13152 Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Proposed Rules 

1For purposes of this proposed policy statement, 

‘‘demand resources’’ refers to the set of demand 

response resources and energy efficiency resources 

and programs that can be used to reduce demand 

or reduce electricity demand growth. 

2 DER comprises dispersed generation devices 

and dispersed storage devices, including 

reciprocating engines, fuel cells, microturbines, 

photovoltaics, combined heat and power, and 

energy storage. See International Electrotechnical 

Commission, International Standards IEC 61850–7– 

420. 

3Energy Independence and Security Act of 2007, 

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

(EISA). 

TABLE 3—SERVICE INFORMATION—Continued 

Service Bulletin Revision 

level Date 

Airbus Service Bulletin A330–27–3110 ..................................................................................................... 02 March 2, 2007. 

Airbus Mandatory Service Bulletin A340–27A4154 ................................................................................... 01 July 25, 2008. 

Airbus Service Bulletin A340–27–4115 ..................................................................................................... 01 March 2, 2007. 

Issued in Renton, Washington, on March 

18, 2009. 

Ali Bahrami, 

Manager, Transport Airplane Directorate, 

Aircraft Certification Service. 

[FR Doc. E9–6734 Filed 3–25–09; 8:45 am] 

BILLING CODE 4910–13–P 

DEPARTMENT OF ENERGY 

Federal Energy Regulatory 

Commission 

18 CFR Chapter I 

[Docket No. PL09–4–000] 

Smart Grid Policy 

Issued March 19, 2009. 

AGENCY: Federal Energy Regulatory 

Commission, DOE. 

ACTION: Proposed policy statement and 

action plan. 

SUMMARY: This proposed policy 

statement and action plan provides 

guidance to inform the development of 

a smarter grid for the Nation’s electric 

transmission system focusing on the 

development of key standards to 

achieve interoperability of smart grid 

devices and systems. The Commission 

also proposes a rate policy for the 

interim period until interoperability 

standards are adopted. Smart grid 

investments that demonstrate system 

security and compliance with 

Commission-approved Reliability 

Standards, the ability to be upgraded, 

and other specified criteria will be 

eligible for timely rate recovery and 

other rate treatments. This rate policy 

will encourage development of smart 

grid systems. 

DATES: Comments on the proposed 

policy statement and action plan are 

due May 11, 2009. 

FOR FURTHER INFORMATION CONTACT: 

David Andrejcak, Office of Electric 

Reliability, 888 First Street, NE., 

Washington, DC 20426 (202) 502– 

6721, david.andrejcak@ferc.gov. 

Elizabeth H. Arnold, Office of General 

Counsel, 888 First Street, NE., 

Washington, DC 20426, (202) 502– 

8818, elizabeth.arnold@ferc.gov. 

Ray Palmer, Office of Energy Market 

Regulation, 888 First Street, NE., 

Washington, DC 20426, (202) 502– 

6569, ray.palmer@ferc.gov. 

SUPPLEMENTARY INFORMATION: 

Before Commissioners: Jon Wellinghoff, 

Acting Chairman; Suedeen G. Kelly, 

Marc Spitzer, and Philip D. Moeller. 

Proposed Policy Statement and Action 

Plan 

Issued March 19, 2009. 

1. The Commission is issuing this 

proposed policy statement to articulate 

its policies and near-term priorities to 

help achieve the modernization of the 

Nation’s electric transmission system, 

one aspect of which is ‘‘Smart Grid’’ 

development. Smart Grid advancements 

will apply digital technologies to the 

grid, and enable real-time coordination 

of information from generation supply 

resources, demand resources,1 and 

distributed energy resources (DER).2

This will bring new efficiencies to the 

electric system through improved 

communication and coordination 

between utilities and with the grid, 

which will translate into savings in the 

provision of electric service. Ultimately 

the smart grid will facilitate consumer 

transactions and allow consumers to 

better manage their electric energy costs. 

These technologies will also enhance 

the ability to ensure the reliability of the 

bulk-power system. The Commission’s 

interest and responsibilities in this area 

derive from its authority over the rates, 

terms and conditions of transmission 

and wholesale sales in interstate 

commerce, its responsibility for 

approving and enforcing mandatory 

reliability standards for the bulk-power 

system in the United States, and a 

recently enacted law 3 requiring the 

Commission to adopt interoperability 

standards and protocols necessary to 

ensure smart-grid functionality and 

interoperability in the interstate 

transmission of electric power and in 

regional and wholesale electricity 

markets. The development and 

implementation of these interoperability 

standards is a challenging task, which 

requires the efforts of industry, the 

states and other federal agencies, in 

addition to the Commission. The 

Commission intends to use its authority, 

in coordination and cooperation with 

other governmental entities, to help 

achieve interoperability in a timely 

manner. Achievement of 

interoperability will not only increase 

the efficiency of the bulk-power system, 

with the goal of achieving long-term 

consumer savings, but will also enable 

demand response and other consumer 

transactions and activities that give 

consumers the tools to better control 

their electric energy costs. Reaching this 

goal will also help promote the 

integration of significant new renewable 

power into the transmission system and 

help state and federal initiatives to 

promote greater reliance on renewable 

power and meet future demand growth 

to satisfy the Nation’s energy needs. 

2. The purpose of the policy statement 

the Commission ultimately adopts will 

be to prioritize the development of key 

interoperability standards, provide 

guidance to the electric industry 

regarding the need for full cybersecurity 

for Smart Grid projects, and provide an 

interim rate policy under which 

jurisdictional public utilities may seek 

to recover the costs of Smart Grid 

deployments before relevant standards 

are adopted through a Commission 

rulemaking. Specifically, development 

of interoperability standards for intersystem communication, system security, 

wide-area situational awareness, 

demand response, electric storage, and 

electric transportation should be 

prioritized and accelerated. The work 

done on certain standards will provide 

a foundation for development of many 

other standards. 

3. In addition, as further explained 

below, for the near term we propose 

certain rate treatments to encourage 

investment in Smart Grid technologies 

that advance efficiency, security, 

reliability and interoperability in order 

to address potential challenges to the 

Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Proposed Rules 13153 

4 16 U.S.C. 824, 824o. 

5EISA sec. 1301, to be codified at 15 U.S.C. 

17381. 

6 Id. 

7EISA sec. 1305(a), to be codified at 15 U.S.C. 

17385(a). 

8Testimony of Patrick D. Gallagher, PhD, Deputy 

Director, National Institute of Standards and 

Technology, before the Committee on Energy and 

Natural Resources, United States Senate, March 3, 

2009, available at: http://www.nist.gov/director/

ocla/nist%20pgallagher%20smart%20grid%

20testimony%20senate%20e&nr%203-3-09.pdf. 

According to the GridWise Architecture Council, 

the term ‘‘interoperability’’ refers to the ability to: 

(1) Exchange meaningful, actionable information 

between two or more systems across organizational 

boundaries; (2) assure a shared meaning of the 

exchanged information; (3) achieve an agreed 

expectation for the response to the information 

exchange; and (4) maintain the requisite quality of 

service in information exchange (i.e., reliability, 

accuracy, security). See GridWise Architecture 

Council, Interoperability Path Forward Whitepaper 

at 1–2, 2005, available at: http:// 

www.gridwiseac.org/pdfs/ 

interoperability_path_whitepaper_v1_0.pdf. The 

GridWise Architecture Council was formed by the 

U.S. Department of Energy to promote and enable 

interoperability among the many entities that 

interact with the Nation’s electric power system. 

