37098 Federal Register / Vol. 74, No. 142 / Monday, July 27, 2009 / Rules and Regulations 

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

(Proposed Policy Statement). 

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

(Notice Requesting Supplemental Comments). 

3 16 U.S.C. 824, 824o (2006). 

4Pub. L. 110–140, 121 Stat. 1492 (2007). 

5EISA section 1305(d), to be codified at 15 U.S.C. 

17385(d). 

DEPARTMENT OF ENERGY 

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 bulk-power 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. 

DATES: Effective Date: The Interim Rate 

Policy will become effective September 

25, 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 Policy and 

Innovation, 888 First Street, NE., 

Washington, DC 20426, (202) 502– 

6569, ray.palmer@ferc.gov. 

Dennis Reardon, Office of Energy 

Market Regulation, 888 First Street, 

NE., Washington, DC 20426, (202) 

502–6719, dennis.reardon@ferc.gov. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

Paragraph 

Nos. 

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.

Before Commissioners: Jon Wellinghoff, 

Chairman; Suedeen G. Kelly, Marc 

Spitzer, and Philip D. Moeller. 

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

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 


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6EISA section 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 

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. 

7EISA section 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. 

9EISA section 1305(d). 

10Proposed Policy Statement, 126 FERC ¶ 61,253 

at P 13. 

11On 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. 

12Proposed Policy Statement, 126 FERC ¶ 61,253 

at P 17–20. 

13 Id. P 21–22. 

14National Institute of Standards and 

Technology, Smart Grid Issues Summary (2009), 

http://collaborate.nist.gov/twiki-sggrid/pub/ 

SmartGrid/TnD/Draft_NIST_Smart_Grid_Issues_

Summary_10March2009.pdf, at 1 and 4–5. 

15Adopted under FPA section 215, 16 U.S.C. 

824o. 

16See 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. 

17See 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 requirements for the 

Commission’s four key grid functionalities 

identified in the Proposed Policy Statement: Widearea 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 cross-cutting issue of a 

prioritized need for common semantic models and 

other standardized communication elements. 

19An alphabetical listing of all commenters and 

abbreviations for each is found at the end of this 

document at Appendix A. 

20An area considered to be a ‘‘key priority’’ is 

proposed as the first level of work to be 

Continued 

number of goals characterizing a smart 

grid.6 EISA also directs the National 

Institute of 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 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 Commissionjurisdictional 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 

overarching need for standardization of 

communication and coordination across 

inter-system interfaces.14

6. In response to the need for urgent 

action on these potential challenges to 

the bulk-power 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 (widearea 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. 

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 ‘‘utilityscale 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

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 priorities 20


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accomplished in the interoperability standardssetting process. Proposed Policy Statement, 126 

FERC ¶ 61,253 at P 27. 

21 Id. P 1. 

22 16 U.S.C. 824, 824o. 

23EISA section 1305(d), to be codified at 15 

U.S.C. 17385(d). 

24See, 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. 

25See, 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. 

26Michigan Commission Comments at 8 and 

Maryland Counsel Comments at 5. 

27Ohio Commission Comments at 5–7. 

28 Kansas Commission Comments at 5–6. 

29California Commission Comments at 6–7. 

30 Id. at 11. 

31NEMA 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. 

32NEMA Comments at 6. 

33 Id. at 7. 

34NARUC Comments at 16, Maryland Counsel 

Comments at 5, and Springfield Comments at 10– 

11. 

35EEI Comments at 14–15. 

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 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 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 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 

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-the-meter 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 standards 31 while 

preserving State ratemaking authority,32

and (4) whether the Commission has the 

authority to mandate a nationwide 

meter communications protocol.33

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. 


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36Promoting 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. 

38NARUC Comments at 13. 

39California Commission Comments at 4, 12. 

40Ohio Commission Comments at 1, 10. 

41EISA section 1301 and section 1305(d). 

42For 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. 

43See, e.g., EISA section 1301 and section 1305(a) 

(stating that the framework should ‘‘enable all 

electric resources, including demand-side 

resources, to contribute to an efficient, reliable 

electricity network’’) and section 1305(b). 

44See, 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). 

45Similarly, 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. 

