<DOC>
[110th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:40588.wais]
FACILITATING THE TRANSITION TO A SMART ELECTRIC GRID
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON ENERGY AND AIR QUALITY
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
__________
MAY 3, 2007
__________
Serial No. 110-41
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
----------
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COMMITTEE ON ENERGY AND COMMERCE
JOHN D. DINGELL, Michigan, Chairman
HENRY A. WAXMAN, California JOE BARTON, Texas
EDWARD J. MARKEY, Massachusetts Ranking Member
EDOLPHUS TOWNS, New York J. DENNIS HASTERT, Illinois
RICK BOUCHER, Virginia RALPH M. HALL, Texas FRANK PALLONE, Jr., New Jersey FRED UPTON, Michigan
BART GORDON, Tennessee CLIFF STEARNS, Florida
BOBBY L. RUSH, Illinois NATHAN DEAL, Georgia
ANNA G. ESHOO, California ED WHITFIELD, Kentucky
BART STUPAK, Michigan BARBARA CUBIN, Wyoming
ELIOT L. ENGEL, New York JOHN SHIMKUS, Illinois
ALBERT R. WYNN, Maryland HEATHER WILSON, New Mexico
GENE GREEN, Texas JOHN B. SHADEGG, Arizona
DIANA DeGETTE, Colorado CHARLES W. ``CHIP'' PICKERING,
Vice Chairman Mississippi
LOIS CAPPS, California VITO FOSSELLA, New York
MIKE DOYLE, Pennsylvania STEVE BUYER, Indiana
JANE HARMAN, California GEORGE RADANOVICH, California
TOM ALLEN, Maine JOSEPH R. PITTS, Pennsylvania
JAN SCHAKOWSKY, Illinois MARY BONO, California
HILDA L. SOLIS, California GREG WALDEN, Oregon
CHARLES A. GONZALEZ, Texas LEE TERRY, Nebraska
JAY INSLEE, Washington MIKE FERGUSON, New Jersey
TAMMY BALDWIN, Wisconsin MIKE ROGERS, Michigan
MIKE ROSS, Arkansas SUE WILKINS MYRICK, North Carolina
DARLENE HOOLEY, Oregon JOHN SULLIVAN, Oklahoma
ANTHONY D. WEINER, New York TIM MURPHY, Pennsylvania
JIM MATHESON, Utah MICHAEL C. BURGESS, Texas
G.K. BUTTERFIELD, North Carolina MARSHA BLACKBURN, Tennessee
CHARLIE MELANCON, Louisiana
JOHN BARROW, Georgia
BARON P. HILL, Indiana
______
Professional Staff
Dennis B. Fitzgibbons, Chief of Staff
Gregg A. Rothschild, Chief Counsel
Sharon E. Davis, Chief Clerk
Bud Albright, Minority Staff Director
(ii)
Subcommittee on Energy and Air Quality
RICK BOUCHER, Virginia, Chairman
G.K. BUTTERFIELD, North Carolina, J. DENNIS HASTERT, Illinois,
Vice Chairman Ranking Member
CHARLIE MELANCON, Louisiana RALPH M. HALL, Texas
JOHN BARROW, Georgia FRED UPTON, Michigan
HENRY A. WAXMAN, California ED WHITFIELD, Kentucky
EDWARD J. MARKEY, Massachusetts JOHN SHIMKUS, Illinois
ALBERT R. WYNN, Maryland JOHN B. SHADEGG, Arizona
MIKE DOYLE, Pennsylvania CHARLES W. ``CHIP'' PICKERING,
JANE HARMAN, California Mississippi
TOM ALLEN, Maine STEVE BUYER, Indiana
CHARLES A. GONZALEZ, Texas MARY BONO, California
JAY INSLEE, Washington GREG WALDEN, Oregon
TAMMY BALDWIN, Wisconsin MIKE ROGERS, Michigan
MIKE ROSS, Arkansas SUE WILKINS MYRICK, North Carolina
DARLENE HOOLEY, Oregon JOHN SULLIVAN, Oklahoma
ANTHONY D. WEINER, New York MICHAEL C. BURGESS, Texas
JIM MATHESON, Utah JOE BARTON, Texas (ex officio)
JOHN D. DINGELL, Michigan (ex
officio)
------
Professional Staff
Sue D. Sheridan, Senior Counsel
John Jimison, Counsel
Margaret Horn, Clerk
David McCarthy, Counsel
C O N T E N T S
----------
Page
Hon. Rick Boucher, a Representative in Congress from the
Commonwealth of Virginia, opening statement.................... 1
Hon. Jane Harman, a Representative in Congress from the State of
California, opening statement.................................. 2
Hon. Michael C. Burgess, a Representative in Congress from the
State of Texas, prepared statement............................. 3
Hon. John Barrow, a Representative in Congress from the State of
Georgia, opening statement..................................... 3
Hon. John D. Dingell, a Representative in Congress from the State
of Michigan, opening statement................................. 4
Hon. J. Dennis Hastert, a Representative in Congress from the
State of Illinois, prepared statement.......................... 5
Hon. Joe Barton, a Representative in Congress from the State of
Texas, prepared statement...................................... 6
Witnesses
Michael W. Howard, senior vice president, research & development,
Electric Power Research Institute.............................. 7
Prepared statement........................................... 9
Answers to submitted questions............................... 157
Kurt Yeager, executive director, Galvin Electricity Initiative... 67
Prepared statement........................................... 69
Answers to submitted questions............................... 176
Dean Kamen, president, Deka Research and Development Corporation. 82
Prepared statement........................................... 85
Answers to submitted questions............................... 181
Brad Gammons, vice president, IBM Global Energy and Utilities
Industry....................................................... 91
Prepared statement........................................... 93
Answers to submitted questions............................... 172
Dan Delurey, executive director, Demand Response and Advanced
Metering Coalition............................................. 95
Prepared statement........................................... 97
Answers to submitted questions............................... 166
John Bryson, chairman, chief executive officer, and president,
Edison International........................................... 103
Prepared statement........................................... 105
Audrey A. Zibelman, chief operating officer, PJM Interconnection. 108
Prepared statement........................................... 110
Jon Wellinghoff, Commissioner, Federal Energy Regulatory
Commission..................................................... 128
Prepared statement........................................... 130
Answers to submitted questions............................... 190
Robert F. Lieberman, commissioner, Illinois Commerce Commission.. 133
Prepared statement........................................... 135
Answers to submitted questions............................... 185
Kevin Kolevar, Director, Office of Energy Delivery and
Electricity Reliability, U.S. Department of Energy............. 137
Prepared statement........................................... 140
Answers to submitted questions............................... 161
FACILITATING THE TRANSITION TO A SMART ELECTRIC GRID
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THURSDAY, MAY 3, 2007
House of Representatives,
Subcommittee on Energy and Air Quality,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:10 a.m., in
room 2123 of the Rayburn House Office Building, Hon. Rick
Boucher (chairman) presiding.
Members present: Representatives Barrow, Markey, Wynn,
Doyle, Harman, Inslee, Matheson, Dingell, Whitfield, Shimkus,
Bono, Rogers, Burgess, and Barton.
Staff present: Sue Sheridan, John Jimison, Laura Vaught,
Chris Treanor, Margaret Horn, David McCarthy, Kurt Bilas, Peter
Kielty, Matthew Johnson, and Garrett Golding.
OPENING STATEMENT OF HON. RICK BOUCHER, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF VIRGINIA
Mr. Boucher. The subcommittee will come to order.
This morning the subcommittee will examine the evolution of
our electricity transmission and distribution network into a
smart grid, a subject regarding which I personally have a
longstanding interest. In the coming weeks this committee will
produce legislation for House floor consideration this summer,
having the overall objective of promoting greater national
energy self-sufficiency. It is my hope that today's hearing
will yield useful legislative suggestions for smart grid
development that we can then incorporate in the larger bill
that this committee will soon assemble, and I would encourage
our witnesses this morning to make legislative recommendations
to us.
Given the number of witnesses who are testifying before the
subcommittee both on this opening panel and also on the second
panel, I intend to defer any further opening statement on my
part and use the time allotted to me to ask questions of these
outstanding witnesses. I would simply note that our first panel
of witnesses is comprised of individuals who are well
positioned to offer a vision of how a smart grid would be
configured, how it would operate, what benefits it would confer
upon utilities, upon consumers and upon society generally, what
barriers exist to its development and what role government can
play in overcoming those hurdles. Our second panel of
government representatives can then respond to the suggestions
made by witnesses on the first panel and of course offer their
own recommendations.
I want to welcome today's witnesses and say that I very
much look forward to their testimony, and I thank each of you
for taking time to join us and share your views with us.
I will now recognize for an opening statement of 5 minutes
the gentleman from Kentucky, Mr. Whitfield.
Mr. Whitfield. Mr. Chairman, thank you very much and I
certainly look forward to the hearing this morning and I am
going to waive my opening statement and look forward to the
testimony of our witnesses and welcome them.
Mr. Boucher. Thank you very much, Mr. Whitfield.
The gentleman from Maryland, Mr. Wynn.
Mr. Wynn. Thank you, Mr. Chairman. I will also waive.
Mr. Boucher. Thank you, Mr. Wynn. And the gentle lady from
California, Ms. Harman.
Ms. Harman. Mr. Chairman, if I don't waive, have I created
some kind of national crisis?
Mr. Boucher. Ms. Harman, we are always delighted to hear
from you. You would be welcome.
OPENING STATEMENT OF HON. JANE HARMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Ms. Harman. In that case, very briefly and succinctly, I
would like to welcome our witnesses and especially an old good
friend, John Bryson of California. I want everyone to know that
John was an environmentalist before he was a captain of
industry, but the good news is, he is still an environmentalist
while he is a captain of industry and I think that his
testimony, and I assume the testimony of others, will show us a
way forward that I think is enormously promising.
If we do one thing in this subcommittee, Mr. Chairman, and
I hope we are going to do many more than one thing, I think
focusing on a smart electric grid is it because that is the way
we really can get our arms around how we use energy and how we
can conserve energy and I just want to note that my house in
Venice, California, has solar panels on the roof, and when I
expanded my house I added more solar panels. I got a rebate
from the city of Los Angeles but I thought it was important to
invest in solar power. The problem is that there really is not
a way for me to sell excess energy back to the utility the way
I think I should be able to do, and until I can do it, I know
my neighbors aren't going to be that excited about putting
solar panels on their roof.
So this testimony will tell us more than we presently know
or at least tell me about real-time metering, smart appliances
and a two-way system for buying and selling electricity and the
benefits that that can have. Information technology should be a
weapon against the climate challenge and our dependence on
foreign oil. If everyone up here including old Grandma can
learn to use a Black Berry and a fancy cell phone, I think I
could even maybe understand what advantages could come from
facilitating a transition to a smart electric grid.
I just want to finally add that this also has advantages
not just for homes and appliances but for cars and trucks and
we have been talking about the tough issues around pushing
transportation in the right direction. A smart grid could lay
the groundwork for plug-in electric hybrid vehicles that would
help cut our oil imports and it could also help us use
effectively the new battery technologies that are being
developed, for example, by Toyota and Honda in my congressional
district and could help people who drive cars and trucks with
those technologies know how to store energy, for example, when
energy prices are sky high. So it just seems to me this is the
key to understanding a way forward on climate change and I
think we have the right panels, and I have abused all the
members here so that I could tell my little story, and I
appreciate you yielding me the time.
Mr. Boucher. Thank you very much, Ms. Harman, and we
appreciate that opening statement.
The gentleman from Texas, Mr. Burgess, is recognized for 3
minutes.
Mr. Burgess. Thank you, Mr. Chairman. Because we have got
so much to get through today, I will just insert my comments
into the record. I would like to welcome Mr. Brad Gammons here
from my home State of Texas. It is good to see you, sir, on the
panel and I look forward to the testimony. Thank you.
[The prepared statement of Mr. Burgess follows:]
Prepared Statement of Hon. Michael C. Burgess, a Representative in
Congress from the State of Texas
Thank you, Mr. Chairman.
I look forward to hearing from our witnesses today about
smart grid technology.
The forces of supply and demand have long governed prices
in a free enterprise system. Unfortunately, that is not the
case with the electricity market.
Consumers pay the same rate per kilowatt during the day,
when demand is high, as they are in the middle of the night,
when demand is low.
This disguises the true costs of electricity and prevents
consumers from adjusting their demand to the actual cost of
electricity.
The Smart Grid technology that we will learn more about
today has the capacity to bring the power of the market to
electric consumers at the retail level by providing them with
real-time prices. This will allow them to make rational
decisions about demanding electricity and if it costs more to
wash a load of towels during the day than it does in the
evening, I may wait until 8 p.m. to do my laundry.
If a whole lot of other people make that same decision, we
may be able to move enough electricity load to off-peak times
to avoid building a new power plant or substation.
That's real energy savings.
Mr. Chairman, conservation and efficiency must play an
important role in our strategy to wean ourselves from our
dependence on foreign energy, so I thank you for holding this
hearing today.
----------
Mr. Boucher. Thank you, Mr. Burgess.
The gentleman from Georgia, Mr. Barrow, is recognized for 3
minutes.
Mr. Barrow. Thank you, Mr. Chairman.
OPENING STATEMENT OF HON. JOHN BARROW, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF GEORGIA
Mr. Barrow. In the interest of time, I would like to state
an area of concern up front that I hope the witnesses will
address as they are able in the course of their presentations.
Advanced metering is one of the key things we can do to involve
consumers in the management of their demand for energy and yet
there is a marked difference in terms of the penetration in the
market for advanced metering technology. The FERC has done a
survey and they show that in the electric co-op sector we have
got 13 percent of the folks. It has been 13 percent penetration
for advanced metering in the electric co-op market. The
investor-owned utility field, it is only about 6 percent. It is
less than half of what they are doing in the electric co-op. So
what I would like you all to do is address what we can do to
try and get the investor-owned utility community to be more
like the electrical co-op community in terms of implementing
advanced metering technology and involving the consumers.