See http://www.gridwiseac.org/about/mission.aspx. 

9EISA sec. 1305(d), to be codified at 15 U.S.C. 

17385(d). 

10See Testimony of Patrick D. Gallagher, PhD, 

infra n.8. 

11A suite of standards would consist of a group 

of related standards. 

bulk-power system. We recognize that a 

key consideration of public utilities in 

deciding whether to invest in Smart 

Grid technologies may involve the 

potential for stranded costs associated 

with legacy systems that are replaced by 

Smart Grid equipment. Additionally, as 

the electric system may require several 

of the new capabilities of the Smart Grid 

before interoperability standards have 

been developed, we recognize the need 

for guidance for jurisdictional entities. 

Thus, to offer some rate certainty and 

guidance regarding cost recovery issues, 

the Commission is proposing a rate 

policy for the interim period until final 

interoperability standards are adopted. 

The Commission also proposes that 

smart grid investments that demonstrate 

system security and compliance with 

Commission-approved Reliability 

Standards, the ability to be upgraded, 

and other specified criteria will be 

eligible for timely rate recovery and 

other rate treatments. For now, we 

propose as an interim rate policy to 

accept single-issue rate filings submitted 

under FPA section 205 by public 

utilities to recover the costs of Smart 

Grid deployments involving 

jurisdictional facilities provided that 

certain showings are made. In other 

words, we propose to consider Smart 

Grid devices and equipment, including 

those used in a Smart Grid pilot 

program or demonstration project, to be 

used and useful for purposes of cost 

recovery if an applicant makes the 

certain showings, as described below. 

4. We seek comments from the 

industry on these and other steps the 

Commission can take to encourage and 

expedite the development of 

interoperability standards and 

implementation of Smart Grid projects. 

In the near future, we may convene a 

technical conference for further public 

input on these issues. 

I. Background 

5. Under the Federal Power Act 

(FPA), the Commission has jurisdiction 

over the transmission of electric energy 

in interstate commerce by public 

utilities, and over the reliable operation 

of the bulk-power system in most of the 

Nation.4 The Commission also was 

given a new responsibility under the 

EISA, discussed further below, to issue 

a rulemaking to adopt standards and 

protocols to ensure Smart Grid 

functionality and interoperability in 

interstate transmission of electric power 

and in regional and wholesale electric 

markets. 

6. Section 1301 of the EISA states that 

it is the policy of the United States to 

support the modernization of the 

Nation’s electricity transmission and 

distribution system to maintain a 

reliable and secure electricity 

infrastructure that can meet future 

demand growth and to achieve each of 

several goals and characteristics, which 

together characterize a Smart Grid.5

These goals and characteristics are: 

(1) Increased use of digital information and 

controls technology to improve reliability, 

security, and efficiency of the electric grid. 

(2) Dynamic optimization of grid operations 

and resources, with full cyber-security. (3) 

Deployment and integration of distributed 

resources and generation, including 

renewable resources. (4) Development and 

incorporation of demand response, demandside resources, and energy efficiency 

resources. (5) Deployment of ‘‘smart’’ 

technologies (real-time, automated, 

interactive technologies that optimize the 

physical operation of appliances and 

consumer devices) for metering, 

communications concerning grid operations 

and status, and distribution automation. (6) 

Integration of ‘‘smart’’ appliances and 

consumer devices. (7) Deployment and 

integration of advanced electricity storage 

and peak-shaving technologies, including 

plug-in electric and hybrid electric vehicles, 

and thermal storage air conditioning. (8) 

Provision to consumers of timely information 

and control options. (9) Development of 

standards for communication and 

interoperability of appliances and equipment 

connected to the electric grid, including the 

infrastructure serving the grid. (10) 

Identification and lowering of unreasonable 

or unnecessary barriers to adoption of smart 

grid technologies, practices, and services.[6] 

7. Section 1305(a) of EISA directs the 

National Institute of Standards and 

Technology (the Institute) ‘‘* * * to 

coordinate the development of a 

framework that includes protocols and 

model standards for information 

management to achieve interoperability 

of smart grid devices and systems.’’ 7 A 

helpful description of interoperability is 

‘‘the ability of a system or a product to 

work with other systems or products 

without special effort on the part of the 

customer * * *’’ 8 In order to achieve 

the Smart Grid characteristics and 

functions listed in EISA section 1301, 

interoperability of Smart Grid 

equipment will be essential. 

8. Finally, pursuant to the EISA, once 

the Commission is satisfied that the 

Institute’s work has led to ‘‘sufficient 

consensus’’ on interoperability 

standards, we are directed 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

9. The Commission appreciates the 

Institute’s work to assess current Smart 

Grid standards and infrastructure to 

identify gaps, and is aware of its plans 

to create a knowledge base to enable 

effective communication among 

stakeholders and a roadmap to lay out 

a recommended course toward a highly 

interoperable grid.10 In general, we 

expect that the Institute will 

recommend standards to the 

Commission that have resulted from the 

Institute’s coordination with standards 

development organizations and 

technical experts. The Commission will 

initiate rulemakings as individual or 

suites of standards 11 achieve sufficient 

consensus. The Commission will 

consider the most effective and efficient 

ways to interact with the Institute and 

standards development organizations 

between the issuance of a notice of 

proposed rulemaking on submitted 

standards and a final rule adopting 

standards. We invite comment on this 

proposed approach. 

10. The Commission will continue to 

take an active role in helping to ensure 

that the participants in the Institute’s 

process effectively prioritize and 

sequence future standards development 

efforts. We invite comments on what 

factors the Commission should consider 

in determining when the Institute’s 

work has led to ‘‘sufficient consensus’’ 

on interoperability standards to warrant 

instituting a rulemaking proceeding. We 

13154 Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Proposed Rules 

12The EISA specifically names the IEEE (formerly 

known as the Institute of Electrical and Electronics 

Engineers), and the National Electrical 

Manufacturers Association. Other relevant existing 

standards development organizations could include 

the International Electrotechnical Commission 

(IEC), the American National Standards Institute 

(ANSI), the German Standards Institute (actually 

Deutsches Institut fu ̈r Normung), the International 

Organization for Standardization, and the 

International Telecommunication Union. 

13 16 U.S.C. 824o. 

14See Mandatory Reliability Standards for 

Critical Infrastructure Protection, Order No. 706, 73 

FR 7368 (Feb. 7, 2008), 122 FERC ¶ 61,040, reh’g 

denied and clarification granted, Order No. 706–A, 

123 FERC ¶ 61,174 (2008). Notably, section 215(a) 

of the FPA, 16 U.S.C. 824o(a), defines the terms 

‘‘reliability standard,’’ ‘‘reliable operation,’’ and 

‘‘cybersecurity incident.’’ 

