a framework 

to achieve interoperability of smart grid devices and systems, including protocols and 

model standards for information management.7

 The Commission explained in the 

Proposed Policy Statement that, in order to achieve the smart grid characteristics and 

functions described in EISA, interoperability of smart grid equipment will be essential.8

4. Once the Commission is satisfied that the Institute’s work has led to “sufficient 

consensus” on interoperability standards, EISA directs the Commission to “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.”9

 In the Proposed Policy 

Statement, the Commission described some of the Institute’s efforts to date, as well as its 

generation; demand response; “smart” technologies for optimal grid operations and 

distribution automation; “smart” appliances; electricity storage; consumer information 

and control; and communication and interoperability standards. 

7

 EISA sec. 1305(a), to be codified at 15 U.S.C. 17385(a). In this Policy 

Statement, we refer to the Institute’s process as both the coordination and the 

development of standards. The Institute’s primary function with regard to smart grid is to 

be a coordinator for the variety of smart grid standards development initiatives. 

8

 Interoperability is described as exchanging meaningful information between two 

or more systems and achieving an agreed expectation for the response to the information 

exchange while maintaining reliability, accuracy, and security. See GridWise 

Architecture Council, Interoperability Path Forward Whitepaper, 

http://www.gridwiseac.org/pdfs/interoperability_path_whitepaper_v1_0.pdf. 

9

 EISA sec. 1305(d). 
Docket No. PL09-4-000 - 4 - 

 

projected work, to develop a framework for interoperability standards, and sought 

comment on the most effective and efficient ways for the Commission and the Institute to 

interact in the ongoing standards development processes. 

5. In the Proposed Policy Statement, the Commission identified several potential 

challenges to the reliable operation of the Commission-jurisdictional bulk-power system 

and the smart grid functions and characteristics that could help address those challenges. 

The major challenges identified include: existing cybersecurity issues;10 issues 

associated with changes to the nation’s generation mix,11 including an increasing reliance 

on variable renewable generation resources;12 and issues that could arise with increased 

and more variable electricity loads associated with transportation technology.13 In 

addition to these challenges, we incorporated the Institute’s assessment that there is an 

10 Proposed Policy Statement, 126 FERC ¶ 61,253 at P 13. 

11 On May 13, 2009, the Commission announced that it had commissioned the 

Lawrence Berkeley National Laboratory to use frequency response to help assess the 

potential for the reliable integration of wind and other renewable energy resources into 

the bulk-power system. The frequency study has three main objectives: (1) determining 

if frequency response is an appropriate metric to assess the reliability effects of 

integrating renewables, (2) using the resulting metric to assess the reliability impact of 

various levels of renewables on the grid, and (3) identifying what further work and 

studies are necessary to quantify and mitigate any negative effects on reliability 

associated with the integration of renewables. 

12 Proposed Policy Statement, 126 FERC ¶ 61,253 at P 17-20. 

13 Id. P 21-22. 
Docket No. PL09-4-000 - 5 - 

 

overarching need for standardization of communication and coordination across intersystem interfaces.14 

6. In response to the need for urgent action on these potential challenges to the bulkpower system, the Commission identified and asked for comments on several areas it 

proposed as deserving high priority in the smart grid interoperability standards 

development process, including two cross-cutting issues (cybersecurity and physical 

security to protect equipment that can provide access to smart grid operations, and a 

common information framework), and four key grid functionalities (wide-area situational 

awareness, demand response, electric storage, and electric transportation). The 

Commission also proposed the Interim Rate Policy to encourage investment in smart grid 

technologies intended to address potential challenges to the bulk-power system through 

the advancement of efficiency, security, reliability, and interoperability. The Interim 

Rate Policy provides that smart grid investments that demonstrate system security and 

compliance with Commission-approved Reliability Standards,15 the ability to be 

upgraded, and other specified criteria will be eligible for timely rate recovery and other 

rate treatments. 

14 National Institute of Standards and Technology, Smart Grid Issues Summary

(2009), http://collaborate.nist.gov/twikisggrid/pub/SmartGrid/TnD/Draft_NIST_Smart_Grid_Issues_Summary_10March2009.pd

f, at 1 and 4-5. 

15 Adopted under FPA sec. 215, 16 U.S.C. 824o. 
Docket No. PL09-4-000 - 6 - 

 

7. The May 19 Notice Requesting Supplemental Comments sought additional input 

regarding potential actions that the Commission could take to insure that public utilities 

may qualify for awards under certain Department of Energy funding programs related to 

jurisdictional facilities. On the same day of the issuance of our Proposed Policy 

Statement, the Department of Energy announced $2.4 billion for electric vehicle 

demonstration and deployment projects.16 On April 18, the Department of Energy 

announced another $615 million for targeted demonstrations programs; one of three 

targets is “utility-scale energy storage demonstrations.”17 

8. The Commission notes from its review of a recent report that the Institute is now 

using the Proposed Policy Statement to coordinate development of interoperability 

standards.18 

16 See March 19, 2009 Department of Energy news release, President Obama 

Announces $2.4 Billion for Electric Vehicles,

http://apps1.eere.energy.gov/news/daily.cfm/hp_news_id=159. In this Policy Statement, 

“electric vehicle” refers to a vehicle that requires periodic re-charging of its propulsion 

battery from the electric grid; such a vehicle may or may not also be a “hybrid,” 

additionally capable of re-charging with a fuel-driven generator or by other mechanical 

means. 

17 See April 16, 2009 Department of Energy news release, Vice President Biden 

Outlines Funding for Smart Grid Initiatives, http://www.energy.gov/news2009/7282.htm. 

18 Don Von Dollen, Report to NIST on the Smart Grid Interoperability Standards 

Roadmap, Electric Power Research Institute (June 17, 2009) (Roadmap Report). See also 

Press Release, Electric Power Research Institute (June 17, 2009). For example, Chapter 

four reports on the collaborative work of the Institute, the contractor, and its 

subcontractors, and attendees at two conferences to develop use cases, interfaces, and 

(continued...) 
Docket No. PL09-4-000 - 7 - 

II. Discussion

9. Approximately 70 sets of comments were submitted from a broad array of 

interested parties.19 In general, commenters support the Proposed Policy Statement, 

including the establishment of key priorities20 identified therein, and the need for focused 

leadership over the process going forward. There is a greater diversity of comments on 

the Interim Rate Policy. Sixteen supplemental comments were submitted, exhibiting a 

split of opinion regarding whether to offer special procedures for rate recovery filings for 

utilities seeking funding through certain Department of Energy programs. 

10. In this Policy Statement, the Commission adopts the key priorities for standards 

development that were identified in the Proposed Policy Statement. The Commission 

 

requirements for the Commission’s four key grid functionalities identified in the 

Proposed Policy Statement: wide-area situational awareness, demand response, electric 

storage, and electric transportation. Two additional priority functionalities have also 

been identified that relate to those proposed by the Commission: AMI systems that relate 

to the need for metering standards are identified in the demand response discussion of the 

Roadmap Report and distribution grid management (related to distributed energy storage) 

is identified in both the electric storage and electric transportation discussions. In 

addition, Chapter five of the report is devoted to the cross-cutting issue of cybersecurity 

identified by the Commission. Chapter six addresses the Commission’s second crosscutting issue of a prioritized need for common semantic models and other standardized 

communication elements. 

19 An alphabetical listing of all commenters and abbreviations for each is found at 

the end of this document at Appendix A. 

20 An area considered to be a “key priority” is proposed as the first level of work to 

be accomplished in the interoperability standards-setting process. Proposed Policy 

Statement, 126 FERC ¶ 61,253 at P 27. 
Docket No. PL09-4-000 - 8 - 

also adopts the Interim Rate Policy, as discussed below, and finds that there is no need 

for special procedures associated with rate recovery filings for projects that are also 

receiving Department of Energy grant funding. 

11. A number of entities also comment on the standards development process and the 

Commission’s interactions with the Institute and other bodies interested in the 

development of interoperability standards. The Commission will address these topics 

separately. 

A. Jurisdictional Concerns

12. In the Proposed Policy Statement, the Commission noted that its interest and 

authority in the area of smart grid derive from its authority over the rates, terms and 

conditions of transmission and wholesale sales in interstate commerce and its 

responsibility for Reliability Standards for the bulk-power system, as well as from 

EISA.21 Specifically, the Commission has jurisdiction over the transmission of electric 

energy in interstate commerce by public utilities pursuant to FPA section 201, and over 

the reliable operation of the bulk-power system in most of the nation under FPA section 

215.22 Section 1305(d) of EISA directs the Commission to initiate rulemaking 

proceedings to adopt such standards and protocols as may be necessary to insure smart 

 21 Id. P 1. 

22 16 U.S.C. 824, 824o. 
Docket No. PL09-4-000 - 9 - 

grid functionality and interoperability in interstate transmission of electric power, and in 

regional and wholesale electricity markets.23

Comments

13. Many commenters note a tension that the Proposed Policy Statement raises 

between federal jurisdiction and state jurisdiction and urge the Commission to clarify 

jurisdictional boundaries. Questions center on both standards adoption and applicability 

and whether deployed technology will be subject to state or federal rate authority. 

14. A number of commenters maintain that EISA does not alter the fundamental 

parameters of the Commission’s authority.24 State commissions, other state authorities, 

and several utilities remark that the Commission should not encroach on traditional state 

jurisdiction.25 The Michigan Commission maintains that implementing smart grid 

functionality and interoperability at the distribution level or in retail sales should be left 

to the states. Several entities are concerned by statements in the Proposed Policy 

Statement that, to those parties, indicate that the Commission may be extending its 

jurisdictional scope. In particular, commenters take issue with the suggestions that the 

 23 EISA sec. 1305(d), to be codified at 15 U.S.C. 17385(d). 

24 See, e.g., Michigan Commission Comments at 6-7, Maryland Counsel 

Comments at 7-8, Ohio Commission Comments at 4, and Ohio Partners Comments at 

2-3. 

25 See, e.g., California Commission Comments at 6, Ohio Commission Comments 

at 5-7, Massachusetts Attorney General Comments at 4-5, and SDG&E Comments at 

22-23. 
Docket No. PL09-4-000 - 10 - 

 

potential reliability impacts of electric vehicles may afford the Commission some 

authority over distribution facilities, and certain devices related to the distribution system 

are eligible for cost recovery in wholesale rates because of some tangential impact on 

bulk-power operations due to interoperability issues.26

15. The Ohio Commission comments that, since interoperability standards encompass 

areas that are outside of the Commission’s jurisdiction, the Commission should support 

the development of model standards through the Institute’s process, resolving any 

impasses through the NARUC/FERC Smart Grid Collaborative, and that the Commission 

and states should adopt model standards to be applied within areas subject to their 

respective jurisdictions. In addition, states should be responsible for ensuring compliance 

with Commission-imposed guidelines and standards.27 

16. The Ohio Commission and North Carolina Agencies note that not all states will 

want the same smart grid functionality deployed in the same manner, and comment that 

standards should accommodate different rate structures and policies. In contrast, NEMA 

and CURRENT appreciate national standardization, noting that the lack of a consistent 

national standard for interconnection has inhibited the development of distributed 

generation. NEMA and CURRENT urge the Commission to pursue nationwide 

26 Michigan Commission Comments at 8 and Maryland Counsel Comments at 5. 

27 Ohio Commission Comments at 5-7. 
Docket No. PL09-4-000 - 11 - 

 

standardization and encourage state commissions to develop policies akin to those in the 

Proposed Policy Statement. The Kansas Commission asks whether the Commission is 

suggesting that the federal government should implement guidelines governing the 

procedures for charging electric vehicles at night as one method for storing electricity.28

17. Various commenters request clarification or guidance in certain areas, notably 

(1) whether the Commission intends to implement mandatory protocols “in areas that are 

traditionally under state jurisdiction, such as the distribution network and behind-themeter installations,”29 (2) how the Commission intends to determine which portions of a 

smart grid are part of the bulk-power system and those which are part of the distribution 

system,30 (3) whether the Commission has the authority to specify physical layer 

standards31 while preserving state ratemaking authority,32 and (4) whether the 

Commission has the authority to mandate a nationwide meter communications protocol.33

28 Kansas Commission Comments at 5-6. 

29 California Commission Comments at 6-7. 

30 Id. at 11. 

31 NEMA makes several references to physical connections and standards in its 

comments, including interconnection for distributed generation, and applications for 

intelligent customer energy management equipment. It is not clear in NEMA’s 

comments whether this reference also applies to meters. 

32 NEMA Comments at 6. 

33 Id. at 7. 
Docket No. PL09-4-000 - 12 - 

 

18. Many commenters ask the Commission to clarify the boundaries between federal 

and state jurisdiction for rate recovery purposes. NARUC suggests that the approach 

should be to examine the location of the deployed technology. If such a technology 

resides on a Commission-jurisdictional line, then it should be regulated by this 

Commission. If it resides on a line regulated by states, then it should be subject to state 

oversight.34 EEI highlights the need for this clarification, noting that specific smart grid 

equipment might be installed on either or both transmission and distribution facilities.35 

Indianapolis P&L asserts that the Commission should apply the seven factor test, set forth 

in Order No. 888,36 to delineate between federal and state activities.37

19. NARUC is also concerned that the Commission’s policies not allow double cost 

recovery, or allow Commission-jurisdictional entities to “bootstrap cost recovery for 

34 NARUC Comments at 16, Maryland Counsel Comments at 5, and Springfield 

Comments at 10-11. 

35 EEI Comments at 14-15. 

36 Promoting Wholesale Competition Through Open Access Non-Discriminatory 

Transmission Services by Public Utilities; Recovery of Stranded Costs by Public Utilities 

and Transmitting Utilities, Order No. 888, FERC Stats. & Regs. ¶ 31,036, at 31,771 and 

31,981 (1996), order on reh’g, Order No. 888-A, FERC Stats. & Regs. ¶ 31,048, order on 

reh’g, Order No. 888-B, 81 FERC ¶ 61,248 (1997), order on reh’g, Order No. 888-C, 

82 FERC ¶ 61,046 (1998), aff’d in relevant part sub nom. Transmission Access Policy 

Study Group v. FERC, 225 F.3d 667 (D.C. Cir. 2000), aff’d sub nom. New York v. 

FERC, 535 U.S. 1 (2002). 

37 Indianapolis P&L Comments at 5-6. 
Docket No. PL09-4-000 - 13 - 

projects implemented within state jurisdiction.”38 The California Commission asserts 

that the Commission should acknowledge that state commissions are in the best position 

to address concerns as they pertain to retail customers and ratepayers.39

20. On the other hand, Ohio Commission states that cost recovery for the initial 

deployment of a demand response program should be at the state level. However, if such 

programs require later upgrading or replacement in order to meet model demand response 

standards approved by this Commission, then Ohio Commission argues that the 

associated costs should be recovered on a socialized, national level in Commissionjurisdictional rates.40

21. Finally, a number of entities encourage the Commission to work together with the 

states, and in particular with the NARUC/FERC Smart Grid Collaborative, to sort out 

jurisdictional boundaries. Maryland Counsel and Ohio Partners comment that ongoing 

dialogues should include consumer advocacy organizations. 