Thank you.
Mr. Boucher. Thank you very much, Mr. Barrow.
We will turn to our witnesses momentarily, and we are
awaiting the arrival of one other Member who has indicated
interest in taking part in our hearing this morning, and he is
just arriving, and it gives me pleasure at this time to
recognize the chairman of the full Energy and Commerce
Committee, the gentleman from Michigan, Mr. Dingell, for a 5-
minute opening statement.
OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Chairman Dingell. Mr. Chairman, I thank you. I will try and
be more brief in this matter than your generosity would permit.
First of all, Mr. Chairman, thank you for holding the
hearing. Second of all, I commend for the outstanding
leadership that you are giving this committee in its
consideration of energy matters. The committee and the country
owe you a great thanks.
The Nation stands in a position where we could reap
significant benefits from new technologies which will maximize
the efficiency of our electric power delivery system. These
benefits include greater reliability, lower cost to consumers,
improved ability of the industry to operate proactively, and
alternatives for improving the Nation's energy infrastructure,
which is unfortunately aging. The shorthand term for these new
technologies is smart grid. Our focus today is on public
policies that will facilitate the rapid deployment and adoption
of these technologies without disruptions or increased costs.
There are a number of challenging requirements created by these
opportunities and I know under your leadership that we will
address them.
First, the electric grid must continue to balance and
constantly do so between ever-shifting demand and supply. That
is a very difficult task for a product that moves, as we know,
at the speed of light and offers no effective means of storage.
Second, the product, electricity, must also be exceptionally
reliable. In today's computerized, high-tech society, even a
momentary interruption of power can create dramatic, costly
losses to the economy and to the society. Third, the ever-
growing demands of our aging electric infrastructure are a
serious concern. Projections show the demand for power
increasing significantly in the coming years. Absent some
extraordinary innovation, we would need to invest tremendous
resources to increase capacity and ensure greater reliability.
Fortunately, smart technologies appear to address these
challenges and with substantial benefits to both the
electricity sector as well as to the consumer. These new
technologies, by working smarter, not harder, promise electric
generation and delivery that is more efficient, economic and
environmentally responsive. It is expected that at some point
smart grid technology will ultimately provide for our
transportation sector's energy needs through plug-in hybrid
vehicles such as plug-in hybrids that provide valuable
electricity storage back to the grid.
While this transition will not quick or easy, the move
towards smart grid technology is coming and your leadership,
Mr. Chairman, is extremely valuable. Again, I want to thank you
for holding this hearing which will enable us all to learn
about the issues associated with the transition, and I want to
thank our witnesses who are here today and I know that their
contribution to this process will be valued.
Thank you, Mr. Chairman.
Mr. Boucher. Thank you very much, Chairman Dingell.
The gentleman from Pennsylvania, Mr. Doyle, is recognized
for 3 minutes.
Mr. Doyle. Mr. Chairman, I will waive my opening remarks. I
just want to welcome the panelists, especially Ms. Zibelman
from PJM.
Mr. Boucher. Thank you very much, Mr. Doyle.
Any other statements for the record will be accepted at
this time.
[The prepared statements of Messrs. Hastert and Barton
follow:]
Prepared Statement of Hon. J. Dennis Hastert, a Representative in
Congress from the State of Illinois
Thank you, Mr. Chairman, for holding this hearing today.
Smart grid technologies hold much promise for the United
States. Deployment of these technologies will help reduce our
electricity use, keep energy costs down, provide jobs for
Americans, and increase our energy security. This is something
I think we all can support.
When I first started my career in public office I wrote the
Illinois Public Utilities Act. A lot has changed in providing
electricity since then.
Smart grid technology will allow for the more efficient
operation of the electric grid. It does this in a number of
ways: better communication, distributed generation, appliances
that can ``talk'' to the grid and if needed, help support the
grid. It can also lead to distributed storage of electricity
through batteries and other devices, and facilitate the
deployment of new generation of vehicles such as plug-in
hybrids.
These technologies also have the ability to reduce peak
demand on the electric system. This helps everyone by reducing
the need for new generation and transmission facilities saving
consumers money.
It also reduces peak period fuel use, which is usually
natural gas. This reduces price pressure on natural gas,
freeing it up for industrial and residential use. Ultimately
keeping jobs in America from moving overseas.
Furthermore, reduced electricity demand and the related
reduced fuel demand means emissions of pollutants and
greenhouse gases such as CO\2\ are lessened. As I have said
before, good energy policy is good environmental policy. Smart
grid technology does both.
Using our energy resources wisely and more efficiently is
always a good idea. The better we use our domestic resources to
generate electricity, and power the next generation of
vehicles, such as plug-in hybrid vehicles, the less we will
depend on unstable foreign sources of energy. Improving our
energy security now and into the future must be our priority. I
am confident we can do that leaving a stronger and cleaner
Nation for generations to come. And new technology will lead
the way.
Many of our best and brightest are involved in developing
smart grid technology.
I am particularly pleased to see Dean Kamen here today
before the committee to testify. I have had the pleasure of
knowing Dean for some years now and he is probably known best
as the inventor of the Segway. However, his work in developing
technology that generates electricity and clean water could be
further reaching. Dean is developing a device that continuously
outputs a kilowatt of electricity, enough to light 70 energy
efficient light bulbs, all on abundant sources of fuel like cow
manure. In developing countries with populations that have
never had electricity this is life changes technology.
It is technology and innovation from companies like Dean's
that will lead energy needs and efficiencies into the future
not only in this country but around the world.
As work on smart grids comes to maturity, it should be
utilized in developing nations, so they too will have the
ability to manage growing electricity and energy demands and
improve their environment. Improvements in emissions in places
like China and India benefit everyone around the globe.
I look forward to our witnesses' testimony today, I want to
wish them the best in developing these new technologies that
will make such a difference in so many peoples' lives.
Thank you, Chairman Boucher, and I yield back the remainder
of my time.
----------
Prepared Statement of Hon. Joe Barton, a Representative in Congress
from the State of Texas
Thank you, Chairman Boucher, for holding this hearing today
on smart grid technologies. I also want to thank our witnesses
here today. This is an exciting area and I look forward to your
testimony.
Smart grid technologies combine advanced communications
technologies, electric distribution technologies and end-use
electric technologies in order to create a more efficient
electric system. Just as advancing computer and communications
technologies over the last 25 years have transformed our
everyday lives with Black Berries, e-mail, cell phones, and
broadband Internet, so too will smart grid technologies
transform the way utilities and consumers use the electric
system. And the resulting system will be better.
I have always supported a market-based approach to the
electric utility system. The market requires three things:
suppliers, consumers, and a distribution method. Congress has
done a great deal to increase the number of competitive
suppliers, starting with the Public Utilities Regulatory Policy
Act of 1978 and extending through the Energy Policy Act of
2005. Competition at the wholesale level for electricity supply
has brought benefits to consumers. The Federal Regulatory
Energy Commission and many States have reformed their
regulations and laws to bring the benefits of competition to
consumers.
What has been missing in this system is the ability for
the consumer to respond to price signals. Just like in any
market, as prices rise, consumers use less of the product.
Except electricity, which doesn't come with a price tag.
Consequently, almost no one has the ability to actually know
the price of power as they buy it. When prices rise, it takes a
month for the bad news to show up in your mailbox. Price
competition doesn't work when the producer won't or can't tell
the customer the price, and this has been a fatal flaw in many
deregulated markets starting in California in 2000.
I can't think of much else that I would buy without
knowing the price, and it looks like smart grid technologies
may finally be able to fill in this last hole in the market by
allowing me and other consumers to know the price and act
accordingly. A true electricity market may be on the horizon.
But there are benefits beyond the creation of a true
competitive market. Smart grid technologies can help the
utility distribute electricity more efficiently. This may mean
fewer new transmission lines, substations and generating units.
And this means lower costs for consumers.
These technologies can help consumers use electricity more
efficiently reducing demand and consumer costs. Greater
efficiency in the distribution and use of electricity can also
result in less pollution and a cleaner environment. It also
improves our energy security. There is a lot to look forward to
as a result of these technologies.
I am sure though, that like any new technology and its
penetration into the American market, there will be bumps along
the road. There may be significant up-front coats before the
results are apparent. Some of the technologies may not perform
as promised. But the bottom line is that these technologies
will be our future and we on this Committee should do
everything we can to see that Americans reap the benefits of
these new technologies.
Thank you, Mr. Chairman. I yield back the remainder of my
time.
----------
Mr. Boucher. We now turn to our panel of witnesses, and I
will simply say a brief word of introduction concerning each.
Mr. Michael Howard is the senior vice president for
Research and Development Group for the Electric Power Research
Institute. Mr. Kurt Yeager is the executive director of the
nonprofit Galvin Electricity Initiative. Mr. Dean Kamen is the
president of DEKA Research and Development Corporation. Mr.
Kamen is also the inventor of the Segway, known to most in this
country, and many other innovative products. Mr. Brad Gammons
is vice president of IBM Global Energy and Utilities Industry
of the IBM Corporation. Mr. Dan Delurey is the executive
director of the Demand Response and Advanced Metering
Coalition. Mr. John Bryson is the chief executive officer and
president of Edison International, the parent company of the
utility, Southern California Edison. And Ms. Audrey Zibelman is
the chief operating officer and executive vice president of the
PJM Regional Transmission Organization. We are pleased to have
each of our witnesses with us today.
Your prepared opening statements will be made a part of the
record and we would welcome your oral summaries of
approximately 5 minutes.
Mr. Howard, we will be pleased to begin with you.
STATEMENT OF MICHAEL W. HOWARD, SENIOR VICE PRESIDENT, RESEARCH
& DEVELOPMENT, ELECTRIC POWER RESEARCH INSTITUTE, PALO ALTO, CA
Mr. Howard. Thank you, Mr. Chairman, Ranking Member Hastert
and members of the committee. I am Michael Howard, senior vice
president of the Research and Development Group for the
Electric Power Research Institute, a nonprofit, collaborative
research and development organization with major offices in
Palo Alto, California, Charlotte, North Carolina, and
Knoxville, Tennessee. My comments today reflect the work of the
talented scientists and engineers who work across our institute
on the many issues associated with an electric power delivery
system.
EPRI's purpose is to work collaboratively with the electric
utility industry to develop the technologies that will ensure
our existing grid infrastructure continues to work reliably and
safely while at the same time facilitate the transition to an
intelligent grid that supports both the changing generation mix
in a carbon-constrained world and a more effective and
efficient participation by consumers in managing their use of
electricity.
During the last 5 years, we have been helping the electric
utility industry develop and deploy the concept of an
intelligent grid through the implementation of our IntelliGrid
initiative. The IntelliGrid initiative is developing the
methodology, tools and integrating technologies that will help
the industry and equipment manufacturers start transitioning
the electric grid of the future.
We believe the grid of the future will include six
important features. It will be a dynamic system that is
interactive with consumers and markets. It will be self-healing
and adaptive. It will be self-optimized to make best use of
resources and equipment. The grid of the future will be
predictive rather than reactive and it will be able to store
large amounts of energy and able to accommodate a variety of
generation options including renewable energy.
Achieving these objectives will require a power system that
incorporates millions of sensors all connected through an
advanced communication and data acquisition system. A
distributed computing system will analyze in real time the
information from the millions of sensors to enable predictive
rather than reactive response to a blink-of-the-eye disruption.
I mentioned that one of the six important grid of the
future features is a dynamic system that is interactive with
the consumers and markets. An example of a dynamic system that
is interactive with consumers and markets is what we refer to
as ``Prices to Devices.'' An example is an intelligent air
conditioning unit with embedded software and hardware capable
of two-way interaction with the power system. The intelligent
air conditioning unit will receive day-ahead and hourly
electricity prices and day-ahead weather forecast through the
Internet. The system will learn the rate of building cool-down
and heat-up based on factors such as occupant habits, outside
temperature and time of ear, and finally the air conditioning
unit will self-optimize to minimize energy costs.
The potential energy efficiency savings from the
intelligent air conditioner and similar devices remains a
matter of ongoing analysis. A peer-reviewed analysis of 11
studies in 2004 by EPRI indicated an achievable savings of 24
percent of the total U.S. electricity demand, although there
was substantial variation among the studies that we reviewed.
Another benefit of the grid of the future is improved
reliability and power equality. The total estimated annual cost
for the U.S. economy from power outages and power quality
disturbances, what I refer to as blink-of-the-eye disruptions,
is over $100 billion. By implementing the six important grid of
the future features outlined in this testimony, we will enable
a robust, interactive and efficient power delivery system that
is more energy efficient, more reliable, more immune to power
quality disturbances and better able to support a vigorous and
growing national economy.
It is a pleasure being here today, Mr. Chairman, and I
appreciate the opportunity to provide testimony to the
committee on facilitating the transition to a smart electric
grid. Thank you.
[The prepared statement of Mr. Howard follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Boucher. Thank you very much, Mr. Howard.
Mr. Yeager.
STATEMENT OF KURT YEAGER, EXECUTIVE DIRECTOR, GALVIN
ELECTRICITY INITIATIVE, PALO ALTO, CA
Mr. Yeager. Thank you, Mr. Chairman. I am Kurt Yeager,
executive director of the nonprofit Galvin Electricity
Initiative. This initiative is described more fully in my
written statement.
Today the United States faces a rapidly approaching perfect
energy storm of rapidly rising costs, carbon constraints and
declining security. The electric grid can either continue to be
a vulnerable liability in meeting this threat or the key to its
resolution and to the protection of our Nation's economy and
its environment. The choice is clearly ours. We do have the
technological means to achieve the prompt transition to a smart
electric grid and we certainly have the economic and the
environmental motives and opportunity as a Nation to do so now.