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 Commissionjurisdictional entities to ‘‘bootstrap cost 

recovery for 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 Commission-jurisdictional 

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 

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 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 wholesale 

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 of the 

Commission’s ratemaking or reliability 

jurisdiction, as many commenters note. 

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 Commission precedent for 

guidance.44 The Commission will 

evaluate particular facilities and 

projects on a case-by-case basis. In 

response to commenters’ concerns, we 

recognize that it would be inappropriate 

for a utility to recover the same costs for 

a smart grid project 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 particular retail customer policies 

or programs. To the extent the 

Commission does adopt smart grid 

standards related to facilities outside the 

Commission’s jurisdiction under the 

FPA, we agree with the Ohio 

Commission that states can insure 

compliance with any 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 smart grid 

interoperability standard related to 

storing electric power by charging 

electric vehicles, the Commission would 

consider adoption of such a standard 

pursuant to EISA section 1305(d). 

27. The Commission recognizes that 

states have an interest in the 


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46Proposed Policy Statement, 126 FERC ¶ 61,253 

at P 28. 

47 Id. P 12. 

48NARUC Comments at 14, EEI Comments at 6, 

11, NERC Comments at 10, and ITC Comments at 

6. 49APPA Comments at 12 and ITC Companies 

Comments at 5–6. 50ELCON Comments at 2. 51Michigan Commission Comments at 5–6, 

GridWise Alliance Comments at 9–10, and National 

Grid Comments at 4. 

52 ITC Companies Comments at 5–6 and PSEG 

Comments at 6–8. 

53EEI Comments at 7. 

functionalities of smart grid 

technologies, as suggested by North 

Carolina Agencies and the Ohio 

Commission, and we encourage states to 

actively participate in the ongoing 

discussions 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 smart 

grid technologies should interfere with 

a State’s ability to adopt whatever 

advanced metering or demand response 

program it chooses. Nor will 

Commission adoption of national 

standards affect the existing statutory 

framework for wholesale and retail 

pricing. Interoperability standards 

should be designed flexibly enough to 

support alternative programs and 

pricing policies being considered by a 

particular State. Indeed, national 

standards adopted by the Commission 

should enhance, not limit, the policy 

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 emerged in many 

states (e.g., integrating renewable 

generation to permit utilities to meet 

State-mandated renewable portfolio 

requirements). We see great benefit from 

collaborating closely with states 

regarding flexibility in smart grid 

standards and adapting to new 

technologies, and we expect to work 

with the 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 

prioritize the 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 to 

address existing and emerging 

challenges to the operation of the bulkpower system. These challenges 

included existing cybersecurity issues, 

large-scale changes in generation mix 

and capabilities, and large potential new 

load from electric vehicles. The 

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 focus their efforts on these 

key priorities first in order to achieve 

interoperability in a timely manner. 

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 

and have received heightened attention 

as part of the creation of recent 

mandatory and enforceable Federal 

standards. We believe that 

implementation of smart grid 

technology, which is designed to 

improve communication, coordination, 

and interoperability, will require added 

attention to cybersecurity standards. 

31. To date, eight mandatory 

cybersecurity and physical critical 

infrastructure 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 and 

a large number of smart grid devices 

expected to be located beyond the 

conventional boundaries of regulated 

entities suggests that cybersecurity 

standards require special attention. 

32. The Commission sought comment 

regarding whether cybersecurity should 

be considered a cross-cutting issue 

affecting interoperability that must be 

included in smart grid standards.47 The 

Commission also proposed harmonizing 

cybersecurity and Reliability Standards 

as a precondition to the adoption of 

smart grid standards. The 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 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. 

Comments 

33. Many commenters support system 

security as a priority.48 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 

large-scale deployment of smart grid 

installations, while ITC Companies 

assert that cybersecurity is of paramount 

importance for the development of a 

smart grid.49 ELCON recommends that 

the Commission use a ‘‘measured 

approach to smart grid deployment’’ so 

that relevant agencies and standards 

development organizations have time to 

overcome cybersecurity related 

technical issues.50

34. Some entities are concerned about 

whether there will be sufficient 

coordination among the Institute and 

other relevant Federal and State 

agencies, and whether there will 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, 

some also support its development 

through a Commission-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 

cybersecurity should be addressed early 

on in the development and 

manufacturing process and that smart 

grid products should undergo thorough 

interoperability and cybersecurity 

testing 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 Institute to avoid jurisdictional 

overlaps. NERC recommends adoption 

of Commission policies to encourage the 

Institute to use its role, as the smart grid 


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54NERC Comments at 11–12. 