15See Appendix A for a graphic representation of 

the various systems. 

16See, e.g., the Western Climate Initiative 

(http://www.westernclimateinitiative.org/) and the 

Midwestern Greenhouse Gas Reduction Accord 

(http://www.midwesternaccord.org/). 

also seek comment and ideas on how to 

identify and stage the adoption of 

successive waves of interoperability 

standards. Finally, we seek comment as 

to whether there should be some formal 

process for parties to seek Commission 

guidance if negotiations on certain 

interoperability standards reach an 

impasse. 

II. Discussion 

A. Urgency of Achieving Certain Smart 

Grid Functionalities 

11. As noted above, rather than 

directing the Institute to develop 

interoperability standards of its own, 

Congress charged the Institute with 

coordinating such development. The 

EISA specifically requires the Institute 

to solicit input from, among others, a 

range of existing standards development 

organizations that rely on extensive 

negotiation in order to achieve broad 

industry consensus on proposed 

standards.12

12. The EISA contains no specific 

deadline for the creation of 

interoperability standards; instead, it 

provides for a consensus-based process. 

However, there is a sense of urgency 

within industry and government for the 

development of standards for and 

deployment of smart grid technologies 

generally. The Commission is 

particularly interested in the 

development of Smart Grid functions 

and characteristics that can help address 

challenges to the Commissionjurisdictional bulk-power system. These 

include the cross cutting issues of 

cybersecurity and the further 

development of common information 

models to allow useful exchange of 

electric system information (e.g., 

standard definitions). Broad policy goals 

also need to be addressed such as 

optimizing the transmission system to 

reduce congestion and improve 

reliability, security and efficiency; 

encouraging increased reliance on 

demand response; state and possibly 

national climate change initiatives such 

as Renewable Portfolio Standards and 

other efforts that result in increased 

reliance on variable renewable 

resources; and the potential for 

increased and variable electricity loads 

from the transportation sector. We 

discuss in turn the importance of each 

of these in driving the need for Smart 

Grid capabilities and the standards to 

achieve interoperability of smart grid 

devices with the electric grid and its 

associated users and infrastructure. 

Cybersecurity and Reliability 

13. Absent any consideration of the 

Smart Grid concept, other activities and 

events currently taking place in various 

regions raise physical and cybersecurity 

concerns for the electric industry. For 

example, utilities have already taken 

advantage of the existing 

communications infrastructure and 

capabilities of the Internet to aid their 

marketing operations. While typically 

not connecting their more sensitive 

control center systems directly to the 

Internet, many entities have 

nevertheless upgraded those systems to 

use Internet-based protocols and 

technologies. This, coupled with the 

fact that the non-Internet-connected 

control center operations may be 

connected to the same corporate 

network as the Internet-connected 

marketing systems, means that there 

may be an indirect Internet vulnerability 

to those sensitive control systems. 

Accordingly, without adequate 

protections, these preexisting utility 

efforts potentially increase the exposure 

of the bulk-power system to 

cybersecurity threats. Cybersecurity and 

physical security have been ongoing 

concerns for the Commission and the 

electric industry with the advent of the 

mandatory and enforceable federal bulkpower system reliability regime in place 

in most of the United States under the 

oversight of the Commission pursuant to 

FPA section 215.13 Pursuant to this 

section 215 authority, the Commission 

recently approved eight cyber and 

physical protection related reliability 

standards.14

14. The fact that a smarter grid would 

permit two-way communication 

between the electric system and a much 

larger number of devices located outside 

of controlled utility environments 

commands that even more attention be 

given to the development of 

cybersecurity standards. Therefore, the 

Commission proposes 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 overarching 

cybersecurity and reliability mandates 

of the EISA as well as existing reliability 

standards approved by the Commission 

pursuant to section 215 of the FPA. The 

Commission proposes to make 

consistency with cybersecurity and 

reliability standards a precondition to 

its adoption of Smart Grid standards. 

We seek comment on these proposals. 

15. In order to fully incorporate 

measures to protect against cyber and 

physical security threats, we also 

propose to advise the Institute to take 

the necessary steps to assure that its 

process for the development of any 

interoperability standards and protocols 

leaves no gaps in cyber or physical 

security unfilled. We are concerned that 

this could be a particular problem 

where separate groups of interested 

industry members independently 

develop and advocate select standards 

or protocols for the Institute’s 

consideration. We seek comment on this 

proposal. 

Inter-System Communication and 

Coordination 

16. There is an urgent need to further 

develop a common semantic framework 

(i.e., agreement as to meaning) and 

software models for enabling effective 

communication and coordination across 

inter-system interfaces. Such standards 

could play an important role in the 

movement to a smarter grid that is 

capable of addressing challenges to the 

operation of the bulk-power system. The 

bulk-power system can be thought of as 

a system of systems.15 In order to enable 

a smarter grid, particularly one capable 

of addressing the bulk-power system 

challenges discussed below, effective 

interfaces must be developed between 

and among all of these systems (i.e., 

inter-system interfaces) and common 

information model standards appear to 

be powerful tools to enable such intersystem interfaces. The Commission 

proposes to identify standards for 

common information models for intersystem interfaces as a high priority for 

accelerated development. We seek 

comment on this proposal. 

Integrating Renewable Resources Into 

the Electric Grid 

17. Several groups of states have been 

working on aggressive regional carbon 

control measures,16 and one regional 

effort has already begun operation in the 

Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Proposed Rules 13155 

17See http://www.rggi.org/home. 18For example, a smarter grid could enable an 

increase in transmission capacity through a switch 

from static to dynamic transmission line ratings 

enabled by the advanced sensor, communications, 

and information technology capabilities associated 

with a smarter grid. 

19Source, American Wind Energy Association’s 

Web site: http://www.awea.org/projects/. 

20North American Electric Reliability 

Corporation, 2008 Long-Term Reliability 

Assessment at 12. 

21 Inertia is the physical property which allows an 

object in motion to continue to stay in motion, 

absent other forces. Traditional dispatchable 

generating units (such as thermal and hydro power 

plants) utilize large rotary generators which have 

large amounts of inertia. This property has a 

tendency to stabilize the bulk-power system with an 

output response in the event of a disturbance. 

Variable resources, such as wind and solar, have 

less or no inertia and, as such, cut back more 

quickly in response to disturbances (e.g., frequency 

excursions), which may contribute to power system 

instabilities. 

22The Electricity Advisory Committee, which 

was formed by the Department of Energy to provide 

it with advice on a number of electricity issues, 

recently issued a report, Bottling Electricity: Storage 

as a Strategic Tool for Managing Variability and 

Capacity Concerns in the Modern Grid, December 

2008. This report asserts that there are many 

benefits to deploying energy storage technologies 

into the Nation’s grid: (1) A means to improve grid 

optimization for bulk power production; (2) a way 

to facilitate power system balancing in systems that 

have variable renewable energy sources; (3) 

facilitation of integration of plug-in hybrid electric 

vehicle power demands with the grid; (4) a way to 

defer investments in transmission and distribution 

infrastructure to meet peak loads (especially during 

outage conditions) for a time; and (5) a resource 

providing ancillary services directly to grid/market 

operators. 