Over the three decades, the U.S. electricity grid has had
to survive an effective moratorium on innovation and little
more than a life-support level of infrastructure investment.
This dangerous situation has left us in a very vulnerable
situation. The result is an electric grid system that now costs
the Nation, as Dr. Howard indicated, over $100 billion each
year in avoidable reliability losses, has very limited ability
to reduce its carbon emissions, and faces hundreds of billions
of dollars in pent-up infrastructure expansion costs just over
the coming decade.
In contrast, a small electric grid can largely eliminate
these reliability losses and simultaneously increase both the
efficiency of electricity use and the consumption of clean
renewable energy. The result will be a very large reduction in
infrastructure investment costs. For example, it costs about
one-third as much to save energy through efficiency
improvements than to build a new power plant to produce the
same amount of energy. In addition, at least $1 trillion a year
more in U.S. gross domestic product could be produced through
the greater economic productivity and competitiveness in the
global market that such a smart system would provide. All of
these smart grid advantages could be achieved at an aggregate
cost that is equivalent to about 1 year's worth of the
unreliability penalty we are now paying, in effect a 1-year
payback.
A smart grid is an electronically controlled, self-healing
electrical supply system that maintains the instantaneous and
continuous flow of both energy and information between
electricity consumers and suppliers. It is indeed a two-way
street entirely open to consumers and most importantly to their
end-use devices. Key innovative technologies that enable this,
instantaneous digital electronic sensors and controls, the
integration of communications, which is what makes it smart.
The electricity business of the future is not based on how many
kilowatt-hours we sell but how much value we can put on each
electron as it enables a microprocessor through both
information and energy. Transforming the electricity meter,
what I would call the iron curtain of electricity, behind which
we are all still captive, into a true consumer gateway that
allows real-time price signals, demand response decisions and
network intelligence as well as electricity to flow
instantaneously back and forth between utilities and consumers
and their end-use devices. The incorporation of a wide range of
distributed energy resources and combined heat and power
capabilities that are key to incorporating significantly more
renewable energy into the grid, and finally, highly efficient
smart electric buildings, appliances and devices which frankly
cannot be utilized to best advantage until we have truly a
smart grid. This can reduce energy consumption by at least 30
percent and even more during peak demand periods with
comparable reductions in emissions and in costs.
The quickest path to transforming the performance and to
realizing the value of the smart grid is to target the
breakthrough technical innovations on the consumer's interface
with the grid, that is, on the local electricity distribution
system. In this way, the tipping point to achieving a universal
national transition to a smart electric grid can be achieved
within 5 years.
In closing, Federal Government policies and actions can
certainly be a critical motivator for the smart grid
transition. These would include, in my judgment, first
expediting new energy efficiency standards and establishing
market incentives for much higher efficiency consumer products
and best practices and buildings such as universally applying
the International Energy Construction Code. Second, raising the
reliability standards for the electricity grid to levels that
are compatible with today's digital economy and society, not
measured in minutes of outage but in fractions of a second.
Three, mandating universal advanced electric metering
infrastructure and real-time pricing and support of demand
response on the part of every consumer. Four, establishing a
national public education campaign to inform consumers about
the value of a smart grid and to encourage local
implementation. And finally, and I believe most importantly,
convening the State electricity regulatory community and
instilling in them the critical national importance of the
smart grid and the need for their universal regulatory support.
The rapidly approaching and unavoidable onslaught of rising
cost rate cases that they face I believe provides a window of
opportunity for regulators to incent and enable the smart grid
on behalf of all their consumers, and in this regard,
regulators must also decouple utilities' profits from the
amount of energy they sell and make them whole on the basis of
the reliability, efficiency and quality of consumer service
they provide.
Thank you very much, Mr. Chairman.
[The prepared statement of Mr. Yeager follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Boucher. Thank you very much, Mr. Yeager
Mr. Kamen, we will be glad to hear from you.
STATEMENT OF DEAN KAMEN, PRESIDENT, DEKA RESEARCH AND
DEVELOPMENT CORPORATION, MANCHESTER, NH
Mr. Kamen. First, I have to give the disclaimer that I am
not an expert on either policy or mega and giga scale energy. I
suspect I was invited here because of another project I have
been working on for about 10 years that ironically was intended
for people that live in a world where there is no grid
whatsoever, and I am happy to tell you that after about 8 years
of working on a little box about the size of a dorm room
refrigerator, we were able to convince ourselves it was
reliable enough, robust enough, efficient enough that it could
be tested, and this box was intended to produce enough
electricity for a small village anywhere in the world where
they have no grid. There are 1.6 billion people in Asia and
Africa that have never used electricity and in our lifetime are
unlikely to see a grid suddenly appear, and we said what if we
could make a small box, the size I just said, that could be
moved into a village that would run for many years, presumably
and hopefully on any local fuel, anything that burns, liquid or
gaseous, and produce a few kilowatts, also could do it in a
place where you could use the waste heat. I am happy to tell
you that about a year ago we placed two of those units in two
villages, one about 75 kilometers north of Dacca, one 75 miles
west of Dacca, in Bangladesh and for 24 weeks around the clock
we did a trial. We electrified these villages and they ran
without interruption. Not bad compared to what most utilities
in this country can do. It turns out that we certainly have
more work to do there but some of the members know about this
box and I think the United States ought to work on these things
and maybe help around the world but that is probably for a
different committee.
How could that box or similar boxes be useful in this
country? I think you have heard all the reasons. I would just
simply ask you to do the mental experiment that the average
homeowner puts a box in their house similar to their water
heater or their furnace that can sit there and burn any locally
available fuel. By the way, I should tell you the only thing
that went into either of these boxes in Bangladesh for 24
weeks, they were put next to a small pit and cow dung, very
naturally evolving methane gas with no intervention by any
exotic biodigester was the only source of fuel, and by the way,
it was preventing the methane that was coming off at 20 times
the environmental damage of CO\2\ from coming off. We then
turned it into the CO\2\ it would have become anyway. In any
event, what does that got to do with all this? Well, it seemed
to us hearing the great debate going on in this country that if
you could put that unit in a house, you might have a very, very
significant impact on a bunch of things.
The real effect of reliability and the real effect of
measurement of how much energy we use and what we get for it
and I would be the first to admit to the giant power company
guys around here that a good, large closed-cycle steam turbine
or other device can turn heat into electricity at about 40
percent efficiency. My little sterling cycle device does it at
about 20 percent. Most people would therefore say my device is
only half as efficient as a great big generator. I think that
19th century mindset has to change when you say what do you
mean by efficiency because that 40 percent efficient system,
let us say it makes a gigawatt, 1,000 megawatts, if it does it
at 40 percent efficiency, it means you made 400 megawatts of
electricity to go out through those lines which they do very
well. That is why we built central plants for 100 and something
years. The other 600 million watts creates the waste heat
sitting in the river somewhere killing fish or polluting but
that 60 percent, that 600 megawatts, can't easily be moved so
it is gone. That is why we say 40 percent efficiency. My little
box or other similar boxes that could do CHP, combined heat and
power, could sit in somebody's house and only turn 20 percent
of the fuel that goes into them into electricity but the other
80 percent is the heat that heats your house and your shower
and washes your dishes and your clothes.
In other words, in most average homes in the United States,
only 20 or 30 percent of the power coming in was meant to be
electricity. The rest of the power the homeowner buys was from
the gas company or the oil company because a unit of energy in
terms of that you need for heat is substantially cheaper to buy
than a very high-quality unit of energy called electricity. If
you could take all the fuel that you would have burned in these
central plants and build miniature power plants in somebody's
home, as long as you burned that fuel efficiently and cleanly,
you could make use of virtually all of the waste; it is no
longer waste. Then for every unit of fuel we could use in this
country, you would find that you make less of a carbon
footprint, you got more overall total efficiency and a bunch of
the advantages that you have heard about. If you put small
distributed units around the country, even if they are only a
couple of kilowatts apiece in people's homes, just do the math.
If every homeowner got a couple of thousand dollar boxes put in
his house and you put a million of them out there and each one
was a couple of kilowatts, you get a couple of gigawatts
without building another big plant. None of that power goes
through the grid, which is getting a little old and a little
tired and a little less reliable. If you build your smart
transmission grids and these little boxes can talk to each
other in the neighborhood, you get other benefits like energy
security because no one plant going down will stop people from
getting their critical loads. They will probably turn off their
air conditioning and their Jacuzzi but if they can make a
couple of kilowatts in their home, there is not a crisis when
there is a snowstorm or other kind of interruption. Second, you
can burn any locally made fuel which is, A, more efficient, and
B, you can economically certainly advantage the homeowner in
doing it that way, and oh, by the way, you can encourage all
sorts of other, once you make this thing smart, interactions
such that in a day where invention is now finally hitting the
world of energy production the way it hit computing 30 or 40
years ago. We suddenly had to go from mainframes to distributed
computing and then the cell phones took the 100-year system
where you had to work with Ma Bell and gave us so many
different ways to communicate, it got better and simpler and
the Internet got--you guys had to start updating the way that
people could do it. I think we are now at a point where whether
it is solar cells getting attractive and efficient, wind
turbines getting attractive and efficient, sterling cycle, any
kind of device getting more efficient, you are going to see
lots of inventions that could become great innovations, that
could make this whole thing better and make great new jobs but
you have got to create an environment--you asked for
recommendations. You have got to create an environment where
all these different new ways of thinking are encouraged rather
than the technology is there but your systems are not keeping
up with allowing them to be implemented.
[The prepared statement of Mr. Kamen follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Boucher. Thank you, Mr. Kamen, very much. We will have
some questions of you shortly.
Mr. Gammons, we will be happy to hear from you.
STATEMENT OF BRAD GAMMONS, VICE PRESIDENT, IBM GLOBAL ENERGY
AND UTILITIES INDUSTRY, AMARILLO, TX
Mr. Gammons. Good morning, Chairman Boucher and members of
the House energy committee. I am Brad Gammons, vice president
of IBM Global Energy and Utility Industry. IBM appreciates the
opportunity to testify before this subcommittee today.
Innovation is a major theme of any leader's agenda today.
Listening to Mr. Kamen, that came up quite clearly. CEOs,
academics, government leaders agree that innovating their
business models, policies, problem-solving approaches and
execution models are key drivers of economic opportunity. In
fact, the pressure to innovate is heavy. In order to establish
and sustain competitive differentiation and institutional value
or to make advances in the world's most pressing issues from
health care, globalization, the energy efficiency and the
environment, you must innovate.
Across all industries, there are two significant changes in
technology that have occurred which are providing the
foundation for innovation. First, the Internet and other
communication technologies have connected a million businesses
and a billion people, making it in essence the world's
operational infrastructure and it is still only in its infancy.
Soon trillions of things will be virtually connected. Right now
we have nearly 3 billion people that subscribe to wireless
technology. This network ubiquity provides a vehicle for people
and things to work and operate in a collaborative way. Second
is open standards very much to what Mr. Kamen was talking
about, is you have to have a way for these things to
communicate together to allow for innovation. The evolution in
open standards presents the opportunity in the utility industry
to accelerate and optimize the implementation of a smart grid
or what IBM calls an intelligent utility network. An
intelligent utility network or a smart grid will provide an IT-
enabled continuous sensing network which connects all parts of
the utility, equipment, control systems, applications,
employees providing for the automatic collection of data and
asset conditions from across the utility on which analytic
simulation and modeling to perform. Ultimately the smart grid
will also connect the utility with the consumer, which will be
bringing increased options, more control over energy usage and
more choices for energy rates. It will literally bring power to
the people.
In the utility industry, there is a great desire to achieve
new levels of operational effectiveness, reliability and energy
stewardship to reach beyond efficiently managing generation or
transmission or distribution to have the business management
and operational visibility across these domains and even to
include raw materials, transportation, supply chain and the
customer experience, in effect the entire energy ecosystem.
The evolution of the power grid or the smart grid is the
connective tissue and the enabler for these utility desires but
the appropriate infrastructure investment and policy is needed
to create this reality.
The utility industry faces a series of significant
dilemmas. How can a utility company contain costs while
increasing power reliability? How can they ensure energy
security while still providing access to all? How do they bring
new supply into the system to meet growing loads when the
current system is challenged to accommodate new energy sources?
How do they build new generation and transmission facilities
when there is significant social and political resistance? And
as a matter of policy, how can energy be a source of economic
growth while preserving environmental sustainability?
Innovation of business processes, operational practices and
models will be key to addressing these competing demands
utilities are facing so let us look at several examples of how
utilities can enable innovation in their business by leveraging
technology. We can use that technology in three important ways.
First, to automate the power grid to make it stronger, cleaner
and less costly; second, to integrate the power grid and create
an end-to-end network; and finally, to expand the value of the
grid with service and information. If we do these things, the
grid can evolve to become an intelligent utility network or
smart grid providing an interactive energy management system
enabled by existing technologies such as system sensors, smart
meters, analytical tools, high-speed communication networks and
digitally enabled equipment and assets.
In most cases, these technologies are not new. What is new
is how proven technology often developed for solutions in other
industries are being applied to the utility industry to
generate tangible benefits and foster innovative business
models today. Imagine if a company were to integrate all these
capabilities with the smart grid. Such a pilot is underway in
Washington State, the Pacific Northwest Gridwise Project
represents a groundbreaking collaboration between Pacific
Northwest National Lab, utility companies and technology
partners such as IBM. This initiative allowed a select group of
homeowners on the Olympic Peninsula to have more information
about their energy use and its costs as an incentive to reduce
power consumption at peak times. Automated controls will adjust
appliances and thermostats based on pre-determined instructions
from the homeowners, allowing consumers to choose to curtail
energy when prices are higher than their set preferences.