55Michigan Commission Comments at 5–6. 

56 Id. at 11–12, 15. 

57CPower Comments at 3. 

58 GWAC Comments at 13–15, 29–31. 

59B–D Research Comments at 1–4. 

60E.ON Comments at 4–6. 

61Ohio Commission Comments at 11–12. 

62California Commission Comments at 7. 

63Southern Comments at 8–9. 

standards proponent and coordinator, to 

build cybersecurity protections into 

standards that affect the full span of 

smart grid systems and devices, such as 

the distribution system, utilities’ 

business systems, customer appliances, 

and information technology systems, 

with an eye towards aggregated impacts 

on the bulk-power system.54

36. The Michigan Commission 

counsels that the Commission should 

avoid being 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 

development organizations and other 

private actors to identify, up front, the 

reliability and security considerations 

that smart grid technologies must 

address while respecting the traditional 

statutory distinctions between state and 

Federal jurisdiction over electricity.55

NERC warns that the possible aggregate 

effects of smart grid devices that 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 required 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 lowlevel details.58 B–D Research contends 

that the definition of cybersecurity must 

be expanded to include matters such as 

(1) non-disruptive events, (2) 

unauthorized access to, or modification 

of, a critical system, (3) information 

leakage, and (4) system compromise.59

E.ON offers that existing cybersecurity 

standards should not serve as 

constraints on the adoption of improved 

and potentially more secure 

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 

should 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 (3) automatically (or intelligently) 

respond to adverse system conditions as 

they occur.62

39. On the matter of Commissionapproved Reliability Standards, 

Southern contends that the Commission 

should confirm that smart grid 

installations do not automatically create 

mandatory Reliability Standard 

compliance obligations and that they do 

not automatically constitute critical 

cyber assets. In its view, smart grid 

technologies and applications should be 

considered critical cyber assets only 

when they would be designated as such 

under the requirements of Commissionapproved CIPS Reliability Standard 

CIP–002.63 NRECA suggests that a 

number of NERC Reliability Standards 

may need to be developed or revised 

concurrently with the implementation 

of smart grid 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 use this access to disrupt 

the proper functioning of the bulkpower 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 grid. 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 of 

the design of interoperability standards. 

There is strong support for this focus 

from the 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 EISA, 

including, where appropriate, a 

proposed smart grid standard applicable 

to local 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 section 

215 of the FPA, respectively, provide 

cybersecurity protection for the electric 

power system for the proposed 

standard. 

42. The Commission does not intend 

to preempt the development and 

implementation of an interoperability 

smart grid framework with the 

prioritization of cybersecurity and 

physical security. On the contrary, given 

our reliability and security oversight 

mandates 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 not conflict 

with, critical efforts to improve the 

cybersecurity of electric power systems. 

43. As noted, many of the commenters 

request collaboration between the 

Institute and NERC on the development 

of smart grid standards. The 

Commission agrees with this approach 

and encourages NERC, as the Electric 

Reliability Organization certified by the 

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 Commissionapproved CIPS standards and help 

identify any gaps or inconsistencies that 

are left unaddressed. To the extent 

necessary, the Commission would direct 

NERC to submit to the Commission a 

new or modified Reliability Standard as 

necessary or appropriate to carry out the 

Commission’s responsibilities under 

section 215 of the FPA 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 


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64See EISA section 1301(2). 

65See Roadmap Report at 7. 

66Proposed 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. 

70 Kansas Commission Comments at 3 and SDG&E 

Comments at 19–20. 

71NERC Comments at 12. 

72Silver Spring Networks Comments at 1. 

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

74CAISO Comments at 7. 

75NYISO Comments at 5. 

76See Initial List of Smart Grid Interoperability 

Standards, Request for Comments, 74 FR 27288 

(June 9, 2009). 

77See Proposed Policy Statement, 126 FERC ¶ 

61,253 at P 33. 