Commission Determination

22. The Commission agrees with those commenters who state that EISA does not alter 

the FPA’s jurisdictional boundaries between federal and state regulation over the rates, 

terms, and conditions of transmission service and sales of electricity. EISA does not 

 38 NARUC Comments at 13. 

39 California Commission Comments at 4, 12. 

40 Ohio Commission Comments at 1, 10. 
Docket No. PL09-4-000 - 14 - 

 

modify any of the provisions of the FPA. Nevertheless, EISA does give the Commission 

new responsibilities for the adoption of standards needed to insure smart grid 

functionality and interoperability. The legislation specifically directs the Commission to 

institute rulemaking proceedings to adopt standards necessary to insure “functionality and 

interoperability in interstate transmission of electric power, and regional and wholesale 

electricity markets.”41 The Commission understands this mandate to mean that the 

Commission has the authority to adopt a standard that will be applicable to all electric 

power facilities and devices with smart grid features, including those at the local 

distribution level and those used directly by retail customers so long as the standard is 

necessary for the purpose just stated.42 We reach this conclusion because Congress does 

not exclude from the scope of EISA 1305(d) facilities used in local distribution, or 

otherwise limit Commission authority to approve standards. Further, other provisions in 

EISA indicate that the smart grid interoperability framework is intended to include all 

41 EISA sec. 1301 and sec. 1305(d). 

42 For example, two-way communications are a distinguishing characteristic of 

smart grid devices on both the transmission and distribution systems. This two-way 

communications capability is essential to the smart grid vision of interoperability, 

allowing the transmission and distribution systems to communicate with each other. 

They also affect the security and functionality of each other. 
Docket No. PL09-4-000 - 15 - 

lesale 

of the Commission’s ratemaking or reliability jurisdiction, as many commenters 

 

elements of the grid, including communications with the ultimate consumer.43 EISA 

does not identify any segment of the interoperability framework that is not within the 

scope of standards to be promulgated. Accordingly, the Commission finds that EISA 

grants the Commission the authority to adopt smart grid standards—such as meter 

communications protocols or standards—that affect all facilities, including those that 

relate to distribution facilities and devices deployed at the distribution level, if the 

Commission finds that such standards are necessary for smart grid functionality and 

interoperability in interstate transmission of electric power, and in regional and who

electricity markets. 

23. EISA, however, does not make any standards mandatory and does not give the 

Commission authority to make or enforce any such standards. Under current law, the 

Commission’s authority, if any, to make smart grid standards mandatory must derive 

from the FPA. Similarly, its authority to allow rate recovery of smart grid costs must 

derive from the FPA. The authority to adopt standards under EISA does not change the

scope 

note. 

43 See, e.g., EISA sec. 1301 and sec. 1305(a) (stating that the framework should 

“enable all electric resources, including demand-side resources, to contribute to an 

efficient, reliable electricity network”) and sec. 1305(b). 
Docket No. PL09-4-000 - 16 - 

ion 

ects 

t it 

ropriate for a utility to recover the same costs for a smart grid project 

particular retail customer policies or programs. To the extent the Commission does adopt 

 

24. In order to determine whether particular facilities are subject to state or federal 

jurisdiction for purposes of rate recovery, interested parties should refer to Commiss

precedent for guidance.44 The Commission will evaluate particular facilities and proj

on a case-by-case basis. In response to commenters’ concerns, we recognize tha

would be inapp

twice, through state-approved retail rates and again in a proceeding before this 

Commission. 

25. As the EISA mandate to adopt interoperability standards does not afford the 

Commission new economic regulatory authority over local distribution facilities 

themselves, 45 and does not provide any authority or directive to mandate standards, the 

Commission does not interpret EISA to allow it to direct states to implement any 

44 See, e.g., Detroit Edison Co., 95 FERC ¶ 61,415 (2001), order on reh’g, 

96 FERC ¶ 61,309 (2001). “[T]o the extent that any facilities, regardless of their original 

nominal classification, in fact, prove to be used by public utilities to provide transmission 

service in interstate commerce in order to deliver power and energy to wholesale 

purchasers, such facilities are subject to this Commission’s jurisdiction and review.” 

Id., 95 FERC ¶ 61,415, at 62,535. Accord, Northeast Utilities Service Co., 107 FERC 

¶ 61,246, at P 22 (2004). 

45 Similarly, the Commission’s previous actions approving proposed North 

American Electric Reliability Corporation (NERC) reliability standards applicable to 

distribution providers and load serving entities to maintain the reliability and integrity of 

the bulk-power system did not, in and of themselves, confer Commission rate jurisdiction 

over those entities’ local distribution facilities. 
Docket No. PL09-4-000 - 17 - 

e 

n insure compliance with any 

art 

mission would consider adoption of such a standard pursuant to EISA 

ies of 

ions 

smart 

of 

smart grid standards related to facilities outside the Commission’s jurisdiction under th

FPA, we agree with the Ohio Commission that states ca

standards they deem applicable to their jurisdictions. 

26. In response to the question posed by the Kansas Commission regarding whether

the federal government should have guidelines governing the procedures for charging 

electric vehicles at night as one method for storing electricity, the Commission does not 

intend to issue policy guidelines for storing electric power by charging electric vehicles

during off-peak load periods. Nevertheless, if the Institute’s process results in a sm

grid interoperability standard related to storing electric power by charging electric 

vehicles, the Com

section 1305(d). 

27. The Commission recognizes that states have an interest in the functionalit

smart grid technologies, as suggested by North Carolina Agencies and the Ohio 

Commission, and we encourage states to actively participate in the ongoing discuss

being organized and facilitated by the Institute to insure that their perspectives are 

represented. We do not believe that Commission adoption of national standards for 

grid technologies should interfere with a state’s ability to adopt whatever advanced 

metering or demand response program it chooses. Nor will Commission adoption 

national standards affect the existing statutory framework for wholesale and retail 

pricing. Interoperability standards should be designed flexibly enough to support 
Docket No. PL09-4-000 - 18 - 

ed, 

 Commission should enhance, not limit, the policy 

alternative programs and pricing policies being considered by a particular state. Inde

national standards adopted by the

choices available to each state. 

28. We believe that it is appropriate for the Commission to have a role in determining 

key priorities in the interoperability standards development process. The Commission’s

leadership in this arena will help to expedite the development of functionalities that are 

important to federal energy policy (e.g., wide-area situational awareness to improve the 

reliability of the transmission grid) as well as to support programs that have emerge

many states (

d in 

e.g., integrating renewable generation to permit utilities to meet statemandated renewable portfolio requirements). We see great benefit from collaborati

closely with states regarding flexibility in smart grid standards and adapting to new 

technologies, and we expect to work with th

ng 

e states to pursue these topics through the 

NARUC/FERC Smart Grid Collaborative. 

B. Development of Key Standards

29. The purpose of this Policy Statement, among other things, is to prioritiz

development of key interoperability standards to provide a foundation for the 

development of many other standards. The Proposed Policy Statement identified and 

requested comment on several key priorities the Commission believed were necessary

address existing and emerging challenges to the operation of the bulk-power sys

These challenges included existing cybersecurity issues, large-scale changes in 

e the 

 to 

tem. 
Docket No. PL09-4-000 - 19 - 

he 

s 

rts on these key priorities first in order to achieve interoperability in a timely 

manner. 

generation mix and capabilities, and large potential new load from electric vehicles. T

proposed key priorities for standards development included two cross-cutting issues, 

system security and inter-system communication, and four key grid functionalities: 

(1) wide-area situational awareness, (2) demand response, (3) electric storage, and 

(4) electric transportation.46 Each of these topics is discussed in detail in the following 

sections. The Commission urges the Institute and interested parties to continue to focu

their effo

1. System Security

30. As explained below, the Commission adopts its Proposed Policy Statement 

position that cybersecurity is essential to the operation of the smart grid and that the 

development of cybersecurity standards is a key priority. Cybersecurity and physical 

security are ongoing concerns for both the Commission and the electricity industry 

have received heightened attention as part of the creation of recent mandatory and 

enforceable federal standards. We believe that implementation of smart grid technolog

which is designed to improve communication, coord

and 

y, 

ination, and interoperability, will 

 

require added attention to cybersecurity standards. 

46 Proposed Policy Statement, 126 FERC ¶ 61,253 at P 28. 
Docket No. PL09-4-000 - 20 - 

cture 

 and 

ber of smart grid devices expected to be located beyond the conventional 

be 

art 

he 

erarching cybersecurity and reliability 

the EISA as well as existing Reliability Standards approved by the 

31. To date, eight mandatory cybersecurity and physical critical infrastru

protection Reliability Standards (CIPS) have been approved by the Commission pursuant 

to section 215 of the FPA. The fact that a smart grid would permit two-way 

communication between the traditionally regulated components of the electric system

a large num

boundaries of regulated entities suggests that cybersecurity standards require special 

attention. 

32. The Commission sought comment regarding whether cybersecurity should 

considered a cross-cutting issue affecting interoperability that must be included in sm

grid standards.47 The Commission also proposed harmonizing cybersecurity and 

Reliability Standards as a precondition to the adoption of smart grid standards. T

Commission further proposed to advise the Institute to undertake the necessary steps to 

assure that each standard and protocol that is developed as part of the Institute’s 

interoperability framework is consistent with the ov

mandates of 

Commission pursuant to section 215 of the FPA. 

Comments 

 

47 Id. P 12. 
Docket No. PL09-4-000 - 21 - 

“measured approach to smart grid deployment” 

e 

n 

will 

-

me also support its development through a Commission-

 

33. Many commenters support system security as a priority. For instance, APPA 

states that security-related concerns should be given the highest priority and that they 

should be harmonized with the NERC CIPS standards to avoid conflicts during the largescale deployment of smart grid installations, while ITC Companies assert that 

cybersecurity is of paramount importance for the development of a smart grid. ELCON 

recommends that the Commission use a 

48

49

so that relevant agencies and standards development organizations have time to overcom

cybersecurity related technical issues.50

34. Some entities are concerned about whether there will be sufficient coordinatio

among the Institute and other relevant federal and state agencies, and whether there 

be a broader application of federal Reliability Standards on distribution facilities.51 

While several entities state that an open connectivity protocol should be developed 

through the Institute’s standards coordination process to insure interoperability of cyber

secure smart grid components, so

48 NARUC Comments at 14, EEI Comments at 6, 11, NERC Comments at 10, and 

ITC Co

TC Companies Comments at 5-6. 

 Michigan Commission Comments at 5-6, GridWise Alliance Comments at 9-10, 

and Na

mments at 6. 

49 APPA Comments at 12 and I

50 ELCON Comments at 2. 

51

tional Grid Comments at 4. 
Docket No. PL09-4-000 - 22 - 

y 

ting 

stitute 

tion system, utilities’ business 

ds 

ing 

 

approved Reliability Standard. Other entities assert that secure protocols already exist 

and are available for adoption.52

35. On the matter of coordination with the Institute, EEI points out that cybersecurit

should be addressed early on in the development and manufacturing process and that 

smart grid products should undergo thorough interoperability and cybersecurity tes

and certification at all levels prior to installation and use by independent firms that have 

been accredited by the Institute.53 NERC agrees that cybersecurity for smart grid 

technologies should be a top priority and advocates close coordination with the In

to avoid jurisdictional overlaps. NERC recommends adoption of Commission policies to

encourage the Institute to use its role, as the smart grid standards proponent and 

coordinator, to build cybersecurity protections into standards that affect the full span of 

smart grid systems and devices, such as the distribu

systems, customer appliances, and information technology systems, with an eye towar

aggregated impacts on the bulk-power system.54 

36. The Michigan Commission counsels that the Commission should avoid be

overly prescriptive in its standards until the Institute’s process is complete and should 

undertake a “bottom up” collaborative process that includes the states, standards 

52 ITC Companies Comments at 5-6 and PSEG Comments at 6-8. 

53 EEI Comments at 7. 

54 NERC Comments at 11-12. 
Docket No. PL09-4-000 - 23 - 

ability 

RC warns that the possible aggregate effects of smart grid devices that 

-

red 

(2) unauthorized access to, or modification of, a critical system, (3) information leakage, 

 

development organizations and other private actors to identify, up front, the reli

and security considerations that smart grid technologies must address while respecting 

the traditional statutory distinctions between state and federal jurisdiction over 

electricity.55 NE

reach into the distribution system can have substantial impact on the security of the bulk

power system.56

37. With respect to sufficient specificity in the Proposed Policy Statement, CPower 

asserts that the Commission's objective should be to bar only significant gaps in 

cybersecurity.57 ELCON suggests that more consistency and standardization are requi

with respect to authentication standards, physical protection standards, and the impact to 

the bulk-power system. GWAC argues that the Proposed Policy Statement should be 

expanded to address system architectures, define the classes of security requirements, and 

include risk management aspects, such as costs and potential consequences, instead of 

directing policy towards low-level details.58 B-D Research contends that the definition of

cybersecurity must be expanded to include matters such as (1) non-disruptive events, 

 

55 Michigan Commission Comments at 5-6. 

56 Id. at 11-12, 15. 

57 CPower Comments at 3. 

58 GWAC Comments at 13-15, 29-31. 
Docket No. PL09-4-000 - 24 - 

hould 

traints on the adoption of improved and potentially more secure 

ld 

3) automatically (or intelligently) respond to adverse system 

s 

ly 

 and 

 

and (4) system compromise.59 E.ON offers that existing cybersecurity standards s

not serve as cons

technologies.60 

38. The Ohio Commission requests that the Commission clarify its neutrality towards 

specific configurations and/or technology and that the common information model shou

not be too formulaic and thereby provide easy opportunities to defeat the cybersecurity 

standards.61 The California Commission suggests that standards should protect the grid

from inadvertent and direct cyber attacks while approved technologies should have the 

ability to: (1) withstand direct cyber attacks, (2) maintain resiliency in times of extreme 

stress and congestion, and (

conditions as they occur.62

39. On the matter of Commission-approved Reliability Standards, Southern contend

that the Commission should confirm that smart grid installations do not automatical

create mandatory Reliability Standard compliance obligations and that they do not 

automatically constitute critical cyber assets. In its view, smart grid technologies

applications should be considered critical cyber assets only when they would be 

59 B-D Research Comments at 1-4. 

60 E.ON Comments at 4-6. 

61 Ohio Commission Comments at 11-12. 

62 California Commission Comments at 7. 
Docket No. PL09-4-000 - 25 - 

be developed or revised concurrently with the implementation of smart grid 

designated as such under the requirements of Commission-approved CIPS Reliability 

Standard CIP-002.63 NRECA suggests that a number of NERC Reliability Standards 

may need to 

technology. 

Commission Determination

40. The Commission adopts its proposed policy position that the development of 

cybersecurity standards is a key priority in protecting the electricity grid. The possibility

that an adversary could access any of potentially millions of smart grid devices and

this access to disrupt the proper functioning of the bulk-power system creates new 

challenges for the operation of the nation’s electricity grid. These challenges are a 

natural consequence of the extensive communications network comprising the smart g

Because cybersecurity becomes a concern whenever one system communicates with 

another, it is important to focus from the outset on cybersecurity as an essential feature o

the design of in

 use 

rid. 

f 

teroperability standards. There is strong support for this focus from the 

 EISA, 

 

commenters. 

41. Accordingly, consistent with our cybersecurity mandates under EISA, the 

Commission will require a demonstration of sufficient cybersecurity protections in 

proposed smart grid standards to be considered in a rulemaking proceeding under

63 Southern Comments at 8-9. 
Docket No. PL09-4-000 - 26 - 

cal 

on 

e cybersecurity protection for the electric power 

n 

andates 

ot 

d 

by the 

including, where appropriate, a proposed smart grid standard applicable to lo

distribution-related components of smart grid. Specifically, there must be a 

demonstration that a proposed smart grid standard: (1) directly incorporates 

cybersecurity protection provisions, or (2) incorporates cybersecurity protection 

provisions from other smart grid standards or electric Reliability Standards that are 

submitted to the Commission concurrently, are already pending before the Commission, 

or have previously been adopted or approved by the Commission under EISA or secti

215 of the FPA, respectively, provid

system for the proposed standard. 