23The Smart Grid concept envisions a power 

system architecture that permits two-way 

communication between the grid and essentially all 

devices that connect to it, ultimately all the way 

down to large consumer appliances. Efforts at 

realizing this concept focus on standardization to 

enable all of this new equipment to be 

manufactured economically in support of 

widespread adoption by consumers. Once that is 

achieved, a significant proportion of electric load 

could become an important resource to the electric 

system, able to respond automatically to customerselected price or dispatch signals delivered over the 

Smart Grid infrastructure without significant 

degradation of service quality. For purposes of this 

proposed policy statement we will refer to such 

new demand response capability as Smart Gridenabled demand response capability. 

24A recent NERC Draft Special Report recognizes 

that ‘‘[d]emand response has already been shown in 

some balancing areas to be a flexible tool for 

operators to use with wind generation [footnote 

omitted] and is a potential source of flexibility 

equal to supply-side options.’’ NERC, Special 

Report Accommodating High Levels of Variable 

Generation at 45; available at http://www.nerc.com/ 

docs/pc/ivgtf/IVGTF_Reporta_17Nov08.pdf. 

25See, e.g., EISA sec. 1301(4), (5), (6), (8), and (9), 

to be codified at 15 U.S.C. 17381(4), (5), (6), (8), and 

(9). 

26There can also be an economic justification for 

around-the-clock operation because large 

conventional units tend to have relatively higher 

capital costs and lower running costs. However, 

their generally slow and difficult start-up and cooldown sequences are the main reason why they 

cannot be started and stopped easily to address 

over-generation situations. 

27Such entities would need to have invested in 

the equipment necessary to reliably measure and 

control either their own load or the load of clients 

that they manage under contract. 

28See, e.g., EISA sec. 1301(4), (5), (6), (8), and (9). 

form of the Regional Greenhouse Gas 

Initiative.17 Federal legislation 

addressing carbon control and other 

environmental and climate related 

matters may follow. These initiatives 

point toward a shift in the mix of fuels 

that will be used to generate electricity, 

and an associated shift in where new 

generation resources are located. 

Additional transmission capacity to 

ensure deliverability of those new 

generating resources will be needed in 

the form of new transmission lines and 

more efficient use of existing 

infrastructure. Also, additional demand 

resources, generation resources, and 

DER will be needed to reliably integrate 

variable generation into the electric grid. 

Efforts to address these challenges could 

benefit from the enhanced capabilities 

associated with certain aspects of the 

Smart Grid; among them, the ability to 

maximize the capability and use of 

existing and new transmission 

capacity,18 and foster the deployment 

and integration of demand resources, 

generation resources and DER. 

18. As of December 2008, the Nation 

had 25,170 MW of wind generation 

based on nameplate capacity.19

According to the 2008 Long-Term 

Reliability Assessment by the North 

American Electric Reliability 

Corporation (NERC), an additional 

145,000 MW of wind power projects are 

planned or proposed over the next ten 

years.20 Accordingly, it is evident that 

in a relatively short period of time, some 

parts of the bulk-power system may face 

the need to effectively integrate 

unprecedented amounts of variable 

generation resources. This is significant 

because operators of variable generation 

have less control over when the 

resource is available to produce 

electricity, in contrast with more 

conventional fossil and nuclear 

generation. 

19. Large amounts of variable 

generation raise several important 

operational and planning issues, 

including: (1) Resource adequacy 

(potential loss and unavailability of 

variable resources at peak periods and 

other critical times such as loss of other 

generators or transmission lines); (2) 

resource management (potential for 

over-generation by variable resources 

during off-peak periods when there is 

insufficient load to accommodate such 

generation); and (3) reduced system 

inertia (potential loss of system stability 

due to the high penetration of variable 

resources with low inertia properties).21

Given sufficient time and resources, a 

variety of solutions to these concerns 

may be feasible. For example, 

investment in large amounts of 

electricity storage could ultimately 

address both the resource adequacy and 

resource management concerns,22

although technical and economic issues 

remain to be addressed before such 

investment is likely to become 

significant. In the meantime, Smart 

Grid-enabled demand response 

capabilities 23 could add important new 

tools to deal with both resource 

adequacy and resource management 

concerns.24 Demand response 

reductions in load can help address the 

resource adequacy concerns 

surrounding unexpected loss of variable 

generation, and EISA envisions, among 

other things, the development of large 

new pools of demand response 

resources.25

20. With respect to the resource 

management concerns surrounding 

potential over-generation, this situation 

tends to arise during off-peak periods 

when load is at its lowest and system 

operators have already turned off all 

traditional generation except their large 

conventional units that, for primarily 

operational reasons, must be operated in 

a nearly steady state around the clock.26

If large amounts of variable generation 

begin producing power during such 

periods, then the supply of electricity 

would exceed the demand for electricity 

and risk unbalancing the bulk-power 

system. In order to bring the system 

back into balance in a situation where 

easily dispatchable generation or 

demand resources are not available, 

system operators may have to require 

variable generation to reduce output. 

However, at such times this variable 

generation may be producing the lowest 

priced energy on the system, so 

reducing or eliminating its output 

would not be economically efficient. If 

a system existed whereby entities 27

could receive a timely signal to 

temporarily shift their demand from 

peak to off-peak, and if such load shifts 

could be controlled by the system 

operator, then such ‘‘dispatchable’’ 

demand response could alleviate to 

some degree the resource management 

concerns associated with overgeneration from the other side of the 

supply/demand equation. Again, the 

urgency to develop and implement 

those aspects of a smarter grid that can 

enable such demand response capability 

is clear.28

21. The future potential for a large 

and variable new class of electric load, 

specifically electricity-powered 

vehicles, also presents challenges that 

13156 Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Proposed Rules 

29See, e.g., Kris Osborn, Services Plan to Buy 

Electric Cars, Federal Times, November 17, 2008, at 

3 (noting that Army, Navy, and Air Force plan to 

purchase a total of 30,000 neighborhood electric 

vehicles for use on military bases). 

30See, e.g., John S. Adams, Bill benefits ‘mediumspeed’ electric cars, Great Falls Tribune, January 9, 

2009 (reporting on efforts in the Montana legislature 

to ease restrictions and ownership and use 

requirements on ‘‘medium speed’’ electric vehicles, 

which could include electric vehicles of up to 5,000 

pounds gross vehicle weight), available at http:// 

www.greatfallstribune.com/article/20090109/ 

NEWS01/901090337. 

31See American Recovery and Reinvestment Act, 

Public Law No. 111–5, Title IV, Subpart A, ll 

Stat. ll, ll(2009) (ARRA). 

32This is consistent with the Institute’s approach 

of prioritizing standards and functionalities that 

may impact reliability. See NIST Smart Grid Issues 

Summary, March 10, 2009, available at: http:// 

www.nist.gov/smartgrid/ (in case link is temporarily 

unavailable at this Web site, please request it via 

e-mail at: smartgrid@nist.gov). 

33See Gridwise Architecture Council, 

Interoperability Path Forward Whitepaper, infra 

n.8. 

34See infra n.32. 