78Roadmap Report at 90. 

envisions a smart grid with 

cybersecurity as a foundational element 

of its system and provided for 

cybersecurity throughout the statute.64

Thus the Commission agrees with 

commenters such as NERC and CAISO 

that the reliability of the bulk-power 

system hinges on insuring the 

cybersecurity of all interconnections, 

including distribution system 

interconnections, to the extent allowed 

by EISA. 

45. With respect to comments 

regarding the level of specificity in the 

cybersecurity requirements, constraints 

on improvements, and system resiliency 

and responsiveness to attacks, the 

Commission agrees that these concerns 

warrant the attention of the Institute, 

NERC, and others who are working on 

proposed smart grid cybersecurity 

issues. The 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 Standards is determined 

through other processes under FPA 215, 

such as the NERC compliance 

registration process and the specific 

requirements of Commission-approved 

Reliability Standards. 

2. Communication and Coordination 

Across Inter-System Interfaces 

46. The Proposed Policy Statement 

suggested making the development of 

standards for inter-system interfaces a 

key priority. It described the issue as 

follows: 

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.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, but were identifying them for 

comment on whether these standards 

should be considered as important 

elements in efforts to realize significant 

early benefits of the smart grid.68

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 standards 

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 interfaces 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 intersystem interfaces is one method 

whereby new and legacy control 

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 

networking as a priority in smart grid 

standards development.72 Silver Spring 

Networks and AT&T also strongly 

support the use of Internet Protocol as 

a networking standard.73

50. Regional transmission 

organizations that submitted comments 

support the 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) and 

independent system operators (ISOs) 

should take 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 essentially 

a ‘‘system of systems’’ and that 

standardized communications across 

the interfaces of these 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 inter-system 

interfaces is critical to supporting 

virtually all of the smart grid goals, such 

as system self-healing, integration of 

diversified resources, and improved 

system efficiency 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 76

identified for the smart grid framework 

includes IEC 61968/61970 and IEC 

61850, which had been suggested by the 

Commission as part of a starting point 

for communication across interfaces.77

The Roadmap Report document 

indicates that much of the ongoing work 

in the Institute’s process will center 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-system 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 

prominent role in defining system 


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79Proposed Policy Statement at P 36. 

80 Id. P 35. 

81See, e.g., Kansas Commission Comments at 4– 

5, Gridwise Alliance Comments at 11, and Duke 

Comments at 11. 82See, 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. 

83See, e.g., CAISO Comments at 9–10, Gridwise 

Alliance Comments at 11, and Midwest ISO 

Comments at 4. 

84NERC Comments at 18. 

85AWEA Comments at 7–11. 

86 Duke Comments at 10. 

87 Id. at 11. 

interfaces, and we encourage ISOs, 

RTOs and all other FERC-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 findings of the Institute’s 

standards development process in our 

rulemaking process. 

3. Wide-Area Situational Awareness 

55. In the Proposed Policy Statement, 

the Commission placed emphasis on 

wide-area situational awareness as 

another key priority for the smart grid. 

Wide-area situational 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-area 

situational awareness could help 

mitigate the effect of reliability events 

by giving reliability entities an 

improved and manageable high-level 

view of system conditions and 

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 present 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 software and 

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 take 

a leadership role in coordinating such 

work with the member transmission 

owners.80

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 bulkpower 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 

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 faster-interval/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 wide-area situational awareness as 

‘‘the visual display of interconnectionwide system conditions in near real 

time at the reliability coordinator level 

and above.’’ 86 Duke believes that widearea situational awareness should be the 

responsibility of all NERC-defined 

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 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 gridenabled 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 


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88See Proposed Policy Statement, 126 FERC 

¶ 61,253 at P 37–39. 

89As 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 

other actors and objects to achieve a specific goal. 

The use case will identify the interfaces between 

different elements and the information being 

exchanged. 

90See, e.g., NYISO Comments at 10, ISO–NE 

Comments at 4, and ELCON Comments at 4–5. 

91NARUC Comments at 8. 

92See, e.g., NARUC Comments at 6–8, Ohio 

Commission Comments at 7, Kansas Commission 

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

93NARUC Comments at 8. 

94See, e.g., NEM and Intelligent Energy 

Comments at 8 and Wal-Mart Comments at 3–4. 