42. The Commission does not intend to preempt the development and implementatio

of an interoperability smart grid framework with the prioritization of cybersecurity and 

physical security. On the contrary, given our reliability and security oversight m

under EISA and FPA section 215, we are attempting to promote and accelerate 

development and implementation of cybersecurity elements that are foundational to the 

smart grid, and which will also promote maintenance of the integrity and reliability of the

underlying bulk-power system. Clearly, interoperability standards must support, and n

conflict with, critical efforts to improve the cybersecurity of electric power systems. 

43. As noted, many of the commenters request collaboration between the Institute an

NERC on the development of smart grid standards. The Commission agrees with this 

approach and encourages NERC, as the Electric Reliability Organization certified 
Docket No. PL09-4-000 - 27 - 

t 

 to 

nder section 215 of the FPA 

ty as a 

 that 

ections, including distribution system interconnections, to the extent allowed by 

 

Commission pursuant to FPA section 215, along with the states and other federal 

agencies, to collaborate with the Institute in developing its interoperability framework. 

We expect that NERC will monitor the compatibility of the smart grid standards with the 

Commission-approved CIPS standards and help identify any gaps or inconsistencies tha

are left unaddressed. To the extent necessary, the Commission would direct NERC

submit to the Commission a new or modified Reliability Standard as necessary or 

appropriate to carry out the Commission’s responsibilities u

as they relate to the development of smart grid standards. 

44. On the matter of Commission jurisdiction over standards, the Commission notes, 

as discussed above, that the cybersecurity characteristic of the smart grid is statutorily 

specified under EISA. In EISA, Congress envisions a smart grid with cybersecuri

foundational element of its system and provided for cybersecurity throughout the 

statute.64 Thus the Commission agrees with commenters such as NERC and CAISO

the reliability of the bulk-power system hinges on insuring the cybersecurity of all 

interconn

EISA. 

45. With respect to comments regarding the level of specificity in the cybersecurity 

requirements, constraints on improvements, and system resiliency and responsiveness to 

64 See EISA sec. 1301(2). 
Docket No. PL09-4-000 - 28 - 

, 

es. The 

, 

s 

rocess and the specific requirements of Commission-approved Reliability 

Standar

2. Communication and Coordination Across Inter-System 

attacks, the Commission agrees that these concerns warrant the attention of the Institute

NERC, and others who are working on proposed smart grid cybersecurity issu

Commission appreciates that the Roadmap Report highlights several relevant 

cybersecurity requirements, including those required in the Commission-approved CIPS 

standards.65 The Commission takes no position here regarding specific technologies and 

technical configurations that are appropriate for particular smart grid standards. Finally

we agree that deploying smart grid technologies does not, in and of itself, result in the 

need for compliance with Reliability Standards. Compliance with Reliability Standard

is determined through other processes under FPA 215, such as the NERC compliance 

registration p

ds. 

Interfaces

46. The Proposed Policy Statement suggested making the development of standards 

for inte

c 

r-system interfaces a key priority. It described the issue as follows:

The second cross-cutting issue is the need for a common semanti

framework (i.e., agreement as to meaning) and software models for

enabling effective communication and coordination across intersystem interfaces. An interface is a point where two systems need 

to exchange data with each other; effective communication an

coordination occurs when each of the systems understa

d 

nds and can 

respond to the data provided by the other system, even if the 

 

65 See Roadmap Report at 7. 
Docket No. PL09-4-000 - 29 - 

t 

s 

ements in efforts to realize significant early benefits of the smart grid.68 

internal workings of each system are quite different.66

47. The Commission stated that IEC Standards 61970 and 61968 (together, Common 

Information Model), along with IEC 61850 (Communications Networks and Systems in 

Substations), could provide a basis for addressing this issue.67 We clarified that we were 

not proposing any Commission requirement that these standards be developed further, bu

were identifying them for comment on whether these standards should be considered a

important el

Comments

48. Many commenters agree on the need for effective communication and 

coordination across inter-system interfaces,69 as well as using the Common Information 

Model standards as a starting place. Starting with Common Information Model st

was mentioned positively by GWAC, National Grid, NRG, Kansas Commission, 

Midwest ISO, and CAISO. However, some commenters caution that the premature 

implementation of standards for common information models for inter-system inte

 

andards 

rfaces 

66 Proposed Policy Statement, 126 FERC ¶ 61,253 at P 32. 

67 Id. 

68 Id. P 33. 

69 GWAC Comments at 16, Kansas Commission Comments at 3, Duke Comments 

at 8, NEMA Comments at 5, Midwest ISO Comments at 3, CAISO Comments at 7, 

ISO-NE Comments at 2, NRECA Comments at 17, NRG Comments at 7, National Grid 

Comments at 2, GridWise Alliance Comments at 1, and NERC Comments at 12. 
Docket No. PL09-4-000 - 30 - 

stem interfaces is one method whereby new and legacy control 

 networking as 

T also 

e 

) and independent system operators (ISOs) should take 

 

might result in valuable existing information systems being deemed inconsistent, 

requiring unnecessary replacement. They suggest a gradual phasing in of new 

technologies as other systems are retired.70 NERC, on the other hand, contends that 

development of inter-sy

systems can be enabled to communicate with each other, which should extend the life of 

such legacy systems.71

49. Silver Spring Networks suggests that the Commission also include

a priority in smart grid standards development.72 Silver Spring Networks and AT&

strongly support the use of Internet Protocol as a networking standard.73 

50. Regional transmission organizations that submitted comments support th

Commission’s proposals and offer some suggestions. CAISO suggests that 

communication across inter-system interfaces would be essential for “deep-area 

situational awareness” and for demand response.74 NYISO suggests that regional 

transmission organizations (RTOs

 

70 Kansas Commission Comments at 3 and SDG&E Comments at 19-20. 

ts at 1. 

71 NERC Comments at 12. 

72 Silver Spring Networks Commen

73 Id. at 3; AT&T Comments at 3. 

74 CAISO Comments at 7. 
Docket No. PL09-4-000 - 31 - 

a prominent role in the development of inter-system interface definitions and data 

communication protocols.75 

Commission Determination

51. The Commission adopts the proposed policy position that the development of 

standards for communicating and coordinating across inter-system interfaces is a key 

priority cross-cutting issue. We agree with GWAC that the smart grid is essential

“system of systems” and that standardized communications across the interfaces o

systems is a critical enabler of smart grid functionality and interoperability. The 

Commission recognizes that development of a common semantic framework and 

software models for enabling effective communication and coordination across the intersystem interfaces is critical to supporting virtually all of the smart grid goals, such a

system self-healing, integration of diversified resources, and improved system efficienc

and reliability. We note that the Institute’s interoperability standards development 

process has already paid a substantial amount of attention to this topic. The Institute’s 

preliminary list of sixteen standards

ly a 

f these 

s 

y 

ludes 

IEC 61968/61970 and IEC 61850, which had been suggested by the Commission as part 

 

76 identified for the smart grid framework inc

75 NYISO Comments at 5. 

76 See Initial List of Smart Grid Interoperability Standards, Request for 

Comments, 74 FR 27288 (June 9, 2009). 
Docket No. PL09-4-000 - 32 - 

titute’s process will center 

m 

t 

RC-

 findings of the Institute’s standards development process 

in our rule

of a starting point for communication across interfaces.77 The Roadmap Report 

document indicates that much of the ongoing work in the Ins

on developing common semantic and information models.78

52. The Commission agrees with the Kansas Commission that the standards 

development process to enable communications and coordination across inter-syste

interfaces should not cause premature dismantling of utility and RTO systems that 

currently function well. Older software systems should be able to continue in service 

during a transition period by using translators or bridges of reasonable cost that enable

the outputs of such systems to be understood by newer higher functionality systems. 

53. We agree with NYISO’s suggestion that RTOs and ISOs should take a prominen

role in defining system interfaces, and we encourage ISOs, RTOs and all other FE

jurisdictional utilities to engage in the Institute’s standards development process. 

54. With regard to networking standards and the potential use of Internet Protocol, the

Commission will consider the

making process. 

3. Wide-Area Situational Awareness

55. In the Proposed Policy Statement, the Commission placed emphasis on wide-are

situational awareness as another key priority for the smart grid. Wide-area situational 

a 

 77 See Proposed Policy Statement, 126 FERC ¶ 61,253 at P 33. 

78 Roadmap Report at 90. 
Docket No. PL09-4-000 - 33 - 

ea 

tities an improved and manageable high-level view of system conditions and 

ent 

re and 

ake a leadership role 

in coordinating such work with the member transmission owners.80

 

awareness is the visual display of interconnection-wide system conditions in near real

time at the reliability coordinator level and above. The implementation of wide-ar

situational awareness could help mitigate the effect of reliability events by giving 

reliability en

parameters. 

56. Furthermore, the Commission identified increased deployment of advanced 

sensors like Phasor Measurement Units as a tool to give bulk-power system operators 

access to large volumes of high-quality information about the actual state of the electric 

system. This functionality could help a smart grid address transmission congestion and 

system optimization. The Commission acknowledged that this technology would pres

its own set of challenges in the form of information processing and management and 

suggested that the Institute should strive to identify the necessary advanced softwa

systems that would be most useful to system operators in addressing transmission 

congestion and reliability.79 The Commission recognized the efforts undertaken by the 

North American SynchroPhasor Initiative and encouraged RTOs to t

79 Proposed Policy Statement at P 36. 

80 Id. P 35. 
Docket No. PL09-4-000 - 34 - 

Comments

57. Commenters generally support the proposition that wide-area situational 

awareness should be a key priority in the development of Smart Grid interoperability 

standards. Many commenters agree with the Proposed Policy Statement that advanced 

sensors like Phasor Measurement Units will give bulk-power system operators access to 

large volumes of high-quality information about the system. 81 Furthermore, commenters 

agree with the Commission that accessing that level of information will require the 

development of advanced software and systems. Various commenters note that further 

investigation regarding additional features for Phasor Measurement Units is required. 

Furthermore, using high quality information about the actual state of the system to 

possibly switch from the current static transmission line rating system to a dynamic 

transmission line rating system would require more research.82 NERC, for example, 

notes that although there might be additional uses for Phasor Measurement Units, their 

primary use should be to improve and protect the reliability of the bulk-power system. 

58. Commenters agree with the Commission that coordination between RTOs and the 

North American SynchroPhasor Initiative will play a key role in the development of 

 81 See, e.g., Kansas Commission Comments at 4-5, Gridwise Alliance Comments 

at 11, and Duke Comments at 11. 

82 See, e.g., Kansas Commission Comments at 4-5, Gridwise Alliance Comments 

at 11, Open Secure Systems Comments at 4, NERC Comments at 17, and American 

Transmission Comments at 8. 
Docket No. PL09-4-000 - 35 - 

 

synchrophasor initiatives.83 Furthermore, commenters agree that the Institute should 

identify the core requirements for advanced software and systems that will gather large 

volumes of data and present it in a useful manner to operators. However, NERC states 

that such efforts have been underway for several years under the guidance of the 

Department of Energy’s visualization and controls research and development program 

with contributions from TVA, Bonneville Power Administration, and CAISO.84 NERC 

believes that since these entities are already engaged on these issues, they, and not the 

Institute, should be in charge of designing and implementing the core requirements for 

software and hardware systems. 

59. AWEA notes that hardware and software tools that will serve to integrate wind 

should be considered vital smart grid technology. For example, AWEA states that 

devices that will contribute to consolidating balancing authorities, tools for fasterinterval/dispatch scheduling, and tools to better forecast wind energy should be 

considered smart grid technology.85

60. Duke seeks clarification on the Proposed Policy Statement’s definition of widearea situational awareness as “the visual display of interconnection-wide system 

83 See, e.g., CAISO Comments at 9-10, Gridwise Alliance Comments at 11, and 

Midwest ISO Comments at 4. 

84 NERC Comments at 18. 

85 AWEA Comments at 7-11. 
Docket No. PL09-4-000 - 36 - 

conditions in near real time at the reliability coordinator level and above.”86 Duke 

believes that wide-area situational awareness should be the responsibility of all NERCdefined functional reliability entities, such as balancing authorities, transmission 

operators, and so forth, and not just limited to the reliability coordinator level and above. 

Furthermore, Duke states that “if the result of the Commission’s term ‘reliability 

coordinator and above’ is that Duke Energy would be required to provide to other parties 

information or data that is not Duke Energy specific (i.e., information that pertains to 

other regional entities), this is of concern, and would require new information-sharing 

and disclosure protocols.”87

Commission Determination

61. The Commission adopts its proposed policy position that wide-area situational 

awareness should be a key priority for the standards development process. Wide-area 

situational awareness is imperative for enhancing reliability of the bulk-power system 

because it allows for greater knowledge of the current state of available resources, load 

requirements, and transmission capabilities. Increased situational awareness could allow 

for additional system automation and quicker reaction times to various reliability events. 

Given this concern about the need for increased situational awareness, and in response to 

 86 Duke Comments at 10. 

87 Id. at 11. 
Docket No. PL09-4-000 - 37 - 

Duke’s request for clarification that the Commission’s description of wide-area 

situational awareness in the Proposed Policy Statement was not intended to limit such 

responsibility to reliability coordinators only, we clarify that this was not our intent.

62. Regarding the development of wide-area situational awareness standards, the 

Commission agrees with NERC that it would be reasonable for the Institute to consider 

work done by the Department of Energy and others as the Institute develops standards. 

4. Demand Response

63. In the Proposed Policy Statement, the Commission stated that smart grid-enabled 

demand response is a key priority for standards development because of its potential to 

help address several bulk-power system challenges including reliably integrating 

unprecedented amounts of variable generation resources into the electric grid. The 

Commission stated that the further development of key standards should enhance 

interoperability and communications between system operators, demand response 

resources, and the systems that support them.88

64. The Commission proposed the development of a series of demand response use 

cases89 employing readily available tools in order to achieve an appropriate level of 

 88 See Proposed Policy Statement, 126 FERC ¶ 61,253 at P 37-39. 

89 As noted in the Proposed Policy Statement, the use case approach is a concept 

from the software and systems engineering communities whereby a developer, usually in 

concert with the end user, attempts to identify all of the functional requirements of a 

system. Each use case essentially describes how a user will interact with a system of 

(continued...) 
Docket No. PL09-4-000 - 38 - 

standardization. The Commission encouraged a particular focus on use cases for the key 

demand response activities of dispatchable demand response load reductions to address 

loss or unavailability of variable resources, and the potential for dispatchable demand 

response to increase power consumption during over-generation situations. 

65. The Commission noted that considerable work has been done to develop demand 

response standards (e.g., Open Automated Demand Response) and further encouraged a 

focus on additional standardization of the interfaces between systems on the customer 

premises and utility systems, including addressing data confidentiality issues. 

66. The Commission encouraged the Institute and industry to work together on 

further standards development, starting with the Institute’s suggestion of the 

harmonization of IEC standard 61850 and several meter standards, namely ANSI C12.19 

and C12.22. Finally, the Commission requested comment from states and other parties 

on the optimal approach to develop standards in the area of customer meters, and stated 

that the Commission will pursue direct communications with the states on this topic. 

 

other actors and objects to achieve a specific goal. The use case will identify the 

interfaces between different elements and the information being exchanged. 
Docket No. PL09-4-000 - 39 - 

Comments

67. Most comments recognize the importance of demand response for helping to 

address the types of challenges listed in the Proposed Policy Statement.90 NARUC 

supports working with the Commission to further develop and expand demand response 

programs.91 That said, NARUC and others stress the need to remember that demand 

response, and the metering and retail pricing reforms that might be needed to fully realize 

demand response’s potential, require retail customer involvement and are thus firmly 

state-jurisdictional matters.92 

68. NARUC also emphasizes that demand response programs can and have operated 

without smart grid capabilities.93 On the other hand, there were several comments 

stressing the importance to demand response of national standardization of certain 

supporting technologies, like communication between customer equipment and utility 

systems and national metering standards.94 These commenters state that the development 

 90 See, e.g., NYISO Comments at 10, ISO-NE Comments at 4, and ELCON 

Comments at 4-5. 