35The concept of the Smart Grid as a ‘‘system of 

systems’’ and the importance of the need of first 

focusing on the inter-system interfaces are 

presented in a paper by the OpenSG Subcommittee 

and Smart Grid Executive Working Group entitled 

Smart Grid Standards Adoption: Utility Industry 

Perspective (Utility Perspective Paper), available at: 

http://osgug.ucaiug.org/Shared%20Documents/ 

Forms/AllItems.aspx. A graphic that illustrates 

these concepts is found in Appendix A. 

36 16 U.S.C 824o. 

may deserve special attention and 

priority in the consensus-based 

interoperability process being 

coordinated by the Institute. In addition 

to the plans of major automobile 

manufacturers to roll out plug-in hybrid 

vehicles starting in 2010, it is possible 

that large numbers of pure electric 

vehicles, sometimes known as 

neighborhood electric vehicles, could be 

purchased as second cars for short-haul 

daily commuting or for other 

purposes.29 Judging by the observed 

intensity of electric utility and state 

government interest in this area,30 the 

potential for a significant shift in 

personal transportation technology to 

electric power in the near future cannot 

be discounted. 

22. The timing of vehicle charging 

activities is an illustration of the effect 

electric vehicles can have on the 

operation of the electric grid. If charging 

takes place during peak periods it could 

require a large investment in new 

generation, demand response resources 

and/or transmission capacity to meet 

the resulting higher peak loads. 

However, charging off-peak could 

actually improve the operation of the 

electric system, for example by 

improving existing generation asset 

utilization or by providing an electricity 

storage solution to address the potential 

for over-generation by variable resources 

in off-peak periods. Ultimately, large 

numbers of plug-in electric vehicles 

have the potential to provide some 

ancillary services like distributed energy 

storage or, when aggregated, regulation 

service. In all cases, however, the 

enhanced information processing and 

high-speed communications and control 

capabilities of the Smart Grid would be 

extremely helpful, perhaps necessary, in 

dealing with the challenges and 

opportunities associated with large 

numbers of new electric vehicles on the 

bulk-power system. 

23. Additionally, these and other 

changing patterns of electricity 

generation and use are increasing the 

frequency with which congestion on 

transmission facilities becomes binding 

and raises costs for consumers. The 

Smart Grid concept includes the 

deployment of advanced sensors and 

controls throughout the electric system 

that should maximize the capability and 

use of existing and new transmission 

capacity. 

24. For all of the reasons discussed 

above, which may represent direct 

challenges to the reliable operation of 

the bulk-power system and wholesale 

power markets, the fact that many 

utilities are already beginning to deploy 

Smart Grid related systems, and the 

substantial funding for Smart Grid in 

the American Recovery and 

Reinvestment Act,31 the Commission 

herein proposes a targeted acceleration 

of certain aspects of the interoperability 

standards process as described further 

below.32

B. Development of Key Interoperability 

Standards 

25. As discussed above, several 

important trends indicate a strong 

national interest in expediting the 

development and deployment of the 

types of technologies and capabilities 

associated with a smarter grid. To 

achieve these types of capabilities, 

Smart Grid technologies must be 

interoperable.33 The Commission 

understands that a consensus-based 

interoperability standards development 

process typically requires time to reach 

consensus, but also recognizes that 

recent efforts by the Institute and 

several industry groups, including the 

OpenSG Subcommittee of the Utility 

Communication Architecture 

International User Group (OpenSG 

Subcommittee) and the GridWise 

Architecture Council, have developed 

concepts to prioritize the large set of 

potential standards, and have suggested 

principles for expediting development 

of a set of transmission and distribution 

systems standards that will facilitate 

many other important standards 

development activities. The 

Commission is committed to identifying 

these key transmission and distribution 

standards and working with the 

Institute to expedite their adoption. The 

Commission believes that focusing on 

the priorities identified below will help 

to remove uncertainty for developers of 

standards applicable to all levels of the 

grid. 

26. The Institute has issued for 

comment a ‘‘Smart Grid Issues 

Summary’’ that will act as an interim 

roadmap, starting with high priority 

standards that are largely based on 

existing broadly accepted standards.34

Leveraging existing standards to the 

greatest extent practical should shorten 

the time required to finalize needed 

interoperability standards. 

27. The Commission proposes to 

prioritize the development of standards 

for two cross-cutting issues and four key 

grid functionalities involving interfaces 

between utilities (e.g., regional 

transmission organizations (RTO) to 

utilities outside the RTO), utilities and 

customers, and utilities and other 

systems (e.g., energy management 

systems). These cross-cutting issues and 

key functionalities are proposed as the 

first level of work to be accomplished in 

the interoperability standards-setting 

process. Swift progress on adopting 

standards for these cross-cutting issues 

and key functionalities is necessary for 

the transmission operator/RTO to 

address the bulk-power system 

challenges identified above. 

28. The two cross cutting issues are 

first, cybersecurity (and physical 

security to protect equipment that can 

give access to Smart Grid operations) 

and second, a common semantic 

framework and software models for 

enabling effective communication and 

coordination at the boundaries of utility 

systems where these interface with 

customer and other systems (and hence 

provide ‘‘inter-system’’ functionality).35

The four key grid functionalities are 

wide-area situational awareness, 

demand response, electric storage, and 

electric transportation. 

System Security 

29. We propose two initial 

overarching principles regarding 

security that Smart Grid applications 

must address in order to comply with 

the need for full cybersecurity and with 

the Commission’s bulk-power system 

concerns, consistent with our authority 

under section 215 of the FPA.36 First, 

we believe that a responsible entity 

subject to Commission-approved 

Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Proposed Rules 13157 

37 ISA99/IEC 62443 represents a suite of 

standards for industrial automation and control 

system security. NIST Special Publication (SP) 800– 

53 involves security controls for federal agencies, 

including those who are part of the bulk-power 

system (e.g., Tennessee Valley Authority, 

Bonneville Power Authority). The Advanced 

Metering Infrastructure (AMI) Security Task Force 

(AMI-SEC), is defining common requirements and 

standardized specifications for securing AMI 

system elements. 38See infra n.32. 

reliability standards, such as the Critical 

Infrastructure Protection Reliability 

Standards, must ensure that it maintains 

compliance with those standards during 

and after the installation of Smart Grid 

technologies. Indeed, many Smart Grid 

installations will need to be included on 

a responsible entity’s list of critical 

assets to be protected under the 

Commission-approved NERC Critical 

Infrastructure Protection Reliability 

Standards. 

30. Second, to the extent that they 

could affect the reliability of the bulkpower system, Smart Grid technologies 

must address, the following 

considerations: (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. 

31. To the extent that any of the new 

Smart Grid standards or extensions to 

relevant existing standards require 

adaptation or extension in order to 

address these security-related concerns, 

such considerations should be given the 

highest priority. The Institute has 

suggested that beyond the NERC Critical 

Infrastructure Protection Reliability 

Standards, additional security standards 

to be investigated include ISA99/IEC 

62443, NIST Special Publication (SP) 

800–53, and the work of AMI–SEC.37

The Institute also suggests examining 

harmonization of several of these 

standards in order to provide additional 

protection to the bulk-power system. 