95See, e.g., Comverge Comments at 1–2 and 

DRSG Coalition Comments at 7–8. 

96American 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. 

98 GWAC Comments at 4. 

99See, e.g., Kansas Commission Comments at 4– 

5 and Black Hills Corp. Comments at 3. 

100Black Hills Corp. Comments at 3. 

101See, e.g., NYISO Comments at 10, Alcoa 

Comments at 5–6, and CAISO Comments at 12. 

102NEMA and Intelligent Energy Comments at 2, 

4. 

103NARUC Comments at 9. 

104Wal-Mart at 5. 

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 cases 89 employing readily 

available tools in order to achieve an 

appropriate level of 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. 

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 

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, non-compatible 

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 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. 

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 jurisdiction of 

State commissions and that a 

rulemaking targeting standards 

connected to the customer 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 also points out, 

demand response resources play an 


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105The Jurisdictional Concerns section of this 

Policy Statement contains a more extensive 

discussion of the boundaries between Federal and 

State jurisdiction. 106See Proposed Policy Statement, 126 FERC 

¶ 61,253 at P 39. 

107Wholesale Competition in Regions with 

Organized Electric Markets, Order No. 719, 73 FR 

61,400 (Oct. 28, 2008), FERC Stats. & Regs. ¶ 31,281 

(2008). 

108For the purposes of this Policy Statement, 

electric storage refers to the storage of different 

forms of energy that may be beneficial to the bulkpower 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. 

109Proposed Policy Statement, 126 FERC 

¶61,253 at P 40. 

110 GridWise Alliance Comments at 11. 

111APPA Comments at 14. 

112National Grid Comments at 5, and Public 

Interest Organizations Comments at 3. 

113NERC Comments at 20–21. 

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 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 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 

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; 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, and states that NERC plans to 

work collaboratively with the 

Commission and the Institute on electric 

storage issues that could have an impact 

on bulk-power system reliability.113

80. Some commenters express 

reservations about establishing storage 

standards at this time. NYISO 

recommends that the Commission allow 

more time to develop experience with 


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114NYISO Comments at 11. 

115CAISO Comments at 13–14. 

116 Xcel Comments at 5–6. 

117CPower Comments at 5. 

118Proposed Policy Statement, 126 FERC ¶ 61,253 

at P 42. 

119National Grid Comments at 5. 

120NYISO Comments at 11. 

121AWEA Comments at 10. 

122Comverge Comments at 3. 

123NERC Comments at 20–21. 

124See, e.g., Illinois Commission Comments at 3– 

4, Maryland Counsel Comments at 3–4, and 

Springfield Comments at 6. 

125CAISO Comments at 13–14 and NRECA 

Comments at 19. 

126 Kansas Commission Comments at 6. 

127Maryland Counsel Comments at 4. 

128Allegheny Companies Comments at 4. 

integrating these devices and that 

standardization of uses should await 

actual operating experience with these 

devices.114 CAISO indicates that tariffs 

and not detailed 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 that 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 be treated as a key 

priority by the Institute and industry in 

the interoperability standards 

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 such 

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 the Institute’s 

interoperability standards development 

process has already assembled a limited 

number of storage use cases and 

identified a few standards that could be 

a starting 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-togrid capabilities. However, as a first 

step, the Commission decided only to 

request that appropriate standards be 

made a high 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 electricity storage solutions that 

help to address the potential for overgeneration in off-peak periods.121

Comverge agrees that electric vehicles 

deserve particular attention with respect 

to interoperability, smart charging, 

enhanced information processing, and 

high-speed communications and 

control.122 NERC points out that the 

reliability of the bulk-power 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 the 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 

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 


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129Ohio Partners Comments at 9. 

130Proposed Policy Statement, 126 FERC ¶ 

61,253 at P 45. 

131 16 U.S.C. 824d. 

132The 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). 

133Proposed Policy Statement at P 45. 

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. 

135National Grid Comments at 5. 

car makers to the harm of existing fuel 

retailers and at a cost to customers.129

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 offpeak 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 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. 

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 widearea 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 those 

challenges.130 Accordingly, the 

Commission proposed certain rate 

policies meant to encourage such nearterm 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 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 


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136PSEG Comments at 4. 

137Allegheny Comments at 8. 