91 NARUC Comments at 8. 

92 See, e.g., NARUC Comments at 6-8, Ohio Commission Comments at 7, Kansas 

Commission Comments at 5, and Wal-Mart Comments at 5. 

93 NARUC Comments at 8. 

94 See, e.g., NEM and Intelligent Energy Comments at 8 and Wal-Mart Comments 

at 3-4. 
Docket No. PL09-4-000 - 40 - 

of metering standards at a national level would be helpful to increase the use of the smart 

grid by demand response resources and avoid implementing multiple, proprietary, noncompatible metering standards across the country that raise the cost of doing business in 

different markets. 

69. Another key issue for commenters involves the need to develop measurement and 

verification standards for demand response. The demand response aggregation industry 

believes that standards will open up new markets for demand response (e.g., capacity or 

ancillary services markets) and will leverage and enable demand response integration to 

address variable generation needs. 95 In addition, American Transmission states that 

specific, concrete requirements will be key to ensuring that committed demand response 

is available when needed allowing utilities to reliably include demand response 

capabilities in their transmission planning.96

70. Several commenters focus on the Proposed Policy Statement’s discussion of 

dispatchable demand response, though their comments tend to reflect different 

viewpoints.97 GWAC seems to interpret this discussion as imposing demand response on 

 95 See, e.g., Comverge Comments at 1-2 and DRSG Coalition Comments at 7-8. 

96 American Transmission Comments at 6. 

97As discussed in the Proposed Policy Statement, “dispatchable” demand response 

allows participants to adjust their demand at the direction of a system operator. Proposed 

Policy Statement, 126 FERC ¶ 61,253 at P 20. 

 
Docket No. PL09-4-000 - 41 - 

 

some group of customers that might be given no option but to respond to dispatch signals 

from system operators regardless of whether they are able to or want to participate.98 

GWAC prefers voluntary response to dynamic pricing signals. In contrast, some 

commenters support a focus on voluntary dispatchable demand response programs.99 

Black Hills Corporation expresses concern with the additional investment required for 

“time sensitive” rates for retail customers since ratepayers are already paying higher rates 

due to recovery mechanisms for efficiency, renewable portfolio, and carbon reduction 

standards in various states.100 

71. Those commenters who speak to the issue seem to support the focus on 

developing demand response use cases as a first step toward interoperability standards.101 

In a similar vein, some stress the need to identify and support valuable opportunities for 

the use of demand response; for example, to provide ancillary services.

98 GWAC Comments at 4. 

99 See, e.g., Kansas Commission Comments at 4-5 and Black Hills Corp. 

Comments at 3. 

100 Black Hills Corp. Comments at 3. 

101 See, e.g., NYISO Comments at 10, Alcoa Comments at 5-6, and CAISO 

Comments at 12. 
Docket No. PL09-4-000 - 42 - 

n of 

mer 

72. There are also comments stressing the importance to demand response of 

providing appropriate access to information gathered from advanced meters.102 

However, NARUC also touches upon this topic in discussing data confidentiality and 

other such issues. It emphasizes that these issues are firmly within the jurisdictio

state commissions and that a rulemaking targeting standards connected to the custo

premises will exceed the Commission’s jurisdiction.103

73. Wal-Mart argues that any environmental attributes (e.g., carbon reduction 

allowances) associated with demand response equipment should be retained by the 

customer in order to foster customer participation and purchase of such equipment.104

Commission Determination

74. The Commission adopts its proposed policy position that the development of 

standards for demand response is a key priority. We agree with ELCON that smart grid 

technologies have considerable potential to promote demand response, which can reduce 

wholesale prices and wholesale price volatility and reduce potential generator market 

power. We also agree with NERC that smart grid capability can enhance the application 

of demand response to accommodate the integration of variable generation. As NYISO 

 102 NEMA and Intelligent Energy Comments at 2, 4. 

103 NARUC Comments at 9. 

104 Wal-Mart at 5. 
Docket No. PL09-4-000 - 43 - 

also points out, demand response resources play an important role in maintaining system 

security, especially in constrained areas. Moreover, demand response can be particularly 

helpful in situations when production from variable generating resources has fallen. We 

note that the Institute has identified demand response as a key priority focus in its 

interoperability standards development process. 

75. In order to achieve appropriate demand response standards, the Commission also 

adopts its proposed policy position that emphasis should be put on further development 

of use cases and scenarios for demand response, particularly with regard to dispatchable 

demand response and various forms of dynamic pricing. We agree with comments by 

Alcoa and Wal-Mart recommending that the dispatchable demand response 

interoperability standards effort should support the full range of customer types from 

large industrial customers through commercial and smaller residential customers. 

Furthermore, we expect that a standard for a dispatchable demand response program 

would support either a mandatory or voluntary program, as determined by the utility or 

retail regulator. With regard to dynamic pricing, the Commission agrees with GWAC 

that it is important to develop standards that support dynamic pricing, which offers an 

efficient means and incentive for large numbers of smaller customers to take appropriate 

demand response actions. We clarify that it is not our intention to require the use of 

dynamic pricing in retail rates. It is, important, however, for utilities and states that 
Docket No. PL09-4-000 - 44 - 

 

choose this option to develop standard pricing terminology and methods for 

communicating pricing information.105

76. The Commission notes that the early stages of the Institute’s interoperability 

standards development process included investigation of standards for advanced metering 

systems. The Commission suggested in the Proposed Policy Statement that the 

development of national interoperability standards for meters may be appropriate.106 

Such standards could also lead to more communications among systems as well as 

facilitate the transfer of a successful program to other systems. National interoperability 

standards for meters should enable the use of direct load control, dynamic pricing, current 

tariff pricing or other program options that are approved by retail regulators. We stress, 

however, that the development of national interoperability standards for meters does not 

create an obligation for states or utilities to use them or to offer any specific type of 

demand response program. The Commission continues to recognize that state and local 

regulators have jurisdiction over retail rates and cost recovery. Recovery of retail 

jurisdictional costs will continue to be determined by state and local regulators. The 

Commission will continue to pursue direct communications with the states and other 

105 The Jurisdictional Concerns section of this Policy Statement contains a more 

extensive discussion of the boundaries between federal and state jurisdiction. 

106 See Proposed Policy Statement, 126 FERC ¶ 61,253 at P 39. 
Docket No. PL09-4-000 - 45 - 

parties on the optimal approach to develop interoperability standards in the area of 

customer meters. It is with these understandings that we encourage the Institute and its 

industry collaborators to continue investigating potential national interoperability 

standards for meters. 

77. Several commenters state the importance of developing measurement and 

verification standards for demand response. We agree. However, the Commission need 

not further address this topic because participants in several forums are doing so, 

including the North American Energy Standards Board and in compliance filings before 

the Commission resulting from Order No. 719.107 Finally, the Commission finds that 

Wal-Mart’s request that any environmental attributes (e.g., carbon reduction allowances) 

associated with demand response equipment should be retained by the customer is 

outside the scope of this Policy Statement. 

5. Electric Storage

78. In the Proposed Policy Statement, the Commission stated that if electricity storage 

technologies could be more widely deployed, they would present an important means of 

addressing some of the difficult issues facing the electric industry, including helping to 

address large-scale changes in generation mix. The Commission noted that, to date, the 

most significant bulk-electricity storage technology has been pumped storage 

 107 Wholesale Competition in Regions with Organized Electric Markets, Order 

No. 719, 73 Fed Reg 61,400 (Oct. 28, 2008), FERC Stats. & Regs. ¶ 31,281 (2008). 
Docket No. PL09-4-000 - 46 - 

hydroelectric technology but that new types of storage technologies are under 

development and in some cases are being deployed, and could also potentially provide 

substantial value to the electric grid.108 The Commission proposed that, while continued 

research and development appeared necessary before any widespread deployment of such 

newer technologies can take place, it is appropriate to encourage the identification and 

standardization of all possible electricity storage use cases at an early stage. While the 

suggested prioritization of storage use cases was the Commission’s only proposal in this 

area, the Commission then went on to highlight certain existing standards that may be 

relevant to further work on storage-related interoperability standards.109 

Comments

79. GridWise Alliance describes the many benefits energy storage may provide to the 

nation’s grid, such as grid optimization for bulk-power production; balancing in systems 

with variable renewable energy sources; facilitation of integration of electric vehicles; 

deferring investments in transmission and distribution infrastructure to meet peak loads; 

 108 For the purposes of this Policy Statement, electric storage refers to the storage 

of different forms of energy that may be beneficial to the bulk-power system. For 

example, while pumped hydroelectric storage refers to the potential energy stored in a 

reservoir of water, it is the conversion of that energy to electricity by a water turbine 

generator that makes it useful. Similarly, a flywheel stores kinetic energy to spin a 

generator, and batteries convert chemical energy directly into electricity. Moreover, there 

are useful applications for stored energy (for example, thermal energy) that is not 

converted into electricity, but can substitute for electrical power by providing an end use. 

109 Proposed Policy Statement, 126 FERC ¶ 61,253 at P 40. 
Docket No. PL09-4-000 - 47 - 

d 

n 

lity.113

 

and providing ancillary services to grid/market operators.110 Many commenters agree 

that standards for electric storage should be a priority. APPA agrees that standardization 

of use cases, protocols and communications regarding new types of electricity storage 

should be undertaken early to avoid a proliferation of competing and incompatible 

deployments of storage system technologies.111 National Grid and Public Interest 

Organizations state that electric storage will enable system integration of greater amounts 

of renewable energy as well as improve overall system efficiency.112 NERC 

recommends that the Commission adopt standards and protocols on electric storage, an

states that NERC plans to work collaboratively with the Commission and the Institute o

electric storage issues that could have an impact on bulk-power system reliabi

80. Some commenters express reservations about establishing storage standards at this 

time. NYISO recommends that the Commission allow more time to develop experience 

with integrating these devices and that standardization of uses should await actual 

operating experience with these devices.114 CAISO indicates that tariffs and not detailed 

110 GridWise Alliance Comments at 11. 

111 APPA Comments at 14. 

112 National Grid Comments at 5, and Public Interest Organizations Comments 

at 3. 

113 NERC Comments at 20-21. 

114 NYISO Comments at 11. 
Docket No. PL09-4-000 - 48 - 

standards would best shape storage development and integration.115 Xcel voices a 

concern that early standardization of storage could stifle innovation.116 CPower 

questions the Commission’s ability to properly delineate yet un-developed storage use 

cases.

117 

Commission Determination

81. The Commission agrees with the comments of GridWise Alliance and others t

electricity storage can serve as a potentially valuable resource providing a variety of 

services to the bulk-power system. We adopt our proposed policy position that electric 

storage is a key functionality of the smart grid, and standards related to storage should

treated as a key priority by the Institute and industry in the interoperability standa

development process, subject to certain reservations. However, the Commission 

appreciates the concerns of commenters such as NYISO that have expressed reservations

about the premature establishment of electric storage standards. Indeed, it was just su

concern that led us, in the Proposed Policy Statement, to suggest prioritization of the 

development of storage use cases at that time. However, it is important to note that 

Institute’s interoperability standards development process has already assembled a 

hat 

 be 

rds 

ch 

the 

limited number of storage use cases and identified a few standards that could be a starting 

 115 CAISO Comments at 13-14. 

116 Xcel Comments at 5-6. 

117 CPower Comments at 5. 
Docket No. PL09-4-000 - 49 - 

point for development of interoperability standards for storage. Thus, we encourage the 

Institute and industry to continue this effort for interoperability standards for storage. 

82. The Commission continues to believe that storage use case development is an 

important step on the path to developing relevant interoperability standards, and thus on 

the path to enabling the wider deployment of storage. However, any initial identification 

of storage use cases would not be exhaustive; if new use cases are identified in the future, 

they can be added to the initially identified set of use cases for storage at that time. Initial 

identification of use cases should not impede future storage innovations. 

6. Electric Vehicles

83. The Commission also identified the integration of electric transportation as a key 

priority of smart grid functionality. The Commission stated that, to the extent that new 

electric transportation options become more widely adopted in the near future, 

maintaining the reliable operation of the bulk-power system will require some level of 

control over when and how electric vehicles draw electricity off of the electric system. 

84. The Commission explained its hope that smart grid interoperability standards 

would ultimately accommodate a wide array of advanced options for electric vehicle 

interaction with the grid, including full vehicle-to-grid capabilities. However, as a first 

step, the Commission decided only to request that appropriate standards be made a high 
Docket No. PL09-4-000 - 50 - 

priority so that distribution utilities will be able to encourage customers to charge their 

vehicles during off-peak load periods.118 

85. The Commission also noted that, for the potential provision of ancillary services to 

the grid by electric vehicles, electrical interconnection issues must be dealt with along 

with potential expansion of communications ability and urged the Society of Automotive 

Engineers and the automobile industry to plan upgradable data communications systems 

between electric vehicles and the power system. Finally, the Proposed Policy Statement 

urged the Institute to include electric vehicles in its distributed energy resource standards 

development. 

Comments

86. National Grid points out the benefits of electric transportation as being a 

significant part of the solution to electric storage, shaping demand, and providing 

ancillary services to maintain reliability and operational efficiency of the electric delivery 

system.119 NYISO agrees with the Commission’s proposed approach toward addressing 

the greater penetration of electric vehicles and developing a common set of operating 

rules, market rules, and communication standards.120 AWEA agrees with the 

Commission that electric vehicles can improve the flexibility of the grid and provide 

 118 Proposed Policy Statement, 126 FERC ¶ 61,253 at P 42. 

119 National Grid Comments at 5. 

120 NYISO Comments at 11. 
Docket No. PL09-4-000 - 51 - 

 

electricity storage solutions that help to address the potential for over-generation in offpeak periods.121 Comverge agrees that electric vehicles deserve particular attention with 

respect to interoperability, smart charging, enhanced information processing, and highspeed communications and control.122 NERC points out that the reliability of the bulkpower system could be impacted by high levels of the penetration of electric vehicles, 

changing the complexity of managing demand and energy dramatically.123 

87. On the other hand, some commenters assert that either electric transportation 

technology itself or the standards for its integration should not be priority items. The 

most common reason stated is that widespread adoption of electric vehicles is seen as 

occurring too far into future and that prioritization should be given to more immediately 

beneficial functionalities.124 The early stage of electric vehicle development is also cited 

by CAISO and NRECA as a reason that it would be premature to develop standards for 

them.125 While NRECA indicates that standards development should be put off until 

more research and analysis is done, CAISO indicates that standards should only address 

121 AWEA Comments at 10. 

122 Comverge Comments at 3. 

123 NERC Comments at 20-21. 

124 See, e.g., Illinois Commission Comments at 3-4, Maryland Counsel Comments 

at 3-4, and Springfield Comments at 6. 

125 CAISO Comments at 13-14 and NRECA Comments at 19. 
Docket No. PL09-4-000 - 52 - 

 

basic, structural, competitive and architectural issues. CAISO views electric vehicles as 

another resource to be shaped by tariff incentives rather than technology standards. 