Commission staff will monitor Institute 

activities with respect to Smart Grid 

cybersecurity and physical security in 

order to fully coordinate the 

Commission’s regulatory objectives and 

responsibilities in this arena. The 

Commission seeks comments on this 

proposed approach to maintaining bulkpower system reliability and security as 

smart grid technologies are deployed 

and integrated. 

Communication 

32. The second cross-cutting issue is 

the need for a common semantic 

framework (i.e., agreement as to 

meaning) and software models for 

enabling effective communication and 

coordination across inter-system 

interfaces. An interface is a point where 

two systems need to exchange data with 

each other; effective communication 

and coordination occurs when each of 

the systems understands and can 

respond to the data provided by the 

other system, even if the internal 

workings of each system are quite 

different. A core group of standards 

initiated by the Electric Power Research 

Institute provide the basis for 

addressing this issue—these standards 

are IEC 61970 and IEC 61968 (together 

often referred to as the ‘‘Common 

Information Model’’ standards) and IEC 

61850. These standards have been cited 

by both the Utility Perspective Paper, as 

well as the Institute’s recent Smart Grid 

Issues Summary.38 This group of 

standards was designed to allow 

different systems to talk to one another 

as well as to provide software 

development tools for more efficient 

system integration. This suite of 

standards is already in use by a number 

of utilities for enterprise system 

integration (enabling integration across 

‘‘intra-system’’ interfaces). Indeed, 

while additional work on these 

standards will also help intra-system 

communication and coordination, we 

agree with the OpenSG Subcommittee 

and the Institute that inter-system 

interfaces should be a priority. 

33. The Commission is not mandating 

that these particular standards be 

further developed. Rather, we identify 

them here to establish priorities for 

further development by the Institute and 

industry. The group of standards 

initiated by the Electric Power Research 

Institute serves as a foundation for 

developing a complete set of 

communications standards. These 

standards require some level of 

harmonization with one another and 

other standards, and extensions to these 

standards will be required for additional 

interoperability and functionality. 

Efforts to coordinate and/or harmonize 

these standards with others intended to 

promote interoperability should be 

encouraged. For example, ongoing 

efforts to coordinate IEC 61968 with 

‘‘MultiSpeak’’ developed by the 

National Rural Electrical Cooperative 

Association should be continued. But 

these standards represent the best work 

to date and will be an essential building 

block in realizing the most significant 

early benefits for the bulk-power 

system. These standards are also key to 

the attainment of renewable power and 

climate policy goals and can help enable 

customers to manage their energy usage 

and cost. The Commission seeks 

comments on this proposed approach. 

Four Priority Functionalities 

34. In addition to the cross-cutting 

issues discussed above, the Commission 

seeks comments on the four Smart Grid 

functionalities that the Commission’s 

preliminary analysis indicates will be 

most helpful in addressing the bulkpower system challenges and should be 

given priority in the standards 

development process. 

Wide-Area Situational Awareness 

35. Wide-area situational awareness is 

the visual display of interconnectionwide system conditions in near real 

time at the reliability coordinator level 

and above. The wide-area situational 

awareness efforts, with appropriate 

cybersecurity protections, can rely on 

the NASPInet work undertaken by the 

North American SynchroPhasor 

Initiative (NASPI) and will require 

substantial communications and 

coordination across the RTO and utility 

interfaces. We encourage the RTOs to 

take a leadership role in coordinating 

the NASPI work with the member 

transmission operators. 

36. Regarding the potential Smart 

Grid role in addressing transmission 

congestion and optimization of the 

system, increased deployment of 

advanced sensors like Phasor 

Measurement Units will give bulkpower system operators access to large 

volumes of high-quality information 

about the actual state of the electric 

system that should enable a more 

efficient use of the electric grid, for 

example through a switch from static to 

dynamic line ratings. However, such 

large volumes of data present challenges 

in the form of information processing 

and management. Advanced software 

and systems will be needed to manage, 

process, and render this data into a form 

suitable for human operators and 

automated control systems. The 

Institute’s process should strive to 

identify the core requirements for such 

software and systems that would be 

most useful to system operators in 

addressing transmission congestion and 

reliability. 

Demand Response 

37. Smart Grid-enabled demand 

response is a priority because of its 

potential to help address several of the 

bulk-power system challenges identified 

13158 Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Proposed Rules 

39The ‘‘use case’’ 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 to achieve a specific goal. 

40The Utility Communication Architecture 

International User Group has also been developing 

OpenHAN, a specification for the energy services 

interface between the home area network (HAN) 

and the utility. Both OpenHan and OpenADR will 

benefit from the planned extensions of IEC 61850 

and the common information model standards 

described above. 

41See Energy Policy Act of 2005, Public Law No. 

109–58, sec. 1254, 110 Stat. 594, 970 (2005), adding 

a new subsection 111(d)(15) to the Public Utility 

Regulatory Policies Act of 1978 (16 U.S.C. 2621(d)). 

above. Further development of key 

standards would enhance 

interoperability and communications 

between system operators, demand 

response resources, and the systems that 

support them. In order to achieve an 

appropriate level of standardizations, a 

series of demand response ‘‘use cases’’ 

should be developed using readily 

available tools.39 In this regard, we 

encourage a particular focus on use 

cases for the key demand response 

activities discussed earlier: 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. 

38. It also appears that achieving such 

demand response capabilities will 

require additional standardization of the 

interfaces between systems on the 

customer premises and utility systems, 

including addressing data 

confidentiality issues. The Institute 

notes that considerable work has been 

done to develop demand response 

standards. One standard, Open 

Automated Demand Response 

(OpenADR) (developed for the interface 

between the utility and large 

commercial customers) has already been 

referred to the Organization for the 

Advancement of Structured Information 

Systems (OASIS). OpenADR has been 

developed by the Lawrence Berkeley 

National Laboratory, and is now going 

through a formal standards development 

process being coordinated between 

OASIS and the Utility Communication 

Architecture International User 

Group.40 Accordingly, we would 

encourage a focus in this area as well. 

39. Specifications for customer meters 

are within the jurisdiction of the States, 

but it is clear that communication and 

coordination across the interfaces 

between the utility and its customers 

can have a significant impact on the 

bulk-power system, particularly as new 

renewable power and climate policy 

initiatives introduce the need for more 

flexibility in the electricity grid, which 

creates the need for increased reliance 

on demand response and electricity 

storage. A large portion of electricity 

storage may ultimately be located on 

customer premises. As noted in the 

Institute’s Smart Grid Issues Summary, 

an appropriate starting point for further 

standards development would be the 

harmonization of IEC Standard 61850 

and several meter standards, namely 

ANSI C12.19 and C12.22, and we 

encourage the Institute and industry to 

work together on this suggestion. The 

Commission seeks comment from States 

and other parties on the optimal 

approach to develop standards in this 

area, and we will pursue direct 

communications with the States on this 

topic through the NARUC–FERC Smart 

Grid Collaborative and other NARUC 

Committees. 