We talked how technology can address and help the current
state of the grid. The benefits for our Nation's transformation
to a smart grid will make the journey well worth it. In other
words, a smart grid is a platform to enable the future. It can
improve the Nation's ability to respond to increased energy
demands and increased need for energy independence, improving
reliability while still providing for a secure infrastructure.
It can also help drive innovation across the energy supply
chain providing value and enhancing the competitive position of
all players in the U.S. energy industry, and oh, by the way,
huge energy users like the IBM Corporation. It can enhance
energy independence and protection of the Nation's critical
infrastructure and save billions in energy productivity and
increase national competitiveness.
The good news is, this innovation of new technology is not
a factor from a policy standpoint. The technology is
sufficiently mature and adaptation for utilities can be
addressed.
Thank you for your time this morning.
[The prepared statement of Mr. Gammons follows:]
Testimony of Brad Gammons
Chairman Boucher and members of the House Energy and
Commerce Subcommittee on Energy and Air Quality, my name is
Brad Gammons and I am Vice President of IBM Global Energy and
Utility Industry. IBM appreciates the opportunity to testify
before this Subcommittee.
Innovation is a major theme of any leader's agenda today.
CEO's, academics and government leaders agree that innovating
their business designs, policies, problem-solving approaches
and execution models are key drivers of economic opportunity.
In fact, the pressure to innovate is heavy in order to
establish and sustain competitive differentiation,
institutional value, and to make advances in the world's most
pressing issues from healthcare and globalization to energy
efficiency and the environment.
It is easy to confuse innovation and invention. Invention
of new technologies is important to IBM and other companies in
the technology industry. However, technology invention, in and
of itself, is not what we mean by ``innovation.'' Instead, we
think about technology as an enabler of business, academic and
government innovation. Technology is an enabler of new ways to
do things whether that is developing a set of products and
services, executing a set of management processes or rethinking
entire business models.
Across industries, there are two significant changes in
technology which are providing great leverage:
1) The Internet. The Internet and other communications
technologies have connected a million businesses and a billion
people. The Internet is, in essence, the world's operational
infrastructure. And, it is still only in its infancy. Right
now, we have nearly three billion people subscribed to wireless
technology. This network ubiquity provides the vehicle for
people and things to work and operate in a collaborative way.
2) Open Standards. Starting with Internet Protocol, the
software industry has made major strides in establishing and
delivering to the market open standards-based products and
technology. Whole new classes of software, like middleware,
make it easier to build solutions faster and based on ``off the
shelf'' components and products. Open standards has been
evolving over the last decade beyond traditional IT to include
networks, digital media, industrial components like sensors and
more. It has expended IT standards to previously closed and
proprietary domains.
Leaders want to put in place new business designs that
break down traditional and operational silos and enable
horizontally-integrated institutions and enterprises. This is
made possible with these open and ubiquitous technologies. The
horizontally-integrated institution can make firms incredibly
flexible in responding to business, marketplace and global
needs.
In the utilities industry, there is a great desire to
achieve new levels of operational effectiveness and to reach
beyond efficiently managing generation, transmission or
distribution. There is a desire to have business management and
operational visibility across these domains and even to include
raw materials, transportation, supply management and the
customer experience--in effect, the entire energy ecosystem.
The desire is to improve network planning, operations and
maintenance--improve the transparency of information,
experience fewer and shorter outages, provide better customer
service, and provide a platform for adding renewable energy and
improved utilization.
The power grid is the ``connective tissue'' of the utility
ecosystem. Today, we are here because we know the power grid
challenges need to be dealt with now.
We need appropriate infrastructure investment as well as
policies to encourage investment. No one cares about putting in
a smart grid or what IBM calls an Intelligent Utility Network
(IUN) just for the sake of it. What truly matters is creating
advantage for your enterprise, value to your customers, and the
ability to improve long-term environmental effects.
The utility industry faces a series of significant
dilemmas. How can utility companies contain costs while
increasing power reliability? How can they ensure energy
security, while still providing access to all? How can they
deliver increasing levels of service while at the same time
being unaware that entire neighborhoods are without power? How
do they bring new supply into the system--to meet growing
load--when the current system is challenged to accommodate new
energy sources? How do they build new generation and
transmission facilities when there is significant social and
political resistance? And, as a matter of policy, how can
energy be a source of economic growth while preserving
environmental sustainability?
In order to address these dilemmas, we need to innovate.
Other industries have faced their own dilemmas and have
responded by innovating their business models.
Let's consider another capital intensive ``grid,'' but for
the transportation industry--the airline industry. Airlines are
able to change pricing structures and how they manage supply
and demand in almost real time. If airlines operated the same
way utilities do, they would charge one price for every seat,
regardless of the class of service or the time of purchase or
available capacity. This scenario is not different from demand
management and pricing in the utility industry where customers
are challenged in their ability to monitor and adjust their
energy consumption.
Let's think about the banking industry. Banks can account
for every dollar of every transaction every time. They can even
leverage the data they have about consumer habits to target
customers with new products and services. In the utility
industry, kilowatt hours are the currency. But utilities are
challenged to track kilowatt hours completely and use data to
improve customer service.
Let's look at some examples of how utilities can innovate
their business designs by leveraging technology.
We can use technology in three important ways.
(1) To automate the power grid to make it stronger, cleaner
and less costly;
(2) To integrate the power grid and create an end-to-end
network;
(3) And, to expand the value of the grid with new services
and new markets.
If we do these things, the grid can evolve to become a
Smart Grid.
Building intelligence into the grid provides the
information backbone to better understand our energy use, and
empowers utilities, regulators and consumers to better manage
their energy environment and practices.
A smart grid represents the transformation into an
interactive energy-management system. The proliferation of
sensors and existing technology such as smart meters,
analytical tools, Services Oriented Architecture, high-speed
communication networks and digitally-enabled equipment have
made this possible.
In most cases, these technologies are not new. What's new
is how proven technology, often developed for solutions in
other industries, is being applied to the utility industry to
generate tangible benefits and foster innovative business
models today.
Again, we're not talking about new technology invention.
We're talking about applying mature technologies to new
approaches. In my view, there's tremendous potential to seize
the ``low-hanging fruit'' for ``no-regrets'' investments.
Utilities are extending equipment life and minimizing
unnecessary substation inspections through remote asset
monitoring and control. This defers costly equipment upgrades,
maximizes the utilization of existing assets, and reduces and
mitigates blackouts.
Utilities like Xcel have consolidated their multiple
operational and IP networks and are using existing
telecommunications infrastructure to transport data from
equipment to the back-office to make it available across the
enterprise and apply analytical tools to turn data into
information.
Utilities are extending the value of their networks by
using Advanced Meter Management. The installation of AMM
includes the customer premise as part of the network enabling
demand response and time-of-use pricing models.
CenterPoint Energy is deploying a number of smart grid
solutions including remote connect/disconnect and Advanced
Meter Management for Houston area customers. This will give
utilities serving consumers better usage information and make
power distribution more reliable. With more detailed
information on usage and pricing, consumers can potentially
save money by changing their consumption patterns.
A smart grid will allow for safe and reliable integration
of distributed energy--such as wind, solar, storage and other
environmentally desirable solutions--into the power grid.
Examples of innovation at the intersection of the
transportation and utility sector are: Pacific Gas & Electric,
Southern California Edison, Xcel, and Austin Energy's vehicle-
to-grid technology. This technology allows for two-way sharing
of electricity between electric vehicles and plug-in electric
hybrid vehicles and the electric power grid. The technology
turns each vehicle into a power storage system, increasing
power reliability and the amount of renewable energy available
to the grid during peak power usage.
Imagine if a company were to integrate all of these
capabilities. Such a pilot is underway in Washington State. The
GridWise Pacific Northwest Gridwise Project represents a
groundbreaking collaboration between the Pacific Northwest
National Laboratory and utility companies and technology
partners such as IBM.
This initiative will give homeowners on the Olympic
Peninsula more information about their energy use and its cost
as an incentive to reduce their power consumption at peak
times. Automated controls will adjust appliances and
thermostats based on pre-determined instructions from the
homeowners. This allows consumers to choose to curtail energy
use when prices are higher than their set preferences.
The smart grid is a platform to enable the future. It can
improve the nation's ability to respond to increased energy
demands and increased need for energy independence while
mitigating security concerns and the economic impact of
blackouts.
Smart grid can also help drive innovation across the energy
supply chain providing value to and enhancing the competitive
position of all players in the US energy industry.
Smart grid can enhance energy independence and protection
of the nation's critical infrastructure, save billions in
energy productivity, and substantially increase national
competitiveness.
The invention of new technology is not a factor from a
policy standpoint. The technology is sufficiently mature and
the adaptations for utilities can be addressed.
At the same time, utilities must embrace innovation and
collaboration to transform their business models and
substantially improve the infrastructure. Technology providers
must seize the opportunity to demonstrate how existing
technologies can be applied for immediate improvement, as well
as be a strong partner in research and development for future
solutions on the horizon--for the benefit of consumers, the
market and the environment.
Thank you.
----------
Mr. Boucher. Thank you very much, Mr. Gammons.
Mr. Delurey.
STATEMENT OF DAN DELUREY, EXECUTIVE DIRECTOR, DEMAND RESPONSE
AND ADVANCED METERING COALITION, WASHINGTON, DC
Mr. Delurey. Thank you, Mr. Chairman. My name is Dan
Delurey and I serve as executive director of Demand Response
and Advanced Metering Coalition, otherwise known as DRAM. DRAM
members include the leading providers of smart metering,
communications and control technologies as well as companies
that use those technologies to provide blocks of megawatts to
utilities with these blocks being equivalent to what they would
otherwise procure from conventional power plants.
Demand response is the term that refers to the business and
policy area where electricity customers reduce or shift their
electricity use on peak in response to price signals or other
incentives. Demand response addresses the fact that in order to
have a smart grid, we need to have smart rates and smart prices
and smart technologies that provide customers and utilities
alike with new options for how to manage electricity. That is
not what we have today. Under our present system, the vast
majority of customers and almost all residential customers pay
no more for electricity on the hottest summer afternoon when
the electricity system is strained and the cost to produce
electricity is extremely high than they do in the middle of the
night on a spring or fall day. That is not a smart system,
especially when having only a percentage of those customers
modify their peak use to prevent reliability problems and lower
prices for all customers on the system. In order to deploy
demand response, it is necessary for two things to happen.
First, technology must be in place that allows electricity
usage to be measured in time intervals instead of the present
system where usage is measured cumulatively and all kilowatt-
hours are treated equally. That information has to then be
communicated in a timely fashion to utilities, customers and
other parties. Second, customers must be provided with time-
differentiated price options and/or other incentives to reward
them for modifying their on-peak usage.
As to the pricing part, Congress is not in position to set
prices for electricity. That is clearly for States and other
bodies of jurisdiction over utilities to decide but it can
ensure that the level of attention, support and funding is
provided that will allow the States to tackle their role in
establishing demand response and creating a smart grid.
Congress began to address this in the Energy Policy Act of 2005
in section 1252. It established a requirement that States and
other bodies with utility oversight examine whether or not its
jurisdictional utilities should provide time-based rates and
smart meters to all their customers. While many States still
have a proceeding underway to consider this requirement, the
majority of those States that have concluded their proceedings
have decided not to adopt this new requirement. That is not to
say that this section of law has not had a positive effect; it
has. Demand response and smart metering are being discussed in
more States and in more places than ever before. But in terms
of States trying to tackle a new and multifaceted issue such as
demand response and its enabling technology, they clearly have
not received the training, education, technical assistance or
other support they have needed as they have taken up this new
requirement. States need more support from Congress so they can
do the job that they have to. Smart grid will not happen with
one big bang or in one fell swoop, and more than people think,
much of it will happen in a disaggregated fashion by actions at
the State level.
With these issues in mind and at the chairman's request, I
would like to just highlight some of the policy recommendations
that I have included in my written testimony. The first area
would be taxation, recognizing that is not the jurisdiction of
this committee but as with energy efficiency and renewable
energy, the proper tax incentives, for example, reduction tax
credit to go along with the production tax credit that is given
lift to the wind industry, that would go a long way in helping
this industry, and I think this committee could in terms of
definition, policy frameworks and statements do a lot in terms
of that. I think that the establishment of a temporary national
commission on electricity modernization should be established
with funding provided that could conduct the proper assessment
of the smart grid and look at funding options and also develop
a national action plan on demand response and grid
modernization, not just a plan, not just a report but an
actively managed plan that would do the things necessary in the
many different places they need to be done to make sure that
this happens. Congress should consider in terms of funding
these new investments looking at a national assessment on the
transmission system. Even an extremely small wire charge would
generate significant revenue earmarked for smart grid
investment.
In terms of the Federal Government showing leadership,
Congress should consider establishing peak demand reduction
standards for Federal agencies. In terms of appliances, you
have heard about prices to devices. Congress should consider
moving to additional types of appliance standards beyond those
that govern internal energy efficiency. Congress should
consider how to integrate smart metering systems in climate
change strategies and regimes so that such systems and other
technologies can be used to more precisely measure and verify
energy reductions and the monetary rewards that accrue to those
carbon reductions. Congress should consider providing funding
and technical assistance to States or groups of States to
undertake smart grid and demand response actions on their own
or in conjunction with a national program as I described.
Congress should consider requiring the Federal Energy
Regulatory Commission to develop a framework on
interoperability, something that has already been touched upon
but is one of the key threshold issues to the growth of demand
response and the smart grid.
In the absence of having more time to address it, I would
like to talk perhaps in response to a question Congresswoman
Harman introduced, an idea that doesn't get talked about enough
and that does all this relate to the environment, and I have
some comments on that. I would be happy to answer in response
to a question in terms of how a smart meter is a green meter.