88. Kansas Commission questions which mandates related to vehicle charging and 

real time metering the Commission intends to implement. Kansas Commission also asks 

the Commission to clarify what it believes is the extent of its jurisdiction.126 Maryland 

Counsel similarly expresses jurisdictional concerns when it asserts that, unless related to 

wholesale and transmission functions, electric vehicles will fall into the state’s 

jurisdiction over distribution (and so costs related to them should not be recoverable in 

Commission-regulated rates).127 

89. Allegheny Companies indicate that electric vehicles should be viewed like all 

pieces of equipment with demand response responsibility and that while electric 

transportation standard development should not be a priority, the grid must have flexible 

standards and protocols to support electric vehicles.128 Ohio Partners view modifications 

to the grid to support electric vehicles as a subsidy for electric car makers to the harm of 

existing fuel retailers and at a cost to customers.129 

126 Kansas Commission Comments at 6. 

127 Maryland Counsel Comments at 4. 

128 Allegheny Companies Comments at 4. 

129 Ohio Partners Comments at 9. 
Docket No. PL09-4-000 - 53 - 

Commission Determination 

90. The Commission adopts the proposed policy position that electric transportation is 

a key functionality of the smart grid, and standards relating to electric transportation 

should be treated as a key priority by the Institute and industry in the process of 

developing interoperability standards. We agree with NERC that the reliability of the 

bulk-power system could be affected by the high levels of penetration by electric 

vehicles. However, the ability of distribution utilities to facilitate off-peak charging may 

be able to mitigate such reliability concerns. Discussions at the Institute’s recent 

conferences indicate that certain metropolitan areas are likely to experience high 

penetrations of electric vehicles more quickly than others. NYISO suggests that 

environmental concerns could lead to relatively high levels of electric vehicle penetration 

in New York by 2020. 

91. For these reasons, although the market will likely play the principal role in 

determining whether and when electric vehicle load will become significant for utility 

systems, we urge the early development of technical requirements that can permit 

distribution utilities to facilitate electric vehicle charging during off-peak load periods. 

Such technical capability should provide the state commissions with an additional tool to 

deal with any electric vehicle-related load growth that they may see in the future. 

Interoperability standards that support such a choice by states permitting the electric 

vehicle to, for example, receive and respond appropriately to peak pricing signals could 
Docket No. PL09-4-000 - 54 - 

greatly improve the success of such an effort. However, if another state commission sees 

no need for such price signals in its area, the mere existence of interoperability standards 

would in no way require the state to adopt such a pricing policy. Accordingly, we see no 

jurisdictional issues with this recommendation for prioritization. 

7. Additional Priorities Suggested by Commenters

92. In addition to the key priorities listed in the Proposed Policy Statement, several 

commenters suggest additional priorities for interoperability standards: modernization of 

the communications and control technologies in the grid; standards for existing resources 

(legacy) equipment and cost effective integration of legacy equipment; interfaces 

between utilities (with interfaces between utilities and customers and other systems to be 

developed along with state and other regulatory bodies); and limitations on access to and 

use of individual customer power usage information. The Valley Group states that, 

because standards for enabling technologies (rather than communications standards) will 

provide the grid with immediate and tangible benefits, these should also be a priority. 

AWEA lists several more general matters that it suggests must be addressed before 

broad-based deployment of smart grid technologies can fully utilize their potential to 

better accommodate renewable power. These include investment in an extra-high voltage 

backbone system, faster interval dispatch and scheduling, expanded area control error 

diversity, integration of wind energy forecasts, and dynamic line rating. 
Docket No. PL09-4-000 - 55 - 

Commission Determination

93. The Commission will not make any additional standards a priority for 

development at this time. Some of the proposed additional priorities are already included 

in this Policy Statement. For example, support for the modernization of the 

communications and control technologies on the grid underlies this entire effort, and the 

use of legacy equipment as utilities migrate to a smart grid is addressed in the Interim 

Rate Policy. Similarly, to the extent that standards for enabling technology are needed to 

permit the development of useful smart grid capabilities like wide-area situational 

awareness standards, then such standards would be encompassed by our broader 

recommendation to make wide-area situational awareness standards a key priority. 

94. Limitations on access to, and use of, individual customer power usage information 

may be addressed by retail regulators and, in any event, are beyond the scope of this 

Policy Statement. Finally, although the topics suggested by AWEA are important, they 

do not relate to the development of interoperability standards and, therefore, are more 

appropriate to address outside of this proceeding. 

C. Interim Rate Policy

95. In the Proposed Policy Statement, the Commission stated that certain upcoming 

challenges to the operation of the bulk-power system justified enacting policies to 

encourage the near-term deployment of smart grid systems capable of helping to address 
Docket No. PL09-4-000 - 56 - 

those challenges.130 Accordingly, the Commission proposed certain rate policies meant 

to encourage such near-term deployment while appropriately protecting customers from 

stranded costs and the electric system from potential cybersecurity threats. Consistent 

with FPA section 205, which requires that all rates for the transmission or sale of electric 

energy subject to the Commission’s jurisdiction be just and reasonable,131 the 

Commission proposed to consider smart grid devices and equipment—including those 

used in a smart grid pilot program or demonstration project—to be “used and useful” 132 

for purposes of cost recovery if the applicant makes certain showings.133 

1. Scope and Duration

96. In the Proposed Policy Statement, the Commission stated that, once 

interoperability standards are adopted, it will consider making compliance with those 

standards a mandatory condition for rate recovery of jurisdictional smart grid costs. For 

the period until interoperability standards are adopted, the Commission proposed the 

Interim Rate Policy to accept rate filings submitted under FPA section 205 by public 

 130 Proposed Policy Statement, 126 FERC ¶ 61,253 at P 45. 

131 16 U.S.C. 824d. 

132 The general rate-making principle is that expenditures for an item may be 

included in a public utility’s rate base only when the item is “used and useful” in 

providing service. See NEPCO Municipal Rate Committee v. FERC, 668 F.2d 1327, 

1333 (D.C. Cir. 1981). 

133 Proposed Policy Statement at P 45. 
Docket No. PL09-4-000 - 57 - 

utilities to recover the costs of smart grid deployments involving jurisdictional facilities, 

provided those filings make certain showings set out by the Commission in this Policy 

Statement. The Commission restated this proposal in terms of finding smart grid 

investments to be “used and useful” for purposes of rate recovery if an applicant makes 

these showings. 

Comments 

97. Several commenters support the Interim Rate Policy.134 These commenters state 

that an interim rate policy is necessary for the deployment of smart grid resources. 

National Grid states that the Commission properly recognizes that utilities will only be 

willing to deploy smart grid equipment if they are able to recover the associated costs in 

regulated rates.135 PSEG believes that implementing the Interim Rate Policy is a critical 

component in advancing the ultimate smart grid evolution.136 

98. Allegheny Companies assert that utilities with stated transmission rates may fail to 

recover their full cost of service as the deployment of smart grid technologies may reduce 

the amount of electricity they sell, and argue that rates should be revised to decouple 

 134 Gridwise Alliance Comments at 12, PSEG Companies Comments at 4-5, 8, 

National Grid Comments at 5-7, Duke Comments at 11-12, Comverge Comments at 5-6, 

and FirstEnergy Comments at 10. 

135 National Grid Comments at 5. 

136 PSEG Comments at 4. 
Docket No. PL09-4-000 - 58 - 

 

revenues from electricity sold.137 Meanwhile, several commenters expect or seek 

clarification that smart grid costs can be recovered in formula rates including existing 

formula rates, and that existing rate formulae do not require modification in order to 

accommodate such smart grid costs.138 

99. NARUC states that efficiency gains and other related benefits of smart grid 

deployments should be factored into rate-setting before passing all costs through to 

consumers.139 NARUC also comments that any government funding under the 

Department of Energy smart grid grant programs should be factored into cost recovery. 

AARP urges caution regarding expedited consideration of such rate filings before final 

adoption of interoperability standards.140 

100. Wal-Mart proposes that the Commission include a deadline for either terminating 

or at least revisiting the Interim Rate Policy.141 Alternatively, Wal-Mart argues for a 

deadline by which utilities who have made use of the Interim Rate Policy must file a full 

137 Allegheny Comments at 8. 

138 American Transmission Comments at 6-7, EEI Comments at 14, and National 

Grid Comments at 6. 

139 NARUC Comments at 12. 

140 AARP Comments at 4, 13-15. 

141 Wal-Mart Comments at 6-7. 
Docket No. PL09-4-000 - 59 - 

 

rate case. Wal-Mart also supports the concept of some type of sharing of risk with 

shareholders. 

101. Alcoa asserts that the Proposed Policy Statement is silent about cost allocation 

issues associated with smart grid costs and argues that the Commission should specify 

that smart grid costs will be allocated in accordance with long-standing cost causation 

principles. 142 In particular, Alcoa argues that consideration of cost causation and 

allocation based on proportional benefits should be specified so that, for example, stable 

high load-factor loads would not be over-burdened by the allocation of costs for smart 

grid equipment deployed primarily to support variable loads and resources.143 

Meanwhile, GridSolar states that existing cost allocation schemes within RTOs may 

unduly favor the development of transmission over competing distributed energy projects 

by allocating costs regionally while a competing distributed energy project might only 

qualify for local cost allocation.144 GridSolar urges the Commission to require that, 

where distributed energy projects incorporating smart grid technologies and practices 

have been approved by a state regulatory commission in lieu of transmission reliability 

upgrades, these distributed energy projects receive the same cost allocation treatment as 

transmission reliability upgrades. 

142 Alcoa Comments at 6-7. 

143 Id. at 7. 

144 GridSolar Comments at 6-8. 
Docket No. PL09-4-000 - 60 - 

 

102. Several entities comment on broad market design issues. CPower, in an appendix 

to its filing, includes a letter to the Commission dated February 24, 2009 that includes 

various rate proposals.145 The letter includes proposals for how demand response should 

participate in various RTO markets. Academic Commenters believe that the Proposed 

Policy Statement does not go far enough because it fails to provide guidance on the 

revised market structures that they believe would be needed to realize the benefits of a 

smart grid.146 BP makes similar comments, focusing primarily on the possibility of 

moving away, at least partially, from the current model of centrally dispatched large-scale 

generation with passive load to a more decentralized decision-making process more like 

other commodities markets.147 CAISO indicates that a wholesale energy and 

transmission market that allows a more refined and granular understanding of what is 

happening on the grid would take better advantage of smart grid capabilities.148 NEMA 

points out that some smart grid technologies, like Phasor Measurement Units and 

145 CPower states that this letter was originally submitted in connection with the 

Commission’s demand response stakeholder process. It is not entirely clear what 

stakeholder process is referenced but it appears to have been an informal submission. 

146 Academic Commenters Comments at 1-13. 

147 BP Comments at 3-6. 

148 CAISO Comments at 3-4. 
Docket No. PL09-4-000 - 61 - 

149

Commission Determination

103. The Commission will adopt an Interim Rate Policy allowing the recovery of 

jurisdictional smart grid costs if certain showings are made, as discussed in the next 

section. Through this Interim Rate Policy, the Commission will provide for assurance of 

recovery of future smart grid costs. To receive this assurance, a public utility must file 

either a petition for declaratory order or an FPA section 205 filing demonstrating that it 

has made the relevant showings described below. This Interim Rate Policy will be 

effective until relevant interoperability standards have been adopted through Commission 

rulemakings, as provided for under EISA section 1305(d).150 There are certain 

potentially imminent challenges to the operation of the nation’s bulk-power system as 

described earlier, and the key smart grid-related capabilities identified in this Policy 

Statement can help address these concerns. Utility equipment that performs 

Commission-jurisdictional activities could be affected by many of these smart grid-

 149 NEMA Comments at 7-8. 

150 Thus, utilities that want to receive the benefit of this Interim Rate Policy must 

submit their filings seeking such treatment prior to the issuance of a final rule adopting 

relevant standards. 
Docket No. PL09-4-000 - 62 - 

related investments. Accordingly, we find that the adoption of the Interim Rate Policy is 

appropriate. 

104. Several commenters argue that having an Interim Rate Policy for smart grid 

investments is premature, citing unresolved technical issues, such as interoperability 

standards. However, waiting for all technical issues to be resolved before beginning 

investment in smart grid deployment would frustrate the development of those very 

standards. Smart grid resources deployed with appropriate protections in the interim 

period could increase our body of knowledge and ultimately assist the standards 

development process. In this case, the Commission proposed several protections, in the 

form of additional showings, to be discussed in the next section. 

105. Several commenters seek to modify rate treatments other than those targeted by 

the Commission in the Proposed Policy Statement. Allegheny Companies seek a 

decoupling of electricity sales from revenues to encourage utilities to develop these 

technologies even though they may lead to lower electricity revenues. The Commission 

finds that Allegheny Companies’ proposal is beyond the scope of this Policy Statement. 

106. Alcoa’s arguments regarding cost allocation are outside the scope of this Policy 

Statement. We have not proposed any modification to currently-effective cost allocation 

policies for Commission-jurisdictional transmission rates. For similar reasons, we 

decline to address GridSolar’s request to modify cost allocation methods within RTOs, 
Docket No. PL09-4-000 - 63 - 

ture 

 

Valley Group’s real-time ratings incentive proposal, and the comments on broad market 

design. 

107. Smart grid costs may be recovered through formula rates if the formula rate 

already authorizes cost recovery of a particular type of investment. In this case, the 

public utility may recover that cost as it would any other recoverable cost. However, in 

the event the public utility desires the assurance of cost recovery provided under the 

Interim Rate Policy, it must submit an FPA section 205 filing or a request for a 

declaratory order justifying such rate treatment by making the demonstrations required 

herein. 151 In the absence of a Commission order approving such a proposal, a smart 

grid-related cost automatically incorporated into a formula rate could be subject to fu

review and challenge. 

108. Finally, with regard to Wal-Mart’s proposal for a stated deadline for terminating 

or revisiting the Interim Rate Policy, the Interim Rate Policy is structured to allow 

applicants to file with the Commission for rate treatment under the Interim Rate Policy 

until the Commission adopts relevant interoperability standards. This is necessary 

because standards will likely be filed for certain functions before others and setting an 

arbitrary deadline may result in rate treatment for some standards and not others. 

151 The Commission will allow a public utility to file to amend a formula rate to 

recover such costs and to seek rate assurance under this Interim Rate Policy without 

reopening other elements of the formula rate. 
Docket No. PL09-4-000 - 64 - 

Moreover, our regulations, which are based on the requirements of the FPA, provide 

customers with the ability to file complaints if they believe that an existing rate has 

become unjust or unreasonable. Because this Interim Rate Policy provides protections in 

addition to such existing protections, nothing more is needed here. 

2. Additional Showings

109. In the Interim Rate Policy, the Commission proposed to require applicants seeking 

the recovery of costs associated with smart grid investments made during the period in 

which interoperability standards are being developed to make several showings, beyond 

the normal filing requirements, before being considered “used and useful” and therefore 

eligible to recover such costs. First, the Commission proposed that an applicant must 

demonstrate that the reliability and security of the bulk-power system will not be 

adversely affected by the deployment of smart grid facilities at issue. Second, the 

Commission proposed that the filing be required to show that the applicant has 

minimized the possibility of stranded costs for smart grid equipment, in light of the fact 

that such filings will predate adoption of interoperability standards through Commission 

rulemakings. Finally, because it would be important for early smart grid deployments, 

particularly pilot and demonstration projects, to provide feedback useful to the 

interoperability standards development process, the Commission proposed to direct the 

applicant to share certain information with the Department of Energy Smart Grid 
Docket No. PL09-4-000 - 65 - 

Clearinghouse, provided for in the American Recovery and Reinvestment Act 

(ARRA).152 

Comments

110. Midwest ISO Transmission Owners fully support the Commission’s proposals 

regarding the used and useful determination for smart grid costs.153 Ice Energy supports 

the proposed eligibility requirements and discusses how its own thermal-storage air 

conditioning technology meets those requirements and could aid utility compliance with 

those requirements as well.154 Public Interest Organizations support the criteria already 

included in the Interim Rate Policy, and also propose two additional criteria: first, a 

requirement that the smart grid cost in question be vetted through a regional planning 

process and that such planning process demonstrates the value of such investments for 

meeting reliability, security, dispatchable demand response, or renewable energy 

integration needs, and second, a requirement to perform a cost/benefit analysis.155 Ohio 

Counsel states that it fully supports the comments made by Public Interest Organizations 

but would add further emphasis to the need for a comprehensive plan based upon 

 152 American Recovery and Reinvestment Act, Pub. L. No. 111-5, sec. 

405(3)(2009). 