Electric Storage 

40. The third key grid functionality is 

electric storage. If electricity storage 

technologies could be more widely 

deployed, they would present another 

important means of addressing some of 

the difficult issues facing the electric 

industry. To date, the only significant 

bulk electricity storage technology has 

been pumped storage hydroelectric 

technology. However, we are aware 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. While further research 

and development appears necessary 

before any widespread deployment of 

such newer technologies can take place, 

it may nevertheless be appropriate to 

encourage the identification and 

standardization of all possible 

electricity storage use cases at an early 

stage. There are existing standards that 

can be the starting point for 

interoperability standards development 

for DER. IEC 61850 addresses 

communications for DER, and IEEE 

1547 has been designated as a federal 

standard for interconnection.41

Electric Transportation 

41. The fourth key grid functionality 

is electric transportation. As indicated 

above, to the extent that new electric 

transportation options become 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 cars 

draw electricity off of the system. At the 

most basic level, this could be 

accomplished by providing an ability 

for distribution utilities to facilitate 

vehicle charging during off-peak periods 

so that this new electric load would not 

increase peak loads and require the 

development of new peak generation, 

demand response and/or more 

transmission to urban load centers that 

are being targeted for these vehicles. A 

more advanced implementation could 

offer vehicle owners the option to 

voluntarily limit their charging to times 

when variable renewable generation is 

producing power or to permit utilities 

the limited use of the aggregated 

capabilities of these vehicles for various 

grid-related purposes such as bulk 

power storage or ancillary services. 

42. Ultimately we would hope for a 

smarter grid to accommodate a wide 

array of advanced options for electric 

vehicle interaction with the grid, 

including full vehicle-to-grid 

capabilities. However, assuming full 

vehicle-to-grid capabilities cannot be 

achieved immediately, we would 

encourage the Institute’s process to 

focus on the development of appropriate 

standards, or extensions to relevant 

existing standards, to provide at least 

the minimum communications and 

interoperability requirements that are 

necessary to permit some ability for 

distribution utilities to facilitate vehicle 

charging during off-peak load periods. 

The Institute’s Smart Grid Issues 

Summary notes that the Society of 

Automotive Engineers (SAE) has 

developed two draft standards, SAE 

J2836 and SAE J2847, which address 

communications and price signals/ 

demand response respectively. These 

standards are on the SAE 2009 Ballot. 

Looking forward to 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. To this end, we 

urge the SAE and the automobile 

industry to plan data communications 

systems between electric vehicles and 

the grid that are able to be upgraded. We 

also urge the Institute to include electric 

vehicles in its DER standards 

development. 

43. Several of the preceding 

paragraphs discuss the development of 

use cases or other standards that appear 

similar to business practice standards 

development, in order to help shape and 

identify the functional needs that the 

Institute’s technical interoperability 

standards development process will 

address. Since the North American 

Energy Standards Board (NAESB) has a 

great deal of experience in helping the 

electric and natural gas industries 

successfully negotiate business practice 

standards, it may be helpful to the 

Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Proposed Rules 13159 

42 16 U.S.C. 824d. 

43The 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 (DC Cir. 1981). 44ARRA sec. 405(3). 

45See Gridwise Architecture Council DecisionMaker’s Interoperability Checklist Draft Version 1.0, 

available at http://www.gridwiseac.org/pdfs/ 

gwac_decisionmakerchecklist.pdf (Interoperability 

Checklist). 

46An 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, 

available at 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 sections 1304 

and 1306. See American Recovery and 

Reinvestment Act, Public Law No. 111–5, sec. 

405(3) and 405(8),llStat.ll,ll(2009). 

Institute to engage NAESB resources in 

the development of these use cases and 

other business practice-like standards. 

We seek comment as to whether the 

Institute would be helped by the 

incorporation of resources from other 

organizations such as NAESB into the 

development of these various business 

practice-like standards. 

44. The Commission seeks comment 

on whether the priorities and reliability 

principles articulated above are 

appropriate, and whether there are other 

priorities or reliability principles that 

should be included in order to address 

potential challenges to the operation of 

the bulk-power system. 

C. Interim Rate Policy: Guidance for 

Smart Grid-Related Filings by 

Jurisdictional Entities 

45. Given the trends discussed above, 

Smart Grid policies should encourage 

utilities to deploy systems in the near 

term that advance efficiency, security, 

and interoperability in order to address 

potential challenges to the bulk-power 

system. A key consideration for utilities 

when determining whether to adopt 

such systems will be whether they are 

able to recover the costs of these 

deployments in regulated rates. Another 

key consideration may involve the 

potential for stranded costs associated 

with legacy systems that are replaced by 

Smart Grid equipment. Additionally, as 

the electric system may require several 

of the new capabilities of the Smart Grid 

before interoperability standards have 

been developed, we recognize the need 

for guidance for jurisdictional entities. 

Thus, to offer some rate certainty and 

guidance regarding cost recovery issues, 

the Commission is proposing a rate 

policy for the interim period until final 

interoperability standards are adopted. 

46. FPA section 205 requires that all 

rates for the transmission or sale of 

electric energy subject to the 

Commission’s jurisdiction be just and 

reasonable.42 In evaluating expenses for 

which cost recovery is appropriate, one 

of the criteria the Commission relies on 

is whether the facilities are ‘‘used and 

useful.’’ 43 Once interoperability 

standards are completed, the 

Commission will consider making 

compliance with those standards a 

mandatory condition for rate recovery of 

jurisdictional Smart Grid investments. 

For now, we propose as an interim rate 

policy to accept rate filings, including 

single issue rate filings, submitted under 

FPA section 205 by public utilities to 

recover the costs of Smart Grid 

deployments involving jurisdictional 

facilities provided that certain showings 

are made. In other words, we propose to 

consider Smart Grid devices and 

equipment, including those used in a 

Smart Grid pilot program or 

demonstration project, to be used and 

useful for purposes of cost recovery if an 

applicant makes the following 

showings. 

47. We propose that an applicant 

must show that the reliability and 

security of the bulk-power system will 

not be adversely affected by the 

deployment at issue. Second, the filing 

must show that the applicant has 

minimized the possibility of stranded 

investment in Smart Grid equipment by 

designing for the ability to be upgraded, 

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, we 

propose to direct the applicant to share 

information with the Department of 

Energy Smart Grid Clearinghouse, 

provided for in the ARRA.44

48. In order to satisfy our first concern 

about reliability and security, we 

propose that applicants will be required 

to address the security concerns 

discussed in the previous section on the 

development of key standards. 

Accordingly, an applicant must show 

how its proposed deployment of Smart 

Grid equipment will maintain 

compliance with Commission-approved 

reliability standards, such as the Critical 

Infrastructure Protection Reliability 

Standards, during and after the 

installation and activation of Smart Grid 

technologies so the reliability and 

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. 