But what I would like to do in closing is more make the comment
that it is important as we talk about the smart grid to not
always talk about it in future tense. Yes, better technology
will come along. Meters and other demand response technologies
are now high-tech items and as with other high-tech items, they
will continue to evolve and improve but smart meters and other
smart technologies are available now that provide all of the
benefits that my testimony describes. If consumers and
businesses had waited to buy their first computer or cell phone
until the best technology came along, they would likely have
gone for years without a computer or phone and in the meantime
have foregone the obvious benefits of using the existing
technology. The barrier to demand response and smart grid is
not more R&D. What is needed most is to put demand response and
the smart grid on a national commitment basis and to make
policy changes that will help implement the smart grid.
With that, let me express my thanks once again for the
opportunity to testify and I look forward to your questions.
[The prepared statement of Mr. Delurey follows:]
Testimony of Dan Delurey
My name is Dan Delurey and I am executive director of the
Demand Response and Advanced Metering Coalition (DRAM). DRAM is
the trade association for companies that provide technologies,
products and services in the electricity industry segment known
as demand response. Its members include the leading providers
of smart metering systems, communications and control
technologies, meter data management systems, smart thermostats
and other ``smart'' equipment. DRAM welcomes the opportunity to
provide testimony to the Subcommittee on Energy and Air Quality
on why demand response needs to be included in electricity
policy, planning and operations, and to offer comments on how
demand response and its enabling technologies, such as smart
meters, not only relate to but are in fact necessary for the
development of the smart grid.
Our testimony seeks to do several things:
Provide a brief explanation as to what demand response is,
why it is important to national energy policy, and why it is an
important element of a ``smart grid''.
Provide a brief overview and explanation on demand
response technologies such as smart meters.
Discuss the many and varied benefits that demand response
and its enabling technologies deliver to various parties.
Discuss the state of demand response policy and comment on
the impact of provisions on demand response and smart meters
included in the Energy Policy Act of 2005.
Present policy options that the Congress can consider and
act upon to accelerate the deployment of demand response
technologies, increase the amount of demand response in the
national electricity mix, and put the foundation in place for
development of the smart grid.
What is Demand Response?
Demand response refers to the policy and business area
whereby electricity customers reduce or shift their peak demand
usage in response to price signals or other types of
incentives. At present, the vast majority of electricity
customers, and virtually all residential customers, are on
rates or prices that have them paying the same unit price for
electricity at any time of day and any time of year, no matter
how much the cost to produce or deliver electricity fluctuates
as demands on the system rise and fall. These existing ``flat''
rates do nothing to stem peak electricity usage, which
continues to grow unconstrained across the U.S. The lack of any
disincentive to on-peak consumption does nothing to address the
reliability of the electricity system, which continues to be
threatened by the rapid growth in peak demand. When demand
response is introduced, and when even a small percentage of
customers modify their peak usage, outages can be prevented,
overall prices to all customers can be reduced, and customers,
utilities and many other stakeholders can reap significant
benefits. More discussion of benefits will be provided in a
later section of this testimony.
As with any new field, definitions of demand response are
still in development within the policy and business community.
One definition that many policy makers have accepted was
developed by the non-profit U.S. Demand Response Coordinating
Committee (DRCC), a diverse group exclusively dedicated to the
development of new content and information on demand response.
Its definition is as follows:Providing electricity customers in
both retail and wholesale electricity markets with a choice
whereby they can respond to dynamic or time-based prices or
other types of incentives by reducing and/or shifting usage,
particularly during peak periods, such that these demand
modifications can address issues such as pricing, reliability,
emergency response, and infrastructure planning, operation, and
deferral.
An examination of this definition reveals that there are a
number of different facets to demand response. While this can
make an appreciation of demand response more challenging, it
also means that the amount and type of benefits can
collectively be very high. Each of these facets will be
discussed in the benefits section below, but it is worthwhile
to note that key to this definition, and to any definition of
demand response, is that it is focused on customers, and
providing them with new options to manage their energy use and
reduce their energy bills.
One more background item is worth noting. Just as energy
efficiency was at one point referred to as ``energy
conservation,'' early forms of demand response were known as
load management. Under that name, a number of utilities have
operated successful programs over the years where in return for
some incentive, customers allowed utilities to put controls on
certain of their appliances and turn those appliances off when
peak demands on hot summer days or cold winter days threatened
the reliability and integrity of the system. These programs
have functioned well in years past and many continue today. The
difference between demand response and load management is that
new technologies in the area of metering, communications and
controls means that many new types of demand response options
are available to customers. These options are ``smarter'' and
allow customers to maintain and share control of appliances and
equipment or to employ automated controls that can respond to
price and other signals. These options also allow other demand
response options to be provided such as time-based rates.
Demand Response Technologies
The most ubiquitous demand response technology is the
meter, and some background on metering can be helpful in
understanding demand response, its benefits and how it plays a
role in the development of the smart grid.
The vast majority of electricity customers in the U.S. do
not have a smart meter on their home or business. (The Federal
Energy Regulatory Commission, in its Report to Congress
required by EPACT 2005, estimates only 6 percent have smart
meters). Many customers still have the basic type of meter that
has been in use for decades. This meter has one function--to
``count'' the units of electricity that the customer consumes
and to maintain a cumulative total of that usage that at some
point is multiplied by the price of that unit to produce a
total electricity bill. In a modern society where customers can
easily and quickly obtain information about the things they
purchase, such meters and the information they provide are
anomalies. A customer with a basic meter gets no informational
feedback on how and when they are using electricity or
information they can apply to their future electricity
purchases. They also are unable to take advantage of any time-
differentiated rates or prices that could help them reduce
their electricity bill.
A smart metering system does two important things. First,
it measures and stores electricity usage in intervals, normally
on at least an hourly basis. This time-based measurement allows
time-based pricing and rates to be offered and accepted.
Second, the smart meter is part of a communications network
that allows the data measured and stored to be collected and
retrieved on a timely basis--at least daily--for use by the
utility and other parties and for presentation to the customer.
This communications network and connectivity with the
customers' premise provides other non-demand response benefits
to utilities and customers alike, as is described below.
Smart meters are not the only new technologies that enable
demand response and that help create the smart grid. ``Smart''
advances have been made in remote controlled and price-
sensitive thermostats and lighting systems that allow the new
products to be utilized in demand response applications. Energy
Management Systems (EMS), formerly only used for energy
efficiency purposes, are being made smarter and thus capable of
empowering demand response applications. New in-home display
devices are available that can transmit information from the
meter to the customer in real time. New building automation and
management technologies are available that allow optimization
of energy use with respect to time of use. New thermal and
battery storage systems are available that allow dynamic
storage and release in concert with peak demand management.
Even automobiles are developing into dynamic storage media in
the case of the Plug-In Hybrid Electric Vehicle (PHEV), where
the replacement of petroleum with electricity has been shown to
have environmental benefits as well as helping to optimize grid
management.
It is important to note that it is not just the technology
but also how it is employed and applied that creates demand
response. For example, some demand response companies have a
service, or resource-based business model, whereby they
contract with utilities to provide a block of demand response
(e.g. 10, 20, 30 or even 40 MWs) in the same manner as if they
were offering a peaking power plant to the utility. The demand
response provider takes on the responsibility for enrolling and
aggregating customers and controlling the peak loads of those
they enlist so as to create a ``negawatt'' resource for the
utility that is a substitute for additional power generation.
Demand Response and the Smart Grid
It is perhaps intuitive to understand why demand response
technologies such as smart metering are an integral part of the
Smart Grid. In the context of the smart grid, demand response
and its enabling technologies such as smart meters are the
place where the smart grid touches the customer. The vision of
a smart grid is that of an intelligent, dynamic ``organism''
that allows the electricity system to be planned and operated
in a way that optimizes all of its components to lower costs,
increase reliability and utilize new informational and
communications technologies. That vision includes an
optimization of not only supply side options but also demand
side options, and demand response is the way for demand side
resources to effectively and dynamically be engaged.
Viewed another way, given that the smart grid will not
arrive in one instant in time or in one fell swoop, smart
meters and other related communications and control
technologies are, collectively, the building blocks of the
smart grid that will provide the foundation upon which the rest
of the smart grid will be built. Timely, and in some cases, on-
demand information from customers will help smart grid
operators better monitor grid conditions and assess potential
threats to the reliability and/or security of the electricity
system. By providing information, including price signals, to
customers, those operators will in turn be able to deploy
customer reductions as a resource. Demand response technologies
allow information and control over the demand side to be
individually addressed yet aggregated into sizable blocks of
``negawatts'' that will be key to the success of smart grid
development. Not only will the deployment of demand response
technologies help avoid electricity outages, but also will help
utilities and regional operators restore electricity faster
than otherwise when outages do occur. In the case of the last
major Northeast Blackout, New York State, where a substantial
number of demand response technologies are deployed with large
customers, was able to use those technologies and customer
connections to do a controlled restoration which resulted in
power being restored a full day earlier than expected.
Benefits of Demand Response and its Enabling Technologies
Demand response and its enabling technologies offer many
different benefits in many different areas. In terms of
reliability, a reduction in peak electricity demand reduces the
threat of outages. In terms of electricity markets, demand
response and its technologies allow dynamic demand reductions
to be deployed instead of resorting to additional power
production, with the result being lower wholesale prices, which
all customers pay one way or the other. Also related to
markets, reductions in peak demand serve as a means of
mitigating market power of suppliers, which can otherwise occur
when demand increases unconstrained during peak periods due to
consumers not paying prices anywhere near the cost of producing
the electricity during that critical peak period.
In almost all cases, technology is required to enable
demand response even if it is only for time-based measurement
purposes. In the case of the smart metering system, however,
non-demand response benefits are introduced when the technology
is deployed for demand response. A good example is grid outage
management and restoration. At present, many utilities rely on
customers who lose service due to a storm to make a telephone
call to let the utility know of the outage. In other cases,
utility truck crews drive around to identify which homes and
businesses are out. With the communications and connectivity
abilities that come with smart metering systems, a utility
customer service operator can instantly know when a customer is
out and can optimize dispatch of crews to address the
situation, increasing the speed and decreasing the cost of
restoration. Other types of benefits in the areas of customer
service, outage management, system planning, system operations
and security maintenance are possible when demand response
technologies are deployed.
In terms of customer benefits, demand response and its
technologies offer many new benefits. Customers will get
information on their electricity usage that they have never had
before and get it in a timely manner such that it acts as
feedback to reinforce their energy management efforts. They
will have price and rate options that will stimulate them to be
more efficient energy consumers. Demand response technologies
will be the answer to the question ``how can you manage what
you cannot measure?''. Studies have shown that even where
customers are not on time-differentiated rates, they may reduce
their electricity usage by 11 percent just as a result of being
more informed and understanding better how and when they are
using electricity.
In terms of addressing climate change and other
environmental issues, demand response can make important
contributions. The obvious one is in the enhancement and
reinforcement of customer energy efficiency, the accepted
cornerstone of emission reduction policies. Demand response
control and information technologies such as smart meters can
be the platform upon which the U.S. moves to an entirely new,
more expansive and effective era of energy efficiency. Also,
demand response technologies and practices will not only lead
to greater energy efficiency but also to greater accountability
of reductions, something that will be increasingly important
under any policy where emissions are constrained and reduction-
based offsets are monetized. Indeed, the smart electricity
meter, while not an energy efficiency device in and of itself,
may prove to be not only a smart meter, but also a green meter,
as it helps improve overall energy efficiency and track energy
savings.
In the case of some pollutants such as NOx, time-based
emissions (e.g. during hot summer afternoons) can lead to ozone
non-attainment. In the case of NOx and ozone, demand response
holds out the potential to be a dynamic emissions tool that can
be used to reduce power plant productions (and emissions)
precisely when they contribute the most to non-attainment.
Finally, and still in the area of environmental benefits, is
the contribution that demand response can make to renewable
energy development. In the case of wind energy, a particular
geographic wind resource may not be available during peak
demand periods. By matching that wind resource with demand
response during the period that wind is non-available, the wind
resource may become more viable. The result is a greater chance
that less environmentally friendly resources can be avoided
through a combination of wind and demand response.
Existing Policy on Demand Response
Congress. Section 1252 of the Energy Policy Act of 2005
represents the first legislation by Congress on demand
response. It included several important provisions:
<bullet> A new PURPA standard that would require that
utilities provide time-based rates and smart meters to all
customers.
As with other PURPA standards, States and other bodies with
jurisdiction over electric utilities were required by EPACT to
conduct an investigation as to whether this new standard was
appropriate for its particular jurisdiction and to make a
finding on such. States and other bodies were given until
August 2007 to complete their investigation and make a finding.
Some observers questioned the impact that this new PURPA
standard would have at the time of EPACT enactment, pointing
out that the only true requirement in the provision was for
states to consider the standard, i.e. utilities were not
required directly by the statute to do anything with respect to
time-based rates and smart meters.
While many states to date have chosen to not adopt the
standards, EPAct 1252 has had significant impact across the
country. It has become the common framework within which
heightened discussion and debate on demand response has taken
place at the state level over the past two years. While many
state commissions are still in the middle of their proceeding
to consider the standards, the level of attention, awareness
and action has risen significantly from where it was prior to
EPACT enactment.
Attachment A depicts the status of State Commission
proceedings on the new PURPA standard at this time, based on
DRAM's assessment:
<bullet> A requirement that FERC conduct an assessment and
report to Congress on various aspects and characteristics of
demand response, including an estimation of the existing
penetration of smart meters.
FERC completed this report on time and the document
delivered to Congress represents the first ever nationwide
survey of smart metering and other demand response technologies
and programs. It also includes a substantial amount of other
information on demand response, including barriers to it and
how they might be overcome.
<bullet> A requirement that DOE make an assessment and
report to Congress on the nationwide potential for demand
response and provide recommendations as to how to achieve a
specific target by a date certain.
DOE delivered its report to Congress within six months of
enactment as required by EPACT but it did not address the
question of ``how much by how soon.'' According to DOE, the
short turn around time of six months to undertake and complete
the report did not allow for such. Instead, DOE opted for a
compendium approach where it produced a report that presented
the range of work by other parties on estimating demand
response potential.