153 Midwest ISO Transmission Owners Comments at 7. 

154 Ice Energy Comments at 19-20. 

155 Public Interest Organizations Comments at 4. 
Docket No. PL09-4-000 - 66 - 

 

appropriate criteria to insure prudence in project scope, implementation, and cost 

recovery. It views this as necessary to insure that the cost/benefit analysis of the 

deployment will be favorable and that the guidelines for cost recovery are prudent and net 

of operation and asset management benefits.156

111. NRECA states that smart grid deployments should not exceed “the pace of value” 

with new elements entering the system only as they are able to demonstrate value.157 

Ohio Partners and Maryland Counsel similarly argue that the benefits to customers must 

be shown before cost recovery is granted.158 Likewise if any Interim Rate Policy is 

finalized, ELCON believes that it must incorporate a cost/benefit requirement.159

112. Several commenters160 also support the addition of a cost-effectiveness 

requirement. In this regard, North Carolina Agencies stress the need for coordination 

with the affected state commissions, and Wal-Mart points to item number six in the 

document “Proposed Funding Criteria for the ARRA Smart Grid Matching Grant 

Program” recently proposed by the NARUC/FERC Smart Grid Collaborative to the 

156 Ohio Counsel Comments at 1-3. 

157 NRECA Comments at 13-14. 

158 Ohio Partners and Maryland Counsel Comments at 5-6. 

159 ELCON Comments at 10. 

160 CPower Comments at 2, Alcoa Comments at 9, PSEG Companies Comments 

at 2, North Carolina Agencies Comments at 3, and Wal-Mart Comments at 6. 
Docket No. PL09-4-000 - 67 - 

 

Department of Energy, which proposes a variety of information requirements that could 

be used to help determine cost-effectiveness. Springfield argues that utilities should be 

required to demonstrate that they are following best utility practices, and should be 

required to demonstrate the incremental benefit of smart grid deployment as if such best 

practices were in place.161 

113. Illinois Commission argues that the Commission’s proposed requirements seem to 

assume that smart grid proposals are economically justified by their very nature.162

Illinois Commission points out that under the Department of Energy’s grant criteria, a 

smart grid project could be denied grant funding if it fails to adhere the Institutepublished standards, but under the Interim Rate Policy the same project could receive rate 

recovery and, in particular, guaranteed recovery of abandonment costs. Illinois 

Commission seeks clarification that this would not be automatically permitted. Instead, 

Illinois Commission argues that during the period between when the Institute publishes 

standards and the Commission adopts them through rulemaking, any affected smart grid 

rate recovery applicants should have the burden to establish that such project remains 

used and useful.163 Illinois Commission and AWEA also urge the Commission to limit 

application of the Interim Rate Policy to only those smart grid projects that further the 

161 Springfield Comments at 10. 

162 Illinois Commission Comments at 4. 

163 Id. at 6. Maryland Counsel Comments at 5, n.4. 
Docket No. PL09-4-000 - 68 - 

 

Commission’s goals associated with the two cross-cutting issues and priority 

functionalities identified in the Proposed Policy Statement.164 Finally, Illinois 

Commission also argues that the Commission should maintain a traditional costcausation, beneficiary-pays cost allocation methodology and, in particular, prohibit broad 

socialization of such costs within RTOs.165

114. Michigan Commission argues that the Interim Rate Policy should be applied 

carefully and conservatively to avoid inefficient spending on equipment that does not 

promote real progress toward true smart grid functionality. Michigan Commission is 

particularly concerned about permitting cost recovery for smart grid deployments that 

cannot be upgraded to final interoperability standards. Accordingly, it argues that if the 

Commission proceeds with an Interim Rate Policy, it should clarify that its eligibility 

criteria will be strictly applied and only available to investments that create significant 

new smart grid functionality or serve as the basis for upgrading or expanding such 

functionality in the future.166

115. Indianapolis P&L also supports the proposed criteria but requests that the 

Commission apply these criteria with some degree of flexibility given that national smart 

grid development is a work-in-progress. Specifically, Indianapolis P&L suggests that the 

164 Illinois Commission Comments at 6-7and AWEA Comments at 11-12. 

165 Illinois Commission Comments at 7. 

166 Michigan Commission Comments at 10-12. 
Docket No. PL09-4-000 - 69 - 

 

need to demonstrate good faith adherence to the smart grid vision articulated in EISA 

may be complicated by the early stage of the interoperability process generally. In this 

regard, Indianapolis P&L suggests that any evaluation of applicant good faith decisions 

take into account the state of affairs at the time any decisions were made.167 Regarding 

the requirement to share information with the Department of Energy Smart Grid 

Clearinghouse, Indianapolis P&L respectfully requests that confidential and 

commercially-sensitive information not be demanded or that appropriate protections be 

permitted to apply.168

116. FirstEnergy urges the Commission not to require applicants to make showings that 

would be unreasonable, overly burdensome, or inflexible such that any proposed cost 

recovery would discourage investment. It does not, however, specify whether any of the 

Commission’s proposed eligibility criteria would fall into this category.169 DRSG 

Coalition, on the other hand, seems to argue that some of the Commission’s proposed 

security criteria for cost recovery may be overly burdensome.170

117. SDG&E proposes that, where an application for rate recovery or incentives 

involves the utility’s share of the cost of a project receiving partial Department of Energy 

167 Indianapolis P&L Comments at 4. 

168 Id. at 4-5. 

169 First Energy Comments at 10. 

170 DRSG Coalition Comments at 9-10. 
Docket No. PL09-4-000 - 70 - 

funding, the Commission could deem the utility’s share of the investment per se prudent 

as used and useful plant so that rate recovery of such costs would be deemed per se just 

and reasonable. If this proposal is not adopted outright, then SDG&E argues that the 

Commission should at least apply a rebuttable presumption that such costs are per se

prudent and their rate recovery would be per se just and reasonable. 

118. AARP argues that the Commission’s proposed eligibility criteria are equivalent to 

“near automatic rate recovery” for new investments labeled “smart grid.”171 AARP does 

not believe that the Commission’s statutory responsibility to insure just and reasonable 

rates can be fulfilled with such criteria. First, it asserts that the Commission has failed to 

identify the specific investments, devices, or other systems that would or could be subject 

to the proposed Interim Rate Policy. It also asserts that the Commission should require 

applicants to affirmatively demonstrate benefits, such as enhanced reliability, as a 

condition for rate recovery. It also seems to argue that rate recovery should not be 

granted unless the applicant can demonstrate that the smart grid equipment in question 

can be upgraded.172 Finally, AARP proposes that the Commission require applicants to 

demonstrate that their investments have been reviewed and approved by state regulators 

 171 AARP Comments at 10. 

172 The Proposed Policy Statement encourages upgradeability but stops short of 

requiring it because it may not always be technically or economically feasible. Proposed 

Policy Statement, 126 FERC ¶ 61,253 at P 49. 
Docket No. PL09-4-000 - 71 - 

 

when those investments are intimately related to, and coordinated with, investments that 

are subject to state regulatory authorities.173

119. APPA has two concerns in this area.174 First, it is concerned that only smart grid 

costs associated with wholesale rates and transmission functions be recovered through 

filings under this proposal. It argues that the cost of smart grid installations that support 

retail service should be recovered in retail rates. Second, APPA opposes the 

Commission’s proposal to consider smart grid devices and equipment to be used and 

useful for cost recovery purposes if the applicant meets the criteria set out in the 

Proposed Policy Statement. APPA believes that such treatment shifts the burden of proof 

from the applicant to customers opposing such a finding. Third, APPA believes that 

applicants for smart grid-related rate recovery or incentives should be required to show 

that their suppliers have attested to the integrity of the components used in the smart grid 

installation in question. 

120. Kansas Commission concurs with the need to provide certainty and guidance 

regarding cost recovery issues but expresses concerns regarding the three criteria 

proposed by the Commission. Specifically, it prefers that more traditional 

demonstrations of the used and useful requirement be preserved and also supports a 

173 AARP Comments at 10-12. 

174 APPA Comments at 16-17, 19. 
Docket No. PL09-4-000 - 72 - 

cost/benefit requirement.175 Massachusetts Attorney General believes that no smart grid 

costs should be eligible for rate recovery until after the Institute provides guidance on 

which technologies are most cost effective and where device deployment will be most 

valuable.176 Massachusetts Attorney General also recommends that the Commission 

require applicants to demonstrate that they maximized all opportunities to secure federal 

funding to offset the costs associated with smart grid deployment. 

121. Citizens Coalition opposes the proposal to find smart grid equipment used and 

useful if three conditions are met on the basis that such changes are “simply dishonest 

manipulation of traditional utility principles.”177 It also expresses concern with the 

proposal to require good faith efforts to adhere to the vision of a smart grid described in 

Title XIII of EISA. Specifically, it opposes a “good faith” standard and instead urges that 

applicants be required to show that they acted reasonably and prudently, which it 

characterizes as a standard of reasonableness. 

Commission Determination

122. To help inform our review for rate approval of smart grid costs, an applicant 

seeking the recovery of smart grid costs must make four demonstrations. The first, and 

threshold, demonstration is that an applicant must show that the smart grid facilities will 

 175 Kansas Commission Comments at 7-8. 

176 Massachusetts Attorney General Comments at 3-4. 

177 Citizens Coalition Comments at 10, 12-13. 
Docket No. PL09-4-000 - 73 - 

 

advance the goals of EISA section 1301. Second an applicant must show that the 

reliability and cybersecurity of the bulk-power system will not be adversely affected by 

the deployment of the smart grid facilities at issue. Third, the applicant must show that it 

has minimized the possibility of stranded investment in smart grid equipment, in light of 

the fact that such filings will predate adoption of interoperability standards. Finally, 

because it will be important for early smart grid deployments, particularly pilot and 

demonstration projects, to provide feedback useful to the interoperability standards 

development process, an applicant must agree to provide feedback useful to the 

interoperability standards development process, by sharing information with the 

Department of Energy Smart Grid Clearinghouse. 

123. To make the first and threshold demonstration, an applicant must describe the 

proposed investment (including the technologies, systems, and applications it entails) and 

how it is consistent with the policy and one or more of the goals Congress set forth in 

section 1301 of EISA. In section 1301 of EISA, Congress made clear that “it is the 

policy of the United States to support the modernization of the Nation’s electricity 

transmission and distribution system to maintain reliable and secure electricity 

infrastructure that can meet future demand growth” and to achieve certain goals, “which 

together characterize a Smart Grid.”178 Those goals include increased use of digital 

178 EISA sec. 1301. 
Docket No. PL09-4-000 - 74 - 

information and controls technology to improve reliability, security, and efficiency of the 

electric grid, dynamic optimization of grid operations and resources, with full 

cybersecurity, and deployment and integration of distributed resources and generation, 

including renewable resources, demand side resources and energy efficiency resources. 

This threshold showing was implicit in the Proposed Policy Statement, but in light of 

many comments we received, we now state it explicitly. 

124. In order to make the second showing, an applicant must describe how its proposed 

deployment of smart grid equipment will maintain compliance with Commissionapproved Reliability Standards, such as the CIPS Reliability Standards, during and after 

the installation and activation of smart grid technologies so the reliability and cyber 

security of the bulk-power system will not be jeopardized. An applicant must also 

address: (1) the integrity of data communicated (whether the data is correct), (2) the 

authentication of the communications (whether the communication is between the 

intended smart grid device and an authorized device or person), (3) the prevention of 

unauthorized modifications to smart grid devices and the logging of all modifications 

made, (4) the physical protection of smart grid devices, and (5) the potential impact of 

unauthorized use of these smart grid devices on the bulk-power system. 

125. To make the third showing concerning potential stranded smart grid investment, 

applicants must show how they have relied to the greatest extent practical on existing, 
Docket No. PL09-4-000 - 75 - 

 

widely adopted and open179 interoperability standards; and where feasible, relied on 

systems and firmware that can be securely upgraded readily and quickly. 

126. Finally, to make the showing concerning the sharing of information, an applicant 

must agree to share with the Department of Energy Smart Grid Clearinghouse the same 

information required by the Department of Energy for its grant program. While in the 

Proposed Policy Statement the Commission initially proposed seven specific categories 

of information to be shared, modeled on a similar proposal made to the Department of 

Energy by the NARUC/FERC Smart Grid Collaborative, the Department of Energy has 

now released its final information sharing requirements and we will rely on those 

requirements instead. 

127. Some commenters argue that these showings represent a departure from traditional 

ratemaking practice. We disagree. These showings do not replace the Commission’s 

179 An open architecture is publicly known, so any and all vendors can build 

hardware or software that fits within that architecture, and the architecture stands outside 

the control of any single individual or group of vendors. In contrast, a closed architecture 

is vendor-specific and proprietary, and blocks other vendors from adoption. 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 Gridwise Architecture Council Decision-Maker’s Interoperability 

Checklist Draft Version 1.0, 

http://www.gridwiseac.org/pdfs/gwac_decisionmakerchecklist.pdf. We note that 

Congress recently made utilization of open protocols and standards, if available and 

appropriate, a condition of receiving funding from the Department of Energy for 

demonstration projects and grants pursuant to EISA sec. 1304 and 1306. See ARRA 

sec. 405(3) and 405(8). 
Docket No. PL09-4-000 - 76 - 

existing demonstrations, but supplement them. The supplemental information is needed 

in this case to assure the Commission that recovery of investments in these new 

technologies, in some cases still experimental, are serving the interests of consumers 

while advancing the effort to create a smart grid. Further, although the Commission 

generally does not allow the recovery of new costs outside a rate case, we will do so for 

smart grid costs as explained further below, and this fact alone creates a need for 

additional filing requirements designed for just these costs. Here we are allowing cost 

recovery for jurisdictional smart grid costs based on traditional standards of review with 

an added showing that the technologies will not adversely affect the security and 

reliability of the grid, have minimized potential stranded investment related to 

consistency with interoperability standards as they are fully developed over time, and 

assist in providing information for future projects. Such considerations are fully 

consistent with the “used and useful” standard, and are the proper determinations for the 

Commission to make when considering whether a smart grid cost is just and reasonable 

in this interim period before a substantial body of relevant interoperability standards are 

adopted through Commission rulemaking. 

128. These considerations do not constitute automatic rate recovery for smart grid 

projects, as some commenters have suggested. The Commission has laid out specific 

showings that must be made, in addition to normal rate filing requirements, for rate 
Docket No. PL09-4-000 - 77 - 

recovery for a smart grid project to be approved. The burden is on the applicant to make 

these showings. 

129. The Commission rejects the arguments that a formal cost/benefit or costeffectiveness analysis should be required in addition to these three filing requirements. 

Under section 205 of the FPA, the Commission already considers whether rates are just 

and reasonable and not unduly discriminatory. Formal quantitative analyses typically 

contain some areas with highly subjective benefits that could lead to protracted debate 

between each side’s experts and increase the cost of litigation. Further, a cost-benefit 

analysis would be particularly infeasible in this instance. For example, if the benefits of 

smart grid deployment were to include enhanced ability to accommodate changes in 

generation mix, including heavier reliance on renewable generation, then the costs of 

failure to deploy such technology could potentially include such hard-to-quantify costs as 

the results of global climate change. Such cost estimates will be highly dependent on a 

broad range of assumptions and would likely be highly contentious in every case. 

Accordingly, the value of such a requirement would be questionable. In any event, 

intervenors in rate proceedings can and do raise the issue of whether utility investments 

were prudently made in light of their costs and they may continue to do so. 