138American Transmission Comments at 6–7, EEI 

Comments at 14, and National Grid Comments at 

6. 

139NARUC Comments at 12. 

140AARP Comments at 4, 13–15. 

141Wal-Mart Comments at 6–7. 

142Alcoa Comments at 6–7. 

143 Id. at 7. 

144 GridSolar Comments at 6–8. 

145CPower 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. 

146Academic Commenters Comments at 1–13. 

147BP Comments at 3–6. 

148CAISO Comments at 3–4. 

149NEMA Comments at 7–8. 

150Thus, 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. 

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 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 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. 

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 associated software, could 

have benefits beyond those identified in 

the Proposed Policy Statement.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-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 Commissionjurisdictional transmission rates. For 

similar reasons, we decline to address 

GridSolar’s request to modify cost 

allocation methods within RTOs, Valley 

Group’s real-time ratings incentive 

proposal, and the comments on broad 

market design. 


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151The 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. 

152American Recovery and Reinvestment Act, 

Pub. L. 111–5, section 405(3)(2009). 

153Midwest ISO Transmission Owners Comments 

at 7. 

154 Ice Energy Comments at 19–20. 

155Public Interest Organizations Comments at 4. 

156Ohio Counsel Comments at 1–3. 

157NRECA Comments at 13–14. 

158Ohio Partners and Maryland Counsel 

Comments at 5–6. 

159ELCON Comments at 10. 

160CPower Comments at 2, Alcoa Comments at 9, 

PSEG Companies Comments at 2, North Carolina 

Agencies Comments at 3, and Wal-Mart Comments 

at 6. 

161Springfield Comments at 10. 

162 Illinois Commission Comments at 4. 

163 Id. at 6. Maryland Counsel Comments at 5, n.4. 

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 gridrelated cost automatically incorporated 

into a formula rate could be subject to 

future review and challenge. 

108. Finally, with regard to WalMart’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. 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 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 

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 commenters 160 also 

support the addition of a costeffectiveness requirement. In this 

regard, North Carolina Agencies stress 

the need for coordination with the 

affected State commissions, and WalMart 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 Department of 

Energy, which proposes a variety of 

information requirements that could be 

used to help determine costeffectiveness. 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 to the 

Institute-published 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 

Commission’s goals associated with the 

two cross-cutting issues and priority 

functionalities identified in the 


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164 Illinois Commission Comments at 6–7 and 

AWEA Comments at 11–12. 

165 Illinois Commission Comments at 7. 

166Michigan Commission Comments at 10–12. 

167 Indianapolis P&L Comments at 4. 

168 Id. at 4–5. 

169First Energy Comments at 10. 

170 DRSG Coalition Comments at 9–10. 

171AARP Comments at 10. 

172The 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. 

173AARP Comments at 10–12. 

174APPA Comments at 16–17, 19. 

175 Kansas Commission Comments at 7–8. 

176Massachusetts Attorney General Comments at 

3–4. 

177Citizens Coalition Comments at 10, 12–13. 

Proposed Policy Statement.164 Finally, 

Illinois Commission also argues that the 

Commission should maintain a 

traditional cost-causation, beneficiarypays 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 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 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 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 gridrelated 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 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 advance the goals of EISA 

section 1301. Second an applicant must 

show that the reliability and 


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178EISA section 1301. 

179An 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 section 1304 

and 1306. See ARRA section 405(3) and 405(8). 

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 

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 Commission-approved 

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, widely 

adopted and open 179 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 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 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 

cost-effectiveness 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 


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180SDG&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. 

181NYISO Comments at 12. 

182Midwest ISO Transmission Owners Comments 

at 4. 

183NRECA 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. 

184ELCON Comments at 9–10. 

185APPA Comments at 17–18. 

186NRECA Comments at 11–13, Maryland 

Counsel Comments at 4, and Ohio Partners at 9–10. 

187Citizens Coalition Comments at 14 and 

ELCON Comments at 13. 

188Promoting 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). 

189See, e.g., Kan. Stat. Ann. section 66–117(f) 

(2009), Pa. Pub. Util. Code section 2804(16)(ii) 

(2009) and WUTC v. Puget Sound Energy, Inc., 

Docket Nos. UE–011570 and UG–011571, at P 25 

and 27 (2002). 