FERC. The Federal Energy Regulatory Commission (FERC) has
in the past several years made significant strides in fostering
the development of demand response. It views demand response as
a vital ingredient to the success of wholesale markets and has
sought to foster demand response programs and markets at the
various regional RTOs and ISOs. As a result, some of the newest
demand response resources that have been developed are at the
wholesale level. FERC continues to push to demand response both
through its actions in party-specific proceedings and in
generic rulemakings.
States, In order to employ demand response, it is
necessary for two things to happen. First, technology must be
in place that allows electricity usage to be measured in time
intervals (instead of the present system where usage is
measured cumulatively and where all kilowatt hours are treated
equally) and provided to utilities, customers and other parties
in a timely manner. Adding automated controls and other
technologies that monitor and control usage enhances and
increases the amount of demand response that can occur. Second,
customers must be provided with time-differentiated price
options and/or other incentives to reward them for modifying
their on-peak usage.
Each of these requirements present state public policy
issues that are only beginning to be addressed and resolved. As
discussed above, the investigation required by EPAct 2005
represents for many states the first demand response activity
they have undertaken. In many cases, state policy makers have
been reluctant to support utility investment in new metering
deployments. In many more cases, state policy makers have
expressed significant reluctance to introduce time-based rates
to customers, citing the political backlash that could or would
occur. These expressions of concern have come even in the face
of suggestions that such time-based rates would be voluntary,
and even after research continues to accumulate that customers
like having such rate options and the information and
technology that comes along with them.
States for the most part ``have the ball'' on demand
response and smart metering. They also therefore have much of
the ball on development of the smart grid, even though this is
not conventional thought on this topic. Yet states have the
least amount of resources to adequately assess and understand
demand response and the smart grid. It is imperative to the
success of both that states receive additional support to be
able to play their necessary role.
Policy Options for Congressional Consideration
DRAM believes that there are a number of steps which
Congress can consider to develop demand response, which will in
turn be steps toward development of the smart grid. Recognizing
that some of these may not be jurisdictional to the
Subcommittee on Energy and Air Quality, we list them as
follows:
Congress should recognize that smart meters represent new,
high-technology hardware and software and should be treated for
tax and regulatory purposes as such. Tax policy should be
changed to accelerate depreciation on smart meters and other
demand response technologies.
Tax incentives should be provided to utilities and other
parties, including customers, to install demand response
technologies as quickly as possible so as to develop as much
demand response as possible in the Nation's electricity mix.
One option would be a reduction tax credit, similar to the
production tax credit that has allowed the renewable energy
industry to gain traction and grow. Such a credit could only be
granted when reductions are measured and verified using demand
response technologies and applications, in recognition of the
capabilities of such. Another option would be an investment tax
credit which helps accelerate the installation of devices and
equipment.
A temporary National Commission on Electricity
Modernization should be established, with funding provided,
that would undertake the following tasks:
(a) Conduct a national assessment of the state of the grid
and provide detailed proposals to Congress, the President and
the States on how to accelerate the deployment of a smart grid.
Included in the Commission's work would be development of a
framework for how the smart grid would operate and how its
components would effectively communicate and interface. Also
included would be a proposal for funding the investment
necessary to put smart grid infrastructure in place.
(b) Develop a National Action Plan on Demand Response and
Smart Technologies that would provide support for education and
training of policy makers, customers and other stakeholders, as
well as a nationwide communications and outreach program that
would lead to greater deployment of demand response.
A temporary independent Commission would allow the efforts
of industry, state policy makers and other stakeholders to be
integrated with the efforts of DOE, FERC and other Federal
agencies in a holistic, comprehensive and effective manner. It
would also be able to provide the required support to states,
where much demand response activity must take place to realize
the potential of the resource.
Congress should consider providing additional funds to
develop demand response resources and the smart grid in general
via the introduction of a national assessment on the
transmission system. Even an extremely small ``wires charge''
would generate significant revenue earmarked for smart grid
investments.
Congress should consider requiring the Federal Government
to demonstrate leadership by establishing peak demand reduction
standards for Federal agencies. These standards would require
progressive reduction in peak electricity demand as compared to
a baseline year, in a manner similar to renewable portfolio
standards or energy efficiency resource standards. These
standards would complement and enhance the other efficiency
activities that Federal agencies already are required to do
and/or have underway.
With the development of new communications and control
technologies that allow individual consumer appliances to
receive and ``act'' upon price signals and other control
signals for purposes of demand response, Congress should
consider moving to additional types of appliance standards
beyond those that govern internal energy efficiency.
Congress should consider how to integrate smart metering
systems into climate change strategies and regimes to allow
such systems and other demand response technologies to be used
to more precisely measure and verify energy reductions and the
monetary rewards that accrue to the associated carbon
reductions.
Congress should consider providing funding and technical
assistance to States or groups of States for developing smart
grid assessments and action plans which will allow them to move
forward to begin to create smart grid components in their
jurisdiction.
Congress should consider requiring the Federal Energy
Regulatory Commission to develop a framework on
interoperability, one of the key threshold issues to the growth
of demand response and the smart grid.
As with any major endeavor such as the transformation of
the Nation's electric system into a smart grid, it is important
to consider the timing and nature of the transition. In the
case of the smart grid, it is easy to always see it as
something that is out in the future somewhere, just out of
reach. It is easy to see it as something that requires
substantial research and development and that can only be
accomplished if new technologies, not necessarily yet invented,
are developed and made available. Some aspects of the smart
grid may indeed meet this future-oriented test. But in the case
of demand response, smart meters and other smart technologies
and applications, the future is now. These technologies, as
with any modern technology such as in the computer or
telecommunications area, will be on a continual path of
evolution and will continue to improve over time. Yet those
businesses and consumers do not wait for the next great product
to be developed before deploying a computer or cellphone so as
to capture the many benefits that present technology provides,
even while recognizing that new technology will certainly
replace what they have at some point. It is important to take
this perspective with the smart grid and not in all cases wait
for future technology. Demand response and smart technologies
are available today which can deliver immediate benefits to
utilities, customers, other stakeholders and the Nation as a
whole. With a greater commitment by state and Federal policy
makers to deploying these technologies now, expressed through
funding and other types of support, the construction of the
smart grid can begin now instead of in the future.
Attachment A
Status of State Commission proceedings to consider EPACT
section 1252 PURPA standard requiring utilities to offer time-
based pricing and advanced metering
Ongoing Proceedings on Standard
Alabama, Alaska, Arizona, Arkansas, District of Columbia,
Georgia, Illinois, Indiana, Kansas, Louisiana, Michigan,
Minnesota, Missouri, New Hampshire, New Mexico, New York, North
Dakota, Rhode Island, South Carolina, South Dakota, Texas,
Washington, Wyoming
Completed Proceedings and/or Decision on Standards Made
Delaware--decided to not adopt but proceeding still open
Florida--decided to not adopt
Iowa--decided to not adopt
Idaho--decided to not adopt
Kentucky--decided to not adopt
Michigan--decided to not adopt but proceeding still open
Montana--deferred adoption
Tennessee--decided to not adopt but proceeding still open
Ohio--decided to adopt; proceeding still open
Utah--decided to not adopt
Vermont--deferred adoption
Virginia--decided to not adopt
West Virginia--decided to not adopt
Proceeding Deferred
Colorado
Maryland
----------
Mr. Boucher. Thank you very much, Mr. Delurey.
Mr. Bryson, we will be happy to hear from you.
STATEMENT OF JOHN BRYSON, CHAIRMAN, CEO AND PRESIDENT, EDISON
INTERNATIONAL, ROSEMEAD, CA
Mr. Bryson. Thank you, Mr. Chairman, members of the
committee. I won't provide a summary of my testimony. The panel
is so strong IN its entirely correct affirmation of the smart
grid. I thought I might pick out the things I can distinctively
offer and see if they add some value.
The smart grid makes sense, Mr. Chairman. Your letter
inviting us to testify indicated arguably the smart grid has
lots of benefits. The short answer is absolutely very great
benefits and we need to move in that direction, and Chairman
Dingell defined the problem well at the outset. Electricity
moves at the speed of light. Anything short of an automated
high-technology means of controlling electricity is
fundamentally insufficient, and as business consumers,
residential consumers increasingly digitize their homes, their
businesses, the traditional means, low-tech means of operating
an electric grid simply mean lack of reliability, slow
response, poor service, high cost. Changes are absolutely
essential and some of them have been well described by members
of the panel.
I thought I would say a little bit about what we are doing
at Southern California Edison and I want to underscore, this is
with the really great support of the State of California.
California has had its reliability and its cost problems. The
response now from the Governor, across the regulators, across
legislators, Federal and State, Congresswoman Harman
underscored the values we bring to this, has been so strong. It
is enabling us to make investments that as recently as 4 or 5
years ago we couldn't make. So my key focus will be to describe
some of the things that we are doing in a utility, a very large
utility that serves a large part of southern California and
central California that are smart grid-type initiatives, and I
want to underscore just what Congresswoman Harman said and that
is, the smart grid more than any one component of the system,
it is the heart of it. It is the essence of bringing all these
things together--reliability, cost reduction, environmental
benefit. Let me just say just a little about that. I will start
extremely briefly with the distribution system, then the
transmission system, then talk about the reach to retail
customers through energy meters and I will respond to some of
the questions.
But very briefly. First, distribution systems in the
country are critical. They reach all the consumers. They are
aging. They are old technology. Designing them as we designed
them in the past is just absolutely insufficient. A transition
in that respect will be costly but it must be done. So just one
example of what we are doing at Southern California Edison and
I believe it is leading the country in most of these respects
but we are now employing and will first put into operation this
summer something called the Avanti Circuit so it is a
distribution circuit. It will be installed and fully
operational in July of this summer in San Bernardino County,
enormously fast growing east of Los Angeles. To oversimplify,
it incorporates the best, most advanced monitoring and control
systems. So that means something very simple. It means the kind
of minor disturbances to the electric system that turns
people's clocks off in homes, for example, that affects
businesses should be substantially overcome. This is an initial
2,000 customers. It needs to go much further but it is
beginning. I wanted to say this was a test program. My
engineers say don't say it is a test program, it is really the
real thing, it will go further. That is distribution. I could
talk much more about that.
Let me talk about transmission, the large wires that carry
electricity and necessarily across a large region. So
transmission has a long way to go, again a fundamentally not
very sophisticated system. It is not a dumb system but is at
best a half smart system. What needs to be done? Well, let me
talk about one thing we are doing: synchronous phasor
measurement developed by engineers with the help of the
Electric Power Research Institute and others. We have now
installed this new means of providing instantaneous reads on
stress across a very large regional transmission system. We
have installed them at our 500kV substations, some smaller
substations. They allow us now, and this is brand new,
everything I am talking about is brand new, to take readings on
stresses on the system 30 times a second. So that is
appropriate to the speed of electricity. It allows our manual
operators of the system to get these reads, we act faster,
identify problems. Over the next 2 to 5 years we will put in
the automation system that allows this means of identifying
from multiple sources stresses on the system and an automated
response. That is the kind of thing that needs to be done at
the transmission level.
Then let me turn to the retail level, the consumer level.
The electric meters, there is talk about them. I think there
should be no misunderstanding about the degree of which they
need to be developed further so the meters that were available
in the market as recently as 1 year ago were not cost-effective
on our system. They are a modest improvement but still largely
analog. Not a whole array of features of the best sort can be
drawn from the computer world, Silicon Valley, so we declined
to go ahead with those meters and instead use the base of 5
million meters that we will install and we have reliably
committed to install them and challenge vendors to come forth
and we set out specifications for an array of services and
capabilities in these meters. And the very good news is that we
have in our labs right now from eight manufacturers meters that
we believe will meet our specifications for interoperability,
for two-way communication, for an array of quality consumer-
friendly services as well as smart grid friendly services. The
key is tying it all together. It needs to be integrated. So
what we see with this new capability is the installation on our
system for an estimated $1.3 billion, so a large investment,
starting next year and over 4 years across all our customers,
not just large businesses, small businesses, residential
customers. These meters will do lots of things and we don't
have time to describe them all but kind of the immediate thing
they do is what others have referred to and that is time-
sensitive or time-abuse pricing that will allow consumers to
better manage their energy, better manage their bills, respond
to price signals. Costs are relatively high of electricity,
that is certainly true in our area in California, but we want
to engage consumers in helping us manage the system. So simply
put, one of the most expensive things on an electric system is
building power plants that are used only occasionally to meet
peak load needs. The meters can help with that. They can do
multiple other things. I am getting the time signal so I will
stop there but I can take that further. There are large
environmental as well as reliability benefits.
[The prepared statement of Mr. Bryson follows:]
Testimony of John Bryson
Thank you Mr. Chairman, Mr. Ranking Member and members of
the subcommittee.
I am John Bryson, the chairman, CEO and president of Edison
International, the parent company of the regulated utility
Southern California Edison and the competitive power generation
business Edison Mission Group.
My message to you today is that a high-tech world can no
longer afford a low-tech electricity grid. We must together
build the smart electricity grid of the future. This will
require substantial capital investment in the modernization of
our transmission and distribution systems, and in the
replacement of the dinosaurs of our industry--analog household
electricity meters--with state of the art digital meters. We
are fortunate that in California our public officials have
provided the necessary regulatory environment to make these
investments possible. I'm pleased to have the opportunity to
share a few observations from our experience.
I'll begin my comments by addressing the application of
smart grid technology to the transmission and distribution
system before focusing my comments on our advanced metering
initiative.
At SCE, our distribution system--the component of the
electricity grid that delivers power directly to most
customers--is both aging and growing. In response, and with the
support of the California Public Utilities Commission, we are
making capital investments in the system at an all-time high
rate.