130. Several commenters state that the Commission should identify what devices will 

be eligible for smart grid rate recovery. The Commission will not attempt to list all the 

particular facilities, equipment, or devices that are eligible or ineligible. In response to 
Docket No. PL09-4-000 - 78 - 

APPA and others, and as noted above, rate recovery will apply only to smart grid costs 

within the Commission’s FPA jurisdiction. EISA does not alter the FPA’s jurisdictional 

boundaries between federal and state regulation over the rates, terms, and conditions of 

transmission service and sales of electricity. 

3. Incentives Under the Interim Rate Policy

131. In its Proposed Policy Statement the Commission proposed several incentive rate 

treatments for smart grid costs. These rate treatments are meant to encourage the 

adoption of and investment in smart grid technologies. 

a. Single Issue Ratemaking

132. As part of the Interim Rate Policy, the Commission proposed that jurisdictional 

entities should be able to recover costs for used and useful smart grid facilities on a single 

issue basis. That is, entities would be able to recover the cost of smart grid investments 

without having to open their entire rate base to Commission review.

Comments

133. Some commenters180 support the Commission’s proposal to permit single issue 

rate filings for qualifying smart grid investments. NYISO notes that allowing 

jurisdictional transmission owners to recover the cost of investment in new controls and 

 180 SDG&E Comments at 24-25, Indianapolis P&L Comments at 3-4, Black Hills 

Corp. Comments at 4, Midwest ISO Transmission Owners Comments at 3-7, and 

Allegheny Companies Comments at 8. 
Docket No. PL09-4-000 - 79 - 

 

communication devices may assist in stimulating needed investment.181 Midwest ISO 

Transmission Owners state that such a policy will encourage investment because it allows 

transmission owners to invest in smart grid equipment without running the risk that other 

aspects of their system-wide rates will become subject to review and possible 

alteration.182

134. Several commenters argue against the proposed single issue ratemaking, and state 

that the Commission should adhere to traditional ratemaking practices.183 ELCON states 

that such cost recovery is premature, given unresolved technical issues.184 APPA argues 

that single issue ratemaking for smart grid technology could lead to an over-recovery of 

costs, and is part of a trend in which the Commission overlooks its duty to insure just and 

reasonable rates in the name of current policy goals.185 Commenters also argue against 

treating approved smart grid technologies as used and useful.186 Citizens Coalition 

181 NYISO Comments at 12. 

182 Midwest ISO Transmission Owners Comments at 4. 

183 NRECA Comments at 11-13, Maryland Counsel Comments at 2, 4-5, Ohio 

Partners Comments at 9-10, ELCON Comments at 9-10, and Citizens Coalition 

Comments at 12-14. 

184 ELCON Comments at 9-10. 

185 APPA Comments at 17-18. 

186 NRECA Comments at 11-13, Maryland Counsel Comments at 4, and Ohio 

Partners at 9-10. 
Docket No. PL09-4-000 - 80 - 

opposes any special rate treatment for smart grid equipment, as does ELCON for the 

same reasons that it opposes finalization of the Interim Rate Policy generally.187

135. EEI also argues that for purposes of smart grid-related single issue rate filings, the 

Commission should consider providing waiver of the full financial data requirements in 

the Commission’s regulations. In particular, EEI argues that Period I data may be 

adequate for determining whether such rates are just and reasonable and the otherwise 

required Period II data may not be needed. 

Commission Determination

136. The Commission will allow single issue rate treatment for the recovery of costs 

associated with smart grid investments as part of its Interim Rate Policy. Although the 

Commission generally does not allow the recovery of new costs outside a rate case that 

considers all costs, the Commission has entertained exceptions for special cases. For 

example, in implementing FPA section 219, as enacted in the Energy Policy Act of 2005, 

the Commission has stated that it would allow single issue rate treatment for new 

transmission projects.188 Furthermore, such rate treatment is not unheard of in other 

jurisdictions; retail rates may include surcharges to the base rates in order to recover 

 187 Citizens Coalition Comments at 14 and ELCON Comments at 13. 

188 Promoting Transmission Investment Through Pricing Reform, Order No. 679, 

FERC Stats. & Regs. ¶ 31,222, at P 191 (2006), order on reh’g, Order No. 679-A, FERC 

Stats. & Regs. ¶ 31,236 (2006), order on reh’g, 119 FERC ¶ 61,062 (2007). 
Docket No. PL09-4-000 - 81 - 

unusual, or “single issue,” costs.189 Here the Commission will allow single issue rate 

treatment in response to a pressing need for the development of new and innovative smart 

grid capabilities that will be needed by the electric system, and in response to a statutory 

directive to support the modernization of the electric grid. This will in no way affect the 

ability of customers to file a complaint pursuant to section 206 of the FPA if they believe 

that the ultimate rate charged by the public utility is no longer just and reasonable. 

137. As to EEI’s request for clarification regarding waiver of the full financial data 

requirements in the Commission’s regulations, the Commission already permits 

applicants to seek such waiver on a case-by-case basis. On the record before us, we see 

no need for a blanket waiver. Applicants seeking such a waiver must retain the burden 

for supporting the waiver. 

b. Recovery of Stranded Costs for Legacy Systems

138. The Commission also proposed to permit applicants to seek recovery of the 

otherwise stranded costs of legacy systems that are to be replaced by smart grid 

equipment. The Commission stated that an appropriate plan for the staged deployment of 

smart grid equipment, which could include appropriate upgrades to legacy systems where 

technically feasible and cost-effective, could help minimize the stranding of unamortized 

 189See, e.g., Kan. Stat. Ann. sec. 66-117(f) (2009), Pa. Pub. Util. Code sec. 

2804(16)(ii) (2009) and WUTC v. Puget Sound Energy, Inc., Docket Nos. UE-011570 

and UG-011571, at P 25 and 27 (2002). 
Docket No. PL09-4-000 - 82 - 

costs of legacy systems. The Commission therefore proposed that any request to recover 

stranded legacy system costs must demonstrate that such a migration plan has been 

developed. 

Comments

139. AARP argues that the proposed stranded cost policies for legacy systems are 

unreasonable because they may present significant cost risk exposure to consumers. 

AARP recommends that the Commission transfer at least some portion of the risks of 

stranded costs from ratepayers to shareholders.190 APPA states that retail costs, including 

stranded costs, should not be reflected in wholesale rates. APPA also argues that 

applicants should be required to make every effort to minimize the stranding of legacy 

costs through phased integration strategies.191 Citizens Coalition opposes any recovery 

of the stranded legacy costs of legacy systems, stating that past stranded cost proceeding

cost consumers billions of dollars.

s 

 

192 It argues that smart grid advocates should 

reimburse utilities and their customers for such costs if they wish to replace such systems 

prematurely. ELCON also opposes permitting recovery of the stranded cost of legacy 

systems.193 NRECA argues that if the Commission’s discussion of permitting applicants 

190 AARP Comments at 12-13. 

191 APPA Comments at 20. 

192 Citizens Coalition Comments at 9, 14. 

193 ELCON Comments at 13. 
Docket No. PL09-4-000 - 83 - 

to seek stranded cost recovery was meant to change existing ratemaking policies, the 

Commission must provide more justification for doing so and detailed criteria for 

evaluating such applications.194 Additionally, several commenters argue that every effort 

should be made to minimize the stranding of legacy costs.195

140. Other commenters support the Commission’s proposals with respect to recovery of 

the stranded investment in legacy systems to be replaced by smart grid equipment, 

including the proposals meant to minimize such stranded costs.196 FirstEnergy also 

proposes that the Commission consider permitting accelerated depreciation or 

amortization for legacy systems to be replaced with smart grid equipment.197 

Commission Determination

141. As part of the Interim Rate Policy, the Commission will allow single issue rate 

treatment of otherwise stranded costs for jurisdictional legacy systems being replaced by 

jurisdictional smart grid equipment, provided that proposals to recover these costs are 

supported by an equipment migration plan that minimizes the stranding of unamortized 

 194 NRECA Comments at 14-15. 

195 Ohio Partners Comments at 11, National Grid Comments at 7, and Maryland 

Counsel Comments at 6. 

196 SDG&E Comments at 26, FirstEnergy Comments at 10, Midwest ISO 

Transmission Owners Comments at 9-11, PSEG Companies Comments at 8, and Black 

Hills Corp. Comments at 4. 

197 First Energy Comments at 10. 
Docket No. PL09-4-000 - 84 - 

costs of legacy systems. Elsewhere in this document, the Commission discusses several 

major potential challenges to the operation of the bulk-power system, and the smart grid 

capabilities that could help address those challenges. We view these challenges as 

potentially serious enough to justify making the development of these smart grid 

capabilities a high priority. Accordingly, if developing these capabilities requires the 

early replacement of some legacy equipment, we would view that as a strong argument 

for doing so, and would not necessarily render these previously-approved investments 

imprudent. 

c. Additional Incentive Rate Treatments

142. The Commission also stated that it will entertain requests for rate treatments such 

as accelerated depreciation and abandonment authority (whereby an applicant is assured 

of recovery of abandoned plant costs if the project is abandoned for reasons outside the 

control of the public utility) specifically tied to smart grid deployments under our FPA 

section 205 authority. The Commission stated that any requests for such rate treatment 

for smart grid costs would need to address all of the requirements for rate recovery and 

make the showings described in FPA section 205. The Commission also stated that it 

would consider applying these rate treatments to the portion of a smart grid pilot or 

demonstration project’s cost that is not already paid for by Department of Energy funds, 
Docket No. PL09-4-000 - 85 - 

such as those authorized by EISA sections 1304 and 1306.198 The Commission further 

stated that to the extent that such showings are made as discussed, it proposed to consider 

permitting abandonment authority to apply to any smart grid investments that, despite 

reasonable efforts, could not be upgraded and must ultimately be replaced if found to 

conflict with the final standards approved in the Institute’s standards development 

process. 

Comments

143. SDG&E supports the Commission’s incentive proposals, particularly as to 

accelerated depreciation and the opportunity to recover the costs of abandoned plant. 

However, SDG&E seeks clarification that the Commission will entertain rate requests for 

abandoned plant costs over and above undepreciated capital costs, including other costs 

associated with abandoned facilities such as costs of early or premature contract 

termination.199

144. In contrast, AARP urges caution regarding incentives for smart grid equipment 

before the adoption of final interoperability standards and proposes that requests for such 

incentives should be required to document the costs and benefits that will ultimately be 

borne by retail consumers. As with cost recovery generally, AARP argues that the 

 198 To be codified at 42 U.S.C. 17384 and 17386. 

199 SDG&E Comments at 26-27. 
Docket No. PL09-4-000 - 86 - 

 

Commission should identify specific investments, devices, or other systems that would or 

could be eligible for incentive treatment under this proposed policy. AARP argues that, 

at a minimum, requests for incentive treatment should be required to document the actual 

and improved reliability benefits from such investments and the applicant should bear all 

of the risk that those benefits will actually occur. Citizens Coalition opposes any special 

rate treatment for smart grid equipment, as does ELCON for the same reasons that it 

opposes finalization of the Interim Rate Policy generally.200 NRECA states that if the 

Commission’s discussion of permitting applicants to seek rate treatments such as 

accelerated depreciation and abandonment authority was meant to change existing 

ratemaking policies, the Commission must provide more justification for doing so and 

detailed criteria for evaluating such applications.201

145. Massachusetts Attorney General urges the Commission to consider prohibiting, or 

at least significantly limiting, applicants’ ability to recover return on equity incentive 

adders for smart grid investments. It argues that the potential risks associated with smart 

grid investments are minimal compared to large-scale transmission projects, especially in 

light of Department of Energy support through stimulus funding.202 

200 Citizens Coalition Comments at 14 and ELCON Comments at 13. 

201 NRECA Comments at 14-15. 

202 Massachusetts Attorney General Comments at 5-6. 
Docket No. PL09-4-000 - 87 - 

 

146. In contrast, Allegheny Companies recommend that three additional rate treatments 

be permitted: incentive return on equity, recovery of a return on 100 percent of 

construction work in progress, and the expensing of pre-commercial costs.203 Allegheny 

Companies also support the proposals regarding accelerated depreciation and 

abandonment but request that applicants be permitted to demonstrate on a case-by-case 

basis significantly shorter depreciable lives for early smart grid investments without 

needing to demonstrate that such shorter lives are required for cash flow purposes.204

147. Valley Group asserts that real-time transmission ratings could reduce congestion 

cost by enabling more of the existing capacity of transmission facilities to be used safely, 

and proposes a new rate incentive tied to investment associated with enabling real-time 

transmission ratings.205

148. Finally, ITC Companies and EEI request clarification regarding the interplay 

between Order No. 679 and the incentive rate treatments discussed in the Interim Rate 

Policy. ITC Companies request that the Commission clarify that smart grid technologies 

applicable to the transmission system are considered advanced transmission technologies 

eligible for transmission rate incentives under Order No. 679.206 EEI asks the 

203 Allegheny Companies Comments at 6-7. 

204 Id. at 8-9. 

205 Valley Group Comments at 2, 5-6. 

206 ITC Companies Comments at 8-10. 
Docket No. PL09-4-000 - 88 - 

Commission to clarify whether the Commission will differentiate between devices that 

qualify for advanced technology incentives under Order No. 679 and those that qualify 

under the Interim Rate Policy; or whether the same technology may qualify for either 

incentive. EEI also requests that the Commission clarify whether projects receiving 

treatment under the Interim Rate Policy preclude smart grid projects from receiving 

incentives under Order No. 679.207 AARP argues that such single issue rate filings 

should be required to adhere to the Commission’s regulations and conform to procedures 

enacted under FPA section 219.208

Commission Determination

149. The Commission will permit utilities to request accelerated depreciation and 

abandonment authority under the terms of its Interim Rate Policy under FPA section 205. 

As discussed elsewhere in this Policy Statement, smart grid investment can help address 

major challenges facing the bulk-power system. However, as with any section 205 filing 

or petition for declaratory order, the Commission will make the rate determination based 

on the specific facts and circumstances presented, including the relationship to other 

incentives, if any. 

 207 EEI Comments at 15. 

208 AARP Comments at 13-15 
Docket No. PL09-4-000 - 89 - 

4. Potential Interplay with Department of Energy Funding Grants

150. Subsequent to the Commission’s issuance of the Proposed Policy Statement, the 

Department of Energy announced two smart grid funding opportunities for up to fifty 

percent of the costs of certain smart grid projects. In addition, the Department of Energy 

planned to require applicants to identify the source of non-Department of Energy funds, 

along with some evidence as to the certainty of these funds. 

151. Given that applicants for these programs might include jurisdictional public 

utilities that seek rate recovery through Commission-jurisdictional rates for the nonDepartment of Energy portion of funds for transmission-related projects, the Commission 

sought supplemental comments on the matter. The Commission received 16 

supplemental comments. 

Comments

152. There are two major themes in the supplemental comments. First, the investorowned electric industry is supportive of the Commission’s proposal to conditionally 

approve rate adjustments on smart grid projects, including those eligible for Department 

of Energy funding. EEI is fully supportive of the Commission’s smart grid Interim Rate 

Policy proposal, stating that it provides certainty and incentives for utilities to 

aggressively pursue Department of Energy funding.209 Without interim rate policies, 

 209 EEI Supplemental Comments at 4-5. 
Docket No. PL09-4-000 - 90 - 

 

utilities may be less willing or unable to pursue Department of Energy funding. EEI 

encourages the Commission to issue its Interim Rate Policy before the Department’s 

release of its June 17, 2009 final funding opportunity documents, and certainly prior to 

the July 29 project submission deadline. EEI supports rate recovery of upgrades to 

legacy systems and rate recovery of stranded costs resulting from smart grid upgrades.210 

EEI also states that expedited rate adjustments can be accomplished through formula 

rates.211 SDG&E, PSEG, PG&E, and the New York Transmission Owners all filed 

comments in support of the Commission’s Interim Rate Policy proposals.212 None of the 

Investor Owned Utility commenters suggests that the Commission adopt a separate rate 

policy for investments supported by Department of Energy funds. 