190AARP Comments at 12–13. 

191APPA Comments at 20. 

192Citizens Coalition Comments at 9, 14. 

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 

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 commenters 180 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 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 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 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 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 

proceedings cost consumers billions of 

dollars.192 It argues that smart grid 

advocates should reimburse utilities and 


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193ELCON Comments at 13. 194NRECA Comments at 14–15. 195Ohio Partners Comments at 11, National Grid 

Comments at 7, and Maryland Counsel Comments 

at 6. 196SDG&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. 

197First Energy Comments at 10. 

198To be codified at 42 U.S.C. 17384 and 17386. 

199SDG&E Comments at 26–27. 

200Citizens Coalition Comments at 14 and 

ELCON Comments at 13. 

201NRECA Comments at 14–15. 

202Massachusetts Attorney General Comments at 

5–6. 

203Allegheny Companies Comments at 6–7. 

204 Id. at 8–9. 

205 Valley Group Comments at 2, 5–6. 

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 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 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 previouslyapproved 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, 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 

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

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 realtime 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 


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37116 Federal Register / Vol. 74, No. 142 / Monday, July 27, 2009 / Rules and Regulations 

206 ITC Companies Comments at 8–10. 

207EEI Comments at 15. 

208AARP Comments at 13–15. 

209EEI Supplemental Comments at 4–5. 

210 Id. at 6. 

211 Id. 

212SDGE Supplemental Comments at 1–2, PSEG 

Supplemental Comments at 1–2, PGE Supplemental 

Comments at 1, and NYISO Supplemental 

Comments at 3. 

213NRECA Supplemental Comments at 4–5. 

214 Id. at 10–11. 

215 Id. at 8–9. 

216ELCON Supplemental Comments at 3. 

217 Id. at 3. 

218NARUC Supplemental Comments at 1. 

219Maryland Commission Supplemental 

Comments at 1–2. 

220CPUC Supplemental Comments at 1. 

221AARP Supplemental Comments at 1–3. 

222Massachusetts Commission Supplemental 

Comments at 3–4. 

technologies eligible for transmission 

rate incentives under Order No. 679.206

EEI asks the 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. 

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 non-Department 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 

investor-owned 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, 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 

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 distributionretail 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, 

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 have 

regulatory approval are eligible to 


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Federal Register / Vol. 74, No. 142 / Monday, July 27, 2009 / Rules and Regulations 37117 

223See generally Recovery Act Smart Grid Grant 

Investment Program, http://www.grants.gov/search/ 

search.do;jsessionid=fvXjKDLQNQG8kgxwx

65nJs4rYhGgThcL9t7KzGZCkqFXSRpGpn9z!

1215949849?oppId=46833&

flag2006=false&mode=VIEW. 

224The 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 × 1740. 

225 5 CFR 1320.12. 

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 p.m. 

Eastern time) at 888 First Street, NE., 

Room 2A, Washington, DC 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 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. 

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 Number of 

respondents 

Number of 

responses per 

respondent 

Hours per 

response 

Total number of 

hours 

FERC–516 ....................................................................................... 116 1 15 1740 

Totals ........................................................................................ ............................ ............................ ............................ 1740 

Total Annual Hours for Collection 

(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 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 regulations 225 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 nearterm 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 

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, 

NE., Washington, DC 20426, Tel: (202) 


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37118 Federal Register / Vol. 74, No. 142 / Monday, July 27, 2009 / Rules and Regulations 

226See 5 U.S.C. 804(2) (2007). 

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, DC 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 

September 25, 2009. 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 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. 

Nathaniel J. Davis, Sr., 

Deputy Secretary. 

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. 

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. 


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Federal Register / Vol. 74, No. 142 / Monday, July 27, 2009 / Rules and Regulations 37119 

APPENDIX A—LIST OF COMMENTERS AND SHORT NAMES—Continued 

Abbreviation Commenter 

Natural Gas Commenters ......................................................................... Natural Gas Supply Association, Interstate Natural Gas Association of 

America, and Independent Petroleum Association of America. 

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. 

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. 

[FR Doc. E9–17624 Filed 7–24–09; 8:45 am] 

BILLING CODE 6717–01–P 


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