We should not, however, continue to invest in the same old
circuit designs. Even momentary interruptions can now cause
significant economic loss for business customers. And
residential customers using more digital home electronics have
understandably higher expectations for service. The old
standards are not good enough.
An early example of the smart grid's potential will be a 12
kV circuit that will become operational this July serving 2000
customers in the San Bernardino area. Called the Avanti
Circuit, it will feature a large array of advanced monitoring
and control capabilities and will interface with our new smart
meters. What will that mean for customers? Current distribution
technology can now take more than a minute to locate and
isolate a problem on the system. The Avanti Circuit will do the
job in seconds, limiting outages and improving reliability.
At the transmission level, we now have sophisticated new
tools to measure stress on the system, including a new early
warning system called Synchronous Phasor Measurement in which
SCE leads the Nation. Over the next two to five years, we will
increasingly have the ability to act on this warning system
with faster and more sophisticated control technology. The
result will be substantially improved system reliability.
Let me give you a sense of how significant this is. If the
technology I just described had existed in August 2003, the
Northeast blackout, which affected 50 million customers, some
for as many as four days, would likely have been largely
controlled.
These same advances will also facilitate the continued
development of renewable power. The smart grid will be better
able to react to the variability of wind and solar generation
by activating other resources, dampening peak demand, and
smoothing out disruptions. This is particularly important to
us, since SCE leads the Nation with nearly 17 percent of our
generation coming from renewable sources.
The feature of smart grid technology most immediately
visible to customers will be the advanced electricity meter.
This is a game-changer for our industry.
Through our advanced metering infrastructure effort, which
we call Edison SmartConnect, every household in our service
territory will be equipped with a truly state of the art
``smart'' all-digital electricity meter. These new meters will
actually be small but powerful computers and communication
systems.
Among many benefits, smart meters will allow time-of-use
electricity pricing for all customers, including small business
and residential. Time-of-use pricing will create powerful
incentives for customers to save money by shifting their use to
off-peak hours when electricity costs are much lower. Customers
will be able to interface with these meters through their home
computers to develop efficient usage patterns that can help
reduce their electric bills.
In a few years, it will likely be common to see signs in
appliance stores labeling household devices as "communicating."
Communicating thermostats already exist. Soon we will have
communicating dishwashers, electric dryers, refrigerators and
pool pumps. Some customers will program their appliances to
respond to the smart meters and automatically reduce usage when
power costs rise. Others will sign up for programs that allow
the utility to control many of their appliances remotely when
needed, in exchange for guaranteed additional cost savings.
Let me spend a few moments emphasizing the importance of
this benefit. One of the keys to meeting our Nation's power
needs in an environmentally friendly way--along with a large
increase in generation from renewable sources and the
commercialization of new clean generation technologies--is the
substantial expansion of energy efficiency and demand response
programs.
California and Edison International have led the way in
both. We lead the Nation's utilities in helping our customers
save electricity through energy efficiency programs. Since the
Department of Energy started tracking energy efficiency in
1992, we have helped our customers conserve more than nine
million megawatt-hours of electricity. To put this number in
some perspective, that's enough to power 1.1 million homes for
a year.
The CPUC has long supported this effort both by the
commitment of program funds and also at a more fundamental
level through ratemaking that decouples sales and revenue. For
utilities this increases our risks because it requires more
frequent rate cases, but constructive regulation makes it work
in California.
Edison also has the largest demand response program in
California. When needed, we can call on more than 1,000
megawatts of interruptible power. That's roughly equivalent to
the size of a large power plant. It has the additional benefit
of being spread across our service territory, which helps us
manage the grid more effectively during times of peak demand.
Peak consumption levels are a key factor in determining
generating capacity requirements, so managing peak load is
essential to controlling the need to build expensive new power
plants. We see demand response programs therefore as an
absolutely vital part of our effort to provide cost-effective
and cleaner power to customers.
After a one-in-fifty-year heat wave hit in Southern
California last July, the CPUC very appropriately challenged us
to increase substantially customer participation in our demand
response programs. We responded with an enrollment push that
since August of last year has added 58,000 new customers,
bringing total participation to more than 250,000 customers.
The added potential for load relief associated with those new
enrollments is 105 megawatts, bringing total potential relief
to nearly 500 megawatts. By the time summer arrives, we expect
an additional 70 megawatts. Here is the key point: We added
this capacity in less than a year, far less than time than it
would take to build a generating station or transmission line.
We can achieve even more in this area and we see advanced
metering as a significant step forward. When fully deployed, we
estimate that Edison SmartConnect could reduce peak demand on
our system by as much as 1,000 megawatts, essentially doubling
our current portfolio.
It is important to note that participation in time-of-use
and other pricing options will be completely voluntary. Some
customers will surely choose not to participate and thus forego
any direct benefits, although they may still benefit if SCE is
able to defer the costs associated with building new
generation.
Smart meters can offer other potentially significant
benefits as well.
They will enable faster outage response. With the aid of
our new meters, dispatchers will know immediately when and
where an outage occurs. Crews will be able to respond faster.
All customers will benefit from improved customer service
and service automation. For example, the residential meters
include a service switch that provides the ability to remotely
turn-on our customers; service--a real benefit for the more
than one million customers who move each year.
For example, wind energy generally peaks in the early
morning hours and solar energy generally peaks mid-day, so any
shift in usage to those off-peak hours facilitates the future
use of new solar and especially new wind power.
These new meters are compatible with future plug in hybrid
vehicles which offer the promise of replacing petroleum
consumption with clean electric power. A soon to be released
EPRI study will quantify the savings in greenhouse gases and
other pollutants from this shift. Even using power from
traditional coal plants to charge a plug in hybrid is
environmentally superior (for CO2 and criteria pollutants) to
driving a regular Toyota Prius. This trend increases over time
as newer, clean generating plants replace older, less efficient
ones.
Just as importantly, integrating all these meters to a
single open standards based system provides utilities
additional communication and pricing tools and flexibility to
respond to outages and emergencies in a far less disruptive
manner than rolling blackouts.
A little more than a year ago, no existing meter technology
met our requirements for cost effectiveness and customer
benefits. So we used the prospect of a five million meter
purchase by SCE to drive the development of technology that met
our requirements for open standards and future flexibility.
Our strategy was successful and as a result new meters and
communication networks from several manufacturers are being
tested right now by SCE technicians. Field tests will be
underway by the end of the year. And by 2013 we plan to install
five million advanced meters with the largest array of
customer-service features offered by any utility in the United
States.
Beginning with the first meter installations in 2008, we
expect a transition period of learning and assessment. Large
commercial and industrial customers (above 200KW) have already
received smart meters, so we have already begun to climb the
learning curve.
Edison SmartConnect meters are a completely new breed. They
contain two way communication capabilities and advanced
software and computer capabilities that make them entirely
different than the previous generation of meters. Edison
International along with a number of other utilities has been
working with the House Ways and Means Committee and the Senate
Finance Committee on new tax policies that better reflect the
nature of the new generation of high technology metering
equipment.
Just last week, at a first-of-its-kind conference sponsored
by the U.S. Department of Energy and others here in Washington,
SCE received one of the inaugural awards for ``Outstanding
Leadership for the Advancement of a Smart Grid.'' We were the
only utility to be recognized.
None of this would be possible without the full support and
backing of the California Public Utilities Commission, which to
its great credit saw the potential value of the Edison
SmartConnect program and is strongly encouraging the other
utilities in the state to adopt the same fully digital
technology.
Thank you.
----------
Mr. Boucher. Thank you, Mr. Bryson.
Ms. Zibelman.
STATEMENT OF AUDREY A. ZIBELMAN, CHIEF OPERATING OFFICER, PJM
INTERCONNECTION, NORRISTOWN, PA
Ms. Zibelman. Thank you, Chairman Boucher and to the
members of the committee. We are absolutely delighted to be
here today and are very pleased that the committee is embracing
the recognition that the smart grid is actually going to be a
very critical element if we are going to meet our goals of
having an independent energy future and one that keeps
electricity both affordable and environmentally sustainable,
and we have provided written comments but let me summarize.
Like Mr. Bryson, I wanted to talk in terms of real time,
since PJM is the real-time operator, of how we see the smart
grid innovation helping us do what we need to do, and the two
things that PJM needs to do most is, we operate a reliable grid
7 days a week, 24 hours a day, and in an area that serves 13
States plus the District of Columbia, which is about 51 million
people and represents about 19 percent of the GDP. And the
other thing we look at is, we look at how do we manage the
markets to continuously optimize the efficiency of the
investment we make both in terms of providing affordable
electricity but also in terms of taking advantage of renewables
and other types of investment so that we see true innovation in
the marketplace. And with that, let me talk about the two
things that we see the smart grid doing. One is clearly
improving reliability. As Representative Dingell and as all the
panelists I think have said, electricity is a real-time
product. It is at the speed of light which means we can't move
faster that the speed of light. That means from our operators,
in order to keep the grid in balance, they always have to
anticipate what is the next event that can create a disturbance
and then they operate in order to secure against that next
event. The more information you can get in the hands of the
operator so that they can anticipate that next event quicker,
they can respond quicker and that is through automation, and if
we do that, what that means is, you are operating the
transmission system at its actual limits, not some predictable
limits, and if you do that, what you are doing is, you are
producing greater efficiency of the grid, you are having to
produce less electricity in order to manage the grid
responsibly, and the net effect is reduced prices, greater
optimization, and if you are producing less energy from carbon-
producing resources, a better environment. So there is no
question it is going to improve reliability. The automation
also helps us against blackouts. One of the things that happens
with a blackout is, if you can't see what is going on, you
might have a cascading event like we saw in 2003. A smart grid
allows the grid to essentially heal itself. We call it grid
sectionalization so that we island the system and we don't
create the cascading failures. That certainly helps the
economy, it certainly helps the security and allows us to
restore the grid because it is a physical machine, it will have
disturbances, and the issue is just like any other machine we
operate, how do we optimize it, and it is the intelligence and
the smarts that allows us to do that.
The second is of course in terms of economic efficiency.
Over the last several years PJM has begun in its markets to
include a revenue source for demand response that is equal to
the types of revenue sources we provide generators and we have
had a tremendous increase in the amount of demand response in
our markets. Again, what we do is, we keep electricity in
balance by either increasing generation output or decreasing
demand output. When by setting the price signals from the
wholesale market to industrial load and other providers, what
they will do is, they will respond to that price and reduce
their take in response to that price. The benefit is that they
are actually paid from the market at the incremental energy
price but the fact is that by reducing demand, they reduce the
demand curve, the supply curve and therefore we produce less
expensive energy to relieve load. To give you an example, last
year during our peak week, the first week in August 2006, PJM
paid demand providers approximately $5 million from the energy
market to reduce demand during the pricing peak. These are
voluntary participants who have said this is my price point and
I will reduce my demand during these prices. As a result of
that, we are able to reduce the demand curve, and over the
course of that week we calculated that the cost savings to the
market represented approximately $650 million. So from the
market perspective, we provide demand responders a payment of
$5 million. As a result of their reduced demand, the peak
prices in the market drop about $650 million, which we think is
a fairly decent investment. The same time during that time
because we were reducing the production of energy, we were able
to save large gas and oil and we calculated that equivalated to
about 13,000, to 14,000 barrels of oil or about 227,000 MCF of
natural gas.
So the net effect is pretty clear. Demand response is the
cheapest way to keep the energy system in balance. If we can do
it this way, if we can provide these types of price signals to
customers, then they could become active participants in the
market, and while we are talking at the wholesale level, if we
do it with our retail providers, they can work with their
residential customers and the customers then, we have a
conversion from electricity being a commodity to a service and
where customers will be able to dictate how much they want to
buy, at what price, from whom, during what hours. For us, that
is the way of the future.
Again, thank you and I would be happy to answer any
questions
[The prepared statement of Ms. Zibelman follows:]
Testimony of Audrey Zibelman
I wish to thank Chairman Boucher and the Sub-Committee on
Energy and Air Quality for inviting PJM Interconnection, L.L.C.
(PJM) to address you on this very important subject. We are
encouraged that the subcommittee recognizes the importance of
gathering information on the need to transform our Nation's
transmission infrastructure into the Smart Grid of the 21st
Century as a key element of ensuring the country's energy
independent future.
PJM is responsible for ensuring the reliable and non-
discriminatory planning and operations of the transmission grid
and the fair and efficient administration of the real-time
wholesale electric market that serves 51 million people in an
area that includes 13 States plus the District of Columbia. PJM
operates the high voltage electric power grid in all or parts
of New Jersey, Pennsylvania, Delaware, Maryland, the District
of Columbia, Virginia, North Carolina, West Virginia, Kentucky,
Ohio, Michigan, Indiana, Illinois and Tennessee. It is an area
of the Nation that, standing alone, represents approximately 19
percent of the Nation's Gross Domestic Product. The power
system under PJM's control is the largest in North America and
one of the largest and most complex in the world. The PJM
region incorporates 56,000 miles of transmission lines, 1,250
generating plants and 6,000 substations. PJM has 250 intertie
points with adjacent systems in the Eastern Interconnection.
This means that along with managing the PJM system, our
operators manage the seams between PJM and seven adjacent
electric systems. To put this in perspective, the next most
extensively interconnected power grid in the world is the
transmission system that serves France, which has 41 interties.
To maintain reliability of the system, PJM has identified
approximately $10 billion in new transmission investments that
will be required over the next 15-year planning period. When
built, we believe this transmission will help reduce current
congestion on the system at a value that will approximate $1
billion a year in savings.
The wholesale markets that PJM operates represent the
largest competitive organized wholesale markets for electricity
in the world. The PJM spot markets were started in 1997 and in
the last 10 years grew from $450 million to $23 billion in
annual revenues. Today, there are more than 450 members of PJM
representing all segments of the industry as well as financial
and trading institutions that add liquidity to the marketplace.