49. Regarding the second concern 

about stranded Smart Grid investment, 

we propose to require a showing that 

the applicants have made good faith 

efforts to adhere to the vision of a Smart 

Grid described in Title XIII of the EISA, 

including optimizing asset utilization 

and operating efficiency. In general, 

applicants should attempt to adhere to 

the principles of the Gridwise 

Architecture Council Decision-Maker’s 

Interoperability Checklist.45 In practice, 

we will place the most weight on an 

applicant’s adherence to the following 

principles: (1) Reliance to the greatest 

extent practical on existing, widely 

adopted and open 46 interoperability 

standards; and (2) where feasible, 

reliance on systems and firmware that 

can be securely upgraded readily and 

quickly. Adherence to these two key 

principles should minimize the 

possibility of stranded smart grid 

investment by making it less likely that 

equipment replacement will be required 

once final standards are approved. 

50. Regarding the information sharing 

concern, the following information 

should be shared with the Department 

of Energy Smart Grid Clearinghouse: (1) 

Any internal or third party evaluations, 

ratings, and/or reviews including all 

primary source material used in the 

evaluation; (2) detailed data and 

documentation explaining any 

improvement in the accurate 

measurement of demand response 

resources; (3) detailed data and 

documentation explaining the 

expansion of the quantity of demand 

response resources that resulted from 

the project and the resulting economic 

effects; (4) detailed data and 

documentation for any improvements in 

the ability to integrate variable 

renewable generation resources; (5) 

detailed data and documentation that 

13160 Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Proposed Rules 

47To be codified at 42 U.S.C. 17384, 17386. 

shows any achievement of greater 

system efficiency through a reduction of 

transmission congestion and loop flow; 

(6) detailed data and documentation 

showing how the information 

infrastructure supports DER such as 

plug-in electric vehicles; and (7) 

detailed data and documentation that 

shows how the project resulted in 

enhanced utilization of energy storage. 

To the extent that the Department of 

Energy specifies additional criteria for 

making grants under the ARRA for 

Smart Grid demonstration and pilot 

projects, the Applicant should agree to 

share information relevant to those 

criteria as well. 

51. Finally, consistent with the policy 

of supporting the modernization of the 

Nation’s electric system announced in 

EISA section 1301, the Commission also 

proposes to permit applicants to file for 

recovery of the otherwise stranded costs 

of legacy systems that are to be replaced 

by smart grid equipment. However, 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 costs of legacy systems. 

Accordingly, we propose that any filing 

for the recovery of stranded legacy 

system costs must demonstrate that 

such a migration plan has been 

developed. 

52. The Commission will also 

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. Any 

requests for such rate treatments for 

Smart Grid deployments will need to 

address all of the concerns discussed 

above for rate recovery and make the 

same showings described in that 

section. We would also 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, such as those authorized 

by EISA sections 1304 and 1306.47 To 

the extent that such showings are made, 

we propose to consider permitting 

abandonment authority to apply to any 

Smart Grid investments that, despite 

reasonable efforts, could not be made 

upgradeable and must ultimately be 

replaced if found to conflict with the 

final standards to be approved under the 

Institute’s standards development 

process. 

53. The Commission invites 

comments on all aspects of this 

proposed interim rate policy. 

III. Comment Procedures 

54. The Commission invites 

comments on this proposed policy 

statement May 11, 2009. 

IV. Document Availability 

55. 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 

FERC’s Home Page (http://www.ferc.gov) 

and in FERC’s Public Reference Room 

during normal business hours (8:30 a.m. 

to 5 p.m. Eastern time) at 888 First 

Street, NE., Room 2A, Washington, DC 

20426. 

56. From FERC’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. 

57. User assistance is available for 

eLibrary and the FERC’s Web site during 

normal business hours from FERC 

Online Support at 202–502–6652 (toll 

free at 1–866–208–3676) or e-mail 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. 

By the Commission. 

Nathaniel J. Davis, Sr., 

Deputy Secretary. 

Appendix A 

Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Proposed Rules 13161 

Adapted from: Smart Grid Standards 

Adoption: Utility Industry Perspective, 

OpenSG Subcommittee of the Utility 

Communication Architecture International 

User Group, and Smart Grid Executive 

Working Group. 

[FR Doc. E9–6471 Filed 3–25–09; 8:45 am] 

BILLING CODE 6717–01–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 117 

[Docket No. USCG–2008–1158] 

RIN 1625–AA09 

Drawbridge Operation Regulation; Gulf 

Intracoastal Waterway (Algiers 

Alternate Route), Belle Chasse, LA 

AGENCY: Coast Guard, DHS. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Coast Guard proposes to 

change the regulation governing the 

operation of the SR 23 bridge across the 

Gulf Intracoastal Waterway (Algiers 

Alternate Route), mile 3.8, at Belle 

Chasse, Plaquemines Parish, Louisiana. 

Due to high vehicular traffic during the 

afternoon, Plaquemines Parish has 

requested a change to the operation 

schedule to allow the bridge to remain 

closed-to-navigation for an additional 90 

minutes during weekday afternoons to 

facilitate the movement of vehicular 

traffic. 

DATES: Comments and related material 

must reach the Coast Guard on or before 

May 26, 2009. 

ADDRESSES: You may submit comments 

identified by Coast Guard docket 

number USCG–2008–1158 to the Docket 

Management Facility at the U.S. 

Department of Transportation. To avoid 

duplication, please use only one of the 

following methods: 

(1) Online: http:// 

www.regulations.gov. 

(2) Mail: Docket Management Facility 

(M–30), U.S. Department of 

Transportation, West Building Ground 

Floor, Room W12–140, 1200 New Jersey 

Avenue, SE., Washington, DC 20590– 

0001. 

(3) Hand delivery: Room W12–140 on 

the Ground Floor of the West Building, 

1200 New Jersey Avenue, SE., 

Washington, DC 20590, between 9 a.m. 

and 5 p.m., Monday through Friday, 

except Federal holidays. The telephone 

number is 202–366–9329. 

(4) Fax: 202–493–2251. 

FOR FURTHER INFORMATION CONTACT: If 

you have questions on this proposed 

rule, call David Frank, Bridge 

Administration Branch at 504–671– 

2128. If you have questions on viewing 

or submitting material to the docket, call 

Renee V. Wright, Program Manager, 

Docket Operations, telephone 202–366– 

9826. 

SUPPLEMENTARY INFORMATION: 

Public Participation and Request for 

Comments 

We encourage you to participate in 

this rulemaking by submitting 

comments and related materials. All 

comments received will be posted, 

without change, to http:// 

www.regulations.gov and will include 

any personal information you have 

provided. We have an agreement with 

the Department of Transportation (DOT) 

to use the Docket Management Facility. 

Please see DOT’s ‘‘Privacy Act’’ 

paragraph below. 

Submitting Comments 

If you submit a comment, please 

include the docket number for this 

rulemaking (USCG–2008–1158), 

indicate the specific section of this 

document to which each comment 

applies, and give the reason for each 

comment. We recommend that you 

include your name and a mailing 

address, an e-mail address, or a phone 

number in the body of your document 

so that we can contact you if we have 

questions regarding your submission. 

You may submit your comments and 

material by electronic means, mail, fax, 

or delivery to the Docket Management 

Facility at the address under ADDRESSES; 

but please submit your comments and 

material by only one means. If you 

submit them by mail or delivery, submit 

them in an unbound format, no larger 

than 81⁄2 by 11 inches, suitable for 

copying and electronic filing. If you 

submit them by mail and would like to 


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