153. Second, the public power sector, energy consumer representatives, and state 

regulatory commissions oppose or have serious reservations about the Commission’s 

policy proposal. NRECA and ELCON continue to oppose the Commission’s Interim 

Rate Policy proposal generally. NRECA stresses that the Commission should strictly 

adhere to the just and reasonable requirements of the FPA.213 NRECA’s position is that 

210 Id. at 6. 

211 Id. 

212 SDGE Supplemental Comments at 1-2, PSEG Supplemental Comments at 1-2, 

PGE Supplemental Comments at 1, and NYISO Supplemental Comments at 3. 

213 NRECA Supplemental Comments at 4-5. 
Docket No. PL09-4-000 - 91 - 

 

rate adjustments related to smart grid investments can be processed expeditiously while 

still following requirements prescribed in the FPA. NRECA also states that cost recovery 

assurance for facilities not under construction is beyond the Commission’s authority.214 

NRECA further states that a careful reading of the Department of Energy draft funding 

opportunity announcement does not condition grant award upon assurance of recovery of 

smart grid facilities in rates.215 Similarly, ELCON states the Commission should proceed 

carefully and focus on its statutory obligation that utility costs are prudently incurred, and 

used and useful.216 ELCON also reaffirms its opposition to the Commission’s proposed 

Interim Rate Policy and states that special rate treatment for smart grid investments is 

contrary to the FPA.217

154. NARUC asserts, as does NRECA, that many if not most of the grant projects will 

occur on the distribution-retail side of the grid.218 In consequence, the Commission 

should not provide funding guarantees for that portion of smart grid projects not covered 

by Department of Energy grants; state commissions must have the opportunity to review 

these projects. The Maryland Commission comments mirror NARUC’s and NRECA’s, 

214 Id. at 10-11. 

215 Id. at 8-9. 

216 ELCON Supplemental Comments at 3. 

217 Id. at 3. 

218 NARUC Supplemental Comments at 1. 
Docket No. PL09-4-000 - 92 - 

opposing the Interim Rate Proposal generally and specifically opposing conditional rate 

recovery of projects it considers to be state jurisdictional.219 The California Commission 

provided a copy of an order describing how it will review smart grid projects eligible for 

Department of Energy funds.220 

155. AARP comments, while not explicitly opposing the Commission’s Interim Rate 

Proposal, say that additional clarity should be provided to the smart grid cost approval 

process, including conducting a preliminary review of smart grid grant applications to 

determine whether they are complete.221 Similarly, the Massachusetts Attorney General 

stresses that the Commission should have a project approval and monitoring process that 

focuses on cost containment.222

Commission Determination

156. Having considered the supplemental comments, the Commission sees no need for 

special procedures for rate recovery filings for projects that also receive Department of 

Energy grant funding. The Department of Energy does not require an assurance of rate 

recovery as a condition for grant funding. In fact, the most recent version of the 

Department of Energy’s Smart Grid Grant Program states that applicants that do not yet 

 219 Maryland Commission Supplemental Comments at 1-2. 

220 CPUC Supplemental Comments at 1. 

221 AARP Supplemental Comments at 1-3. 

222 Massachusetts Commission Supplemental Comments at 3-4. 
Docket No. PL09-4-000 - 93 - 

have regulatory approval are eligible to receive an award.223 The more general concerns 

expressed by the commenters regarding the Interim Rate Policy have been addressed in 

previous sections of this Policy Statement. 

III. Document Availability

157. In addition to publishing the full text of this document in the Federal Register, the 

Commission provides all interested persons an opportunity to view and/or print the 

contents of this document via the Internet through the Commission’s Home Page 

(http://www.ferc.gov) and in the Commission’s Public Reference Room during normal 

business hours (8:30 a.m. to 5:00 p.m. Eastern time) at 888 First Street, N.E., Room 2A, 

Washington D.C. 20426. 

158. From the Commission’s home page on the Internet, this information is available 

on eLibrary. The full text of this document is available on eLibrary in PDF and 

Microsoft Word format for viewing, printing, and/or downloading. To access this 

document in eLibrary, type the docket number excluding the last three digits of this 

document in the docket number field. 

159. User assistance is available for eLibrary and the Commission’s website during 

normal business hours from Federal Energy Regulatory Commission Online Support at 

 223 See generally Recovery Act Smart Grid Grant Investment Program, 

http://www.grants.gov/search/search.do;jsessionid=fvXjKDLQNQG8kgxwx65nJs4rYhG

gThcL9t7KzGZCkqFXSRpGpn9z!1215949849?oppId=46833&flag2006=false&mode=

VIEW. 
Docket No. PL09-4-000 - 94 - 

202-502-6652 (toll free at 1-866-208-3676) or email at ferconlinesupport@ferc.gov, or 

the Public Reference Room at (202) 502-8371, TTY (202)502-8659. E-mail the Public 

Reference Room at public.referenceroom@ferc.gov. 

IV. Information Collection Statement 

160. Office of Management and Budget’s (OMB) regulations in 5 CFR 1320.11 require 

that it approve certain reporting and recordkeeping requirements (collections of 

information) imposed by an agency. Upon approval of a collection of information, OMB 

assigns an OMB control number and an expiration date. Entities subject to the filing 

requirements of the Interim Rate Policy will not be penalized for failing to respond to this 

collection of information unless the collection of information displays a valid OMB 

control number. 

161. The Interim Rate Policy may affect the following existing data collection: Electric 

Rate Schedule and Tariff Filings (FERC-516) OMB Control No. 1902-0096. 

162. The following burden estimate is based on the projected costs for the industry to 

implement revisions to satisfy the requirements of the Interim Rate Policy if and when 

rate recovery is sought under that policy: 

Data Collection No. of 

Respondents 

No. of Responses 

Per Respondent 

Hours Per 

Response 

Total No. of 

Hours 

FERC-516 116 1 15 1740

Totals 1740

Total Annual Hours for Collection 
Docket No. PL09-4-000 - 95 - 

(Reporting and Recordkeeping, (if appropriate)) = 1740 

163. Information Collection Costs: The Commission projects the average annualized 

cost for all respondents to be the following:224

FERC-516 

Total Annualized Costs $261,000 

164. The Commission sought comments on the Interim Rate Policy, among other 

things, in the Proposed Policy Statement. No comments were filed relating to the burden 

of reporting or complying with the requirements for seeking rate recovery pursuant to the 

Interim Rate Policy. 

165. The Commission’s Interim Rate Policy adopted herein is necessary to encourage 

the near-term deployment of smart grid systems capable of addressing upcoming 

challenges to the operation of the bulk-power system. Requiring the information 

specified in the Interim Rate Policy will encourage this near-term deployment while 

appropriately protecting customers from stranded costs and the electric system from 

potential cybersecurity threats. 

166. These requirements conform to the Commission's goal for efficient information 

collection, communication, and management within the electric power industry. The 

 224 The total annualized costs for the information collection is $261,000. This 

number is reached by multiplying the total hours to prepare responses (1740 hours) by an 

hourly wage estimate of $150 (a composite estimate that includes legal, technical and 

support staff rates, $90+$35+$25). $261,000 = $150 x 1740. 
Docket No. PL09-4-000 - 96 - 

Commission has assured itself, by means of its internal review, that there is specific, 

objective support for the burden estimates associated with the information requirements. 

167. OMB regulations225 require it to approve information collection requirements 

imposed by an agency. The Commission is submitting notification of the Interim Rate 

Policy to OMB. These information collections are voluntary and apply only to the extent 

that an entity seeks to benefit from the Interim Rate Policy. 

Title: Electric Rate Schedule and Tariff Filings (FERC-516) 

Action: Proposed collection. 

OMB Control No.: 1902-0096 

Respondents: Business or other for profit. 

Frequency of Responses: Estimated to be one time per respondent. The Interim Rate 

Policy will be in effect until relevant interoperability standards have been adopted 

through Commission rulemaking as provided by the EISA. 

Necessity of the Information: The Interim Rate Policy will encourage near-term 

deployment of smart grid systems capable of helping to address the upcoming challenges 

to the operation of the bulk-power system associated with the EISA. The information to 

be collected is necessary to protect customers from stranded costs and the electric system 

from potential cybersecurity threats. The Commission will use the information in rate 

 225 5 CFR 1320.12. 
Docket No. PL09-4-000 - 97 - 

proceedings to review rate and tariff changes by public utilities, for general industry 

oversight, and to supplement the documentation used during the Commission's audit 

process. 

168. The Commission is submitting to OMB a notification of these proposed 

collections of information. For information on the requirements, submitting comments 

on the collection of information and the associated burden estimates, including 

suggestions for reducing this burden, please contact the following: 

Federal Energy Regulatory Commission 

Attn: Michael Miller, Office of the Executive Director 

888 First Street, N.E., Washington, DC 20426 

Tel: (202) 502-8415 / Fax: (202) 273-0873 

Email: michael.miller@ferc.gov 

Or contact: 

Office of Information and Regulatory Affairs 

Office of Management and Budget 

Washington, D.C. 20503 

Attention: Desk Officer for the Federal Energy Regulatory Commission 

 (Re: OMB Control Nos. 1902-0096) 

Tel: (202) 395-4638 

E-mail: omb_submissions@omb.eop.gov

V. Effective Date and Congressional Notification

169. The Interim Rate Policy adopted in this Policy Statement is effective [insert date 

60 days from publication in Federal Register]. The Commission has determined, with the 

concurrence of the Administrator of the Office of Information and Regulatory Affairs of 

OMB, that this Policy Statement is a “major rule” as defined in section 351 of the 
Docket No. PL09-4-000 - 98 - 

 

Small Business Regulatory Enforcement Fairness Act of 1996.226 The Commission will 

submit this Policy Statement to both houses of Congress and to the Government 

Accountability Office. 

By the Commission. 

( S E A L ) 

Nathaniel J. Davis, Sr., 

Deputy Secretary. 

226 See 5 U.S.C. 804(2) (2007). 
Docket No. PL09-4-000 - 99 - 

Appendix A List of Commenters and Short Names 

Abbreviation Commenter

AARP American Association of Retired Persons 

Academic Commenters Michael C. Caramanis, Geoffrey Parker, and Richard 

D. Tabors 

Alcoa Alcoa Inc. and Alcoa Power Generating Inc. 

Allegheny Companies Trans-Allegheny Interstate Line Company and 

Allegheny Power 

American Transmission American Transmission Company LLC 

APPA American Public Power Association 

APS Arizona Public Service Company 

AT&T AT&T, Inc. 

AWEA American Wind Energy Association 

B-D Research Bochman-Danahy Research 

Black Hills Corp. Black Hills Power, Black Hills/Colorado Electric 

Utility Company, LP d/b/a Black Hills Energy, and 

Cheyenne Light, Fuel and Power Company 

BP BP Energy Company 

CAISO California Independent System Operator Corporation 

California Commission Public Service Commission of California 

CenterPoint CenterPoint Energy Houston Electric, LLC 

Chamber U.S. Chamber of Commerce 

Citizens Coalition The Empowerment Center of Greater Cleveland, the 

Neighborhood Environmental Coalition, Consumers for 

Fair Utility Rates, and Cleveland Neighborhood 

Housing 

Comverge Comverge, Inc. 

CPower CPower, Inc. 

CURRENT CURRENT Group, LLC 

DRSG Coalition Demand Response and Smart Grid Coalition 

Duke Duke Energy Corporation 

EEI Edison Electric Institute 

ELCON Electricity Consumers Resource Council 

EPSA Electric Power Supply Association 

E.ON E.ON U.S. LLC 
Docket No. PL09-4-000 - 100 - 

FirstEnergy FirstEnergy Service Company on behalf of its affiliates 

American Transmission 

Systems, Incorporated, the Cleveland Electric 

Illuminating Company, Jersey Central Power and Light 

Company, Metropolitan Edison Company, Ohio Edison 

Company, Pennsylvania Electric Company, 

Pennsylvania Power Company, and the Toledo Edison 

Company 

GridSolar GridSolar, LLC 

GridWise Alliance 

GWAC 

GridWise Alliance 

GridWise Architecture Council 

Ice Energy Ice Energy, Inc. 

Illinois Commission Illinois Commerce Commission 

Indianapolis P&L Indianapolis Power & Light Company 

ISO-NE ISO New England Inc. 

ITC Companies International Transmission Company d/b/a 

ITCTransmission, Michigan Electric Transmission 

Company, LLC, and ITC Midwest LLC 

James E. Miller James E. Miller 

Kansas Commission Kansas Corporation Commission 

Maryland Commission Public Service Commission of Maryland (supplemental 

comments only) 

Maryland Counsel Maryland Office of People’s Counsel 

Massachusetts Attorney 

General 

Massachusetts Office of Attorney General 

Michigan Commission Michigan Public Service Commission 

Midwest ISO Midwest Independent Transmission System Operator, 

Inc. 

Midwest ISO 

Transmission Owners 

Midwest ISO Transmission Owners 

NARUC National Association of Regulatory Utility 

Commissioners 

National Grid National Grid USA 

Natural Gas 

Commenters 

Natural Gas Supply Association, Interstate Natural Gas 

Association of America, and Independent Petroleum 

Association of America 
Docket No. PL09-4-000 - 101 - 

NEM and Intelligent 

Energy 

National Energy Marketers Association and Intelligent 

Energy 

NEMA National Electrical Manufacturers Association 

NERC North American Electric Reliability Corporation 

New York Transmission 

Owners 

Central Hudson Gas & Electric Corporation, 

Consolidated Edison Company of New York, Inc., New 

York Power Authority, New York State Electric & Gas 

Corporation, Orange and Rockland Utilities, Inc., and 

Rochester Gas and Electric Corporation (supplemental 

comments only) 

North Carolina 

Agencies 

North Carolina Public Utilities Commission and Public 

Staff-NC Utilities Commission 

NRECA National Rural Electric Cooperative Association 

NRG Companies NRG Energy, Inc. and Reliant Energy Retail Services, 

LLC 

NYISO New York Independent System Operator 

Ohio Commission Public Utilities Commission of Ohio 

Ohio Counsel Office of the Ohio Consumers’ Counsel 

Ohio Partners Citizen Power, Cleveland Housing Network, Edgemont 

Neighborhood Coalition of Dayton, the Empowerment 

Center of Greater Cleveland, the Energy Project, the 

National Consumer Law Center, the Neighborhood 

Environmental Coalition, and Ohio Partners for 

Affordable Energy 

Open Secure Systems Open Secure Energy Control Systems, LLC 

PG&E Pacific Gas and Electric Company 

PNM Public Service Company of New Mexico 

PSEG Companies PSEG Energy Resources & Trade LLC, Public Service 

Electric and Gas Company, PSEG Power LLC, PSEG 

Global LLC 

Public Interest 

Organizations 

Project for Sustainable FERC Energy Policy, 

Conservation Law Foundation, Natural Resources 

Defense Council, The Commons, Union of Concerned 

Scientists, and Western Grid Group 

SDG&E San Diego Gas & Electric Company 

Silver Spring Networks Silver Spring Networks 

Southern Southern Company Services, Inc. 
Docket No. PL09-4-000 - 102 - 

Springfield Springfield Utility Board 

TANC Transmission Agency of Northern California 

TAPS Transmission Access Policy Study Group 

(supplemental comments only) 

TVA Tennessee Valley Authority 

Valley Group The Valley Group 

Wal-Mart Wal-Mart Stores, Inc. 

Xcel Xcel Energy Services Inc.