The buyers and sellers into and from the PJM Markets also
include many generators and load serving entities from adjacent
regions, all of whom benefit from the transparency and
robustness of the marketplace.
The installed generation capacity in the PJM region
currently exceeds 165,000 MW while the peak demand for the PJM
region reached a record 144,644 MW in August of 2006. This peak
demand exceeded the peak achieved in 2005 by 10.627 MW. In
short, in one year we saw an increase in peak load that is
equal to the level of generation that is required to serve a
large American city. Although we do not anticipate that
sizeable an increase in peak demand each year, we do anticipate
load growth in the region to remain in the range of 1.5 percent
annually over the next 10 to 15 years. During this same period,
we envision retirements of older, less efficient generating
units, which necessitates further development of new more
efficient generation. Indeed, the pattern of retirement of
older generating plants affected by environmental laws as well
as the region's increasing demand for electricity has created
new challenges. If we tried to meet this increased demand for
electricity solely by building new generating plants, over the
next 15 years this combination of factors could require as much
as 55,000 MW of new generation investment, an amount equivalent
to four large nuclear plants or coal plants being constructed
every year.
To summarize, the industry challenges confronting the PJM
community are reflective of those we are experiencing
throughout the Nation. We are an electricity-dependent economy.
The demand for electricity continues to rise reflecting a
growing digital age economy. Yet, we have an aging
infrastructure that will require significant new investment in
all segments of the industry, from the fuel input to the
customer meter. We also must actively consider how we can help
achieve the energy independence that the country demands, while
continuing to focus on maintaining fair and affordable electric
prices and reducing our carbon footprint. We are in a period
when we cannot afford to ignore the contributions of any
segment of the industry to our energy policy objectives. In
fact, based on PJM's perspectives as a grid operator and market
administrator, we believe that the transformation of the bulk
power transmission system to a Smart Grid of the 21st century
should be considered part of the foundation of meeting
America's energy policy and climate change objectives. I am
attaching a brochure which was part of PJM's recently released
Strategic Report. It is designed to explain the Smart Grid in
understandable terms for the general public.
With this in mind, my remaining testimony will focus on
four primary areas:
1. The PJM vision of the Smart Grid;
2. How Smart Grid implementation can increase reliable,
secure and efficient system operations;
3. How a Smart Grid will enable true consumer
participation in the electric marketplace as a means of gaining
greater environmental benefit and affordable electric prices;
and
4. The actions and public policy efforts we should focus
on today to establish the right platforms for a 21st century
electric power system.
1. The PJM Vision of the Smart Grid
There are many industry definitions and descriptions of
the Smart Grid. For PJM, where we are required to keep the grid
in balance 24 hours a day, 365 days a year, the Smart Grid is
not a theoretical concept or a ``gee, it would be nice'' item.
PJM's perspective derives from its dual focus on continuously
looking for ways to improve secure, reliable and efficient grid
operations, while assuring a robust competitive wholesale
electric market that supports Federal and state energy
policies. PJM's vision of a Smart Grid encompasses the
transformation of the interconnected electric system in three
critical ways:
<bullet> Ensuring a Multi-Directional Grid: The industry
needs to transition from today's radial system linking
generation to load to a true network with full connectivity and
interoperability. The goal of this change will be to allow
horizontal interconnectivity all the way through the energy
value chain--from fuel management through to the end customer
energy use. We have achieved much of this connectivity goal in
telecommunications, yet are only beginning to work on this in
the electricity sector;
<bullet> Moving to a Digital Grid: We will need to
convert from today's electro-mechanical grid to a digital
system that supports information and automation-enabled grid
assets. The objective of this conversion is to allow for more
efficient, cost-effective and secure system operations;
<bullet> Moving to an Interactive Grid: The grid of the
future will require two-way communication between the system
operator and the end-user. The objective of two-way
communication is to convert end-users from passive to active
participants in the marketplace.
Each of these elements will be a necessary component of
implementing Federal and state energy policies.
2. Developing a grid that promotes a more reliable, secure
and cost effective electric transmission system
The interconnected electric system is often alternatively
described as either a single complex engine comprised of
generators, transmission and distribution systems and end-user
devices or an ecosystem with many interdependent elements. In
either case, there are four fundamental attributes of the
interconnected system that help explain the value of a
transformation to a Smart Grid. First, is the fact that the
system is interconnected. As the Nation learned again on August
14, 2003, an uncontrolled disturbance on one part of the system
can cascade and impact large segments of the grid. A second
attribute reflects that electricity is a speed of light
product. Operators today must always operate the system in
anticipation of what might happen next. Third, electricity is
the only commodity that is consumed at the same time it is
produced. At least at this time, large scale storage of
electricity is not practical or economical. Fourth, the
information environment required to operate and control the
system is extraordinarily sophisticated. The information
requirements of the grid continues to grow. Today, PJM employs
an energy management system that processes about 88,000 bits of
information every two to three seconds. This information need
will grow in magnitude as we add more diverse demand side and
generation resources on the system. The challenge for grid
owners and operators is to make certain that we maintain the
sophistication to be able to instantaneously translate this
data into the information operators will need to perform their
jobs.
PJM's Smart Grid vision contemplates transitioning the
system from one which is highly dependent on human interaction
to a system that is highly monitored and provides human
operators with the best of current and future computing
technology. Advanced transmission technologies such as super
conducting and other devices that are also considered part of
the Smart Grid will further produce a system that is capable of
moving energy more efficiently than the current system allows.
There are several direct benefits of this transformation.
First, having a highly monitored transmission system will
enable the grid itself to better optimize the performance of
the system than can be accomplished today. Voltage and current
can be monitored continuously and the system will be able to
automatically adjust performance of the component parts. This
will in turn allow operators the ability to manage the
throughput on the system more accurately and efficiently. The
societal benefits will include a more secure and efficient
system from both an economic and environmental perspective.
These objectives will be accomplished through the reduction of
unaccounted-for energy, the reduction of transmission
congestion since the grid assets will be operated at higher and
more accurate limits, and the more efficient use of generation
resources. In other words, to use our engine analogy, consumer
demands will be met by a better running and operated machine.
The presence of monitoring devices will also increase the
asset management capabilities of owners. By deploying a Smart
Grid, owners will not be required to send employees in the
field to identify potential problems on the system. Rather,
they will have better information about the state of the system
and be able to better target employees' repair and restoral
efforts. This will in turn allow owners and operators improved
capability to assure the reliability of the system at lower
costs.
A Smart Grid also provides operators a better and more
rapid opportunity to anticipate disturbances on the system.
Today, operators have limited control over the entirety of the
grid (which includes the distribution system as well as the
high voltage transmission grid) and still make many emergency
decisions over the telephone. The grid of the future will have
pervasive control systems and rely on secure computers to help
identify the best step to take if there is a potential
disturbance created by a failed generator or transformer or
line outage on the system. System operators will also be able
to rely on secure and distributed computing capabilities to
develop sophisticated decision support analyses so that they
can select the best solution to either optimize the system or
to reduce the risk of system failure. We call this a fast look-
ahead simulation. The benefits are to provide greater
predictability and security. This again allows operators to
optimize the operations and secure the system at a much greater
level of granularity and certainty.
The third advantage of a Smart Grid becomes readily
apparent when there is in fact a significant disturbance. One
critical goal of the Smart Grid is known as ``islanding'' or
grid-sectionalization. This occurs when there is a disturbance.
In these circumstances, pre-identified solutions will cause the
affected part of the grid to ``island'' itself into defined
self-sustaining regions. This avoids the type of cascading
failures we witnessed in 2003 and also, when there is a
failure, allows for much quicker and easier restoration. In
turn, our economy and society as a whole realizes the direct
benefit of a reduction in the risk and costs of widespread
blackouts.
3. The Smart Grid will help reduce electric prices and
produce environmental benefit by promoting a customer-centric
electric energy marketplace
One of the primary lessons that PJM has learned repeatedly
over the last ten years is that the information ubiquity
provided by organized markets is the single most important
factor differentiating well-functioning markets. With accurate
and timely market information about the value of their
generating asset to the marketplace, owners of generation
operate their generating assets more efficiently which, in
turn, makes electricity available at lower costs to consumers.
With timely and accurate pricing information, the grid works
better. PJM operators are able to find ways to optimize the
system continuously by dispatching the lowest priced generator
among a broad diversity of resources. Information availability
and markets also allows greater diversity of resources and
innovation. Wind generators and other forms of interruptible
resources can compete more efficiently in the marketplace by
participating on their own terms--not terms dictated by
traditional utility operations. Finally, and most importantly,
we have also learned in the last several years, that with real
time information ubiquity provided by markets, end-use
customers have the opportunity to participate in the
electricity market and as a result save money and contribute to
a cleaner environment.
As I mentioned, one of the chief attributes that
contributes to the complexity of the electric power system is
that electricity is not able to be stored in large quantities.
To keep the lights on, the operator must keep the system in
balance--which on a real-time basis means continuously
increasing or decreasing the output of generators to meet the
electric demands of customers and the economy as a whole. In a
competitive market, we accomplish this objective by selecting
the generators based on their price--and in the absence of
reliability requirements--the generator payment is based on the
lowest incremental price offered for that time period.
Until the last several years, competition in the electric
industry has largely been characterized by the ability of
customers to choose among generators at the wholesale level
and, in certain states, suppliers at the retail level. However,
several years ago, PJM and its members changed the
characteristic of the wholesale market by starting to match
every source of revenues provided to generators that sell their
energy and capacity into the market to a similar revenue source
for load customers who are willing to sell their demand into
the market.
As I stated, as a reliability operator, PJM's
responsibility is to make certain that generation and load are
in balance. As an independent market administrator, we are
indifferent whether that next megawatt of change occurs because
we are increasing generation or decreasing load. When operating
the grid in real time, PJM is also indifferent to the next
megawatt of supply or demand that is produced or saved due to
the operations of a central station power plant, a wind
generator, a roof-top solar device, a stand-by combined cycle
turbine at a manufacturing plant, a restaurant dimming its
lighting or a family turning down the air conditioner. For the
market and the system, that next megawatt has the same value.
For customers however, there is a clear difference--since the
price of electricity varies depending on the level of load on
the system, reducing load by controlling demand allows us to
run less expensive generation which ultimately saves customers
money.
The benefit, of course, is a more efficient economic
marketplace, both in terms of the economy and the environment.
For example, during the week of extreme peak conditions last
August, PJM calculated that it paid demand providers
approximately $5 million to participate in reducing demand in
the wholesale market. As a consequence, reducing that demand
reduced the incremental price of electricity by approximately
$650 million. On the assumption that during this period, PJM
would have been dispatching coal or oil plants, the savings
could also be seen as a reduction of 1,367 tons of coal or
15,855 barrels of oil. Similarly, a study prepared by the
Brattle Group for PJM and a coalition of Mid-Atlantic State
Commissions showed that a modest reduction in electricity usage
by 3% through demand response could save consumers, on an
extremely conservative basis, up to $182 million annually. I
would note that this calculation only involved a portion of the
PJM region. However, for demand response to work most
effectively, we must have the ability to know with certainty
that the load on the system is reducing in response to the
price, similar to what now occurs when generating units produce
more or less electricity.
For PJM then the issue is a truly a no-brainer. We have an
opportunity and, I would suggest from a societal standpoint, an
obligation to continue to promote demand response as a critical
component of our electric market. The future as we would like
to see it requires transforming wholesale competition, which
today is almost exclusively among generators of power, to a new
form of competition where customers are empowered, through
interactive technology, to be able to select how much
electricity they want to purchase, at what price, from what
vendor and at what time. In other words, a truly customer-
focused market that enables new technologies such as advanced
metering, plug-in cars and distributed generation and storage,
will result in innovative new ways of providing electric
service at a net benefit to the economy and the environment.
To achieve this vision, we will need certain key elements
in place. First, and most important, customers, whether
directly or through an automatic metering device, need to
receive timely price information so that they know the value of
reducing or altering usage and can respond accordingly. Second,
as the system operator, PJM has to have accurate information
that the load is responding to price--otherwise we cannot
guarantee reliability. Depending on the size of the customer
load, this information can be provided directly or through the
local utility. Third, since we are now talking about numerous
devices on the system working in concert (a true network), we
will need to make sure that these devices are interoperable.
The PJM energy management system, the brains of our network,
must be able to use the same communication protocol whether
that information is coming from a large central station
generator or an individual ``smart'' appliance in the home.
Fourth, PJM and third parties will need to develop the
computing capability to optimize this system. Today, PJM
processes approximately 88,000 bits of information every two to
three seconds. In the future, as we operate the system as a
complex network of centralized and dispersed generators--in
essence, an intelligent grid with active consumer
participation--the information needs and the ability of
computers to process that information will increase
significantly.
4. The actions and pubic policy efforts that will support
Smart Grid development
PJM has identified several actions that we believe should
be taken today to support development of the Smart Grid. There
is no one government or business organization that can make the
Smart Grid happen all at once. Rather, from our perspective
there are activities that have to be taken at the Federal and
state levels and among all segments of the industry for the
transformation to occur. With that said, however, we believe
that there are some first steps that Congress can and should
support:
<bullet> Development of a regional technology plan--
Today PJM and its members and stakeholders develop long-term
regional transmission plans that are designed to identify the
transmission infrastructure required to assure reliability and
economic efficiency. We believe that for the Smart Grid to
develop we should work with our asset owners to develop a
living technology plan to ensure that we have a coordinated,
deliberate and realistic plan to make this transformation. In
our view, this collaboration is essential to make sure that, in
the end, the installations that are being made throughout the
system will work together to achieve our common goals.
<bullet> Promotion of horizontal network systems,
including standard communication protocol and service oriented
architecture--Industry and policy makers must support the
development of a web-based communications network that uses
service oriented architecture to enable the Smart Grid network.
In other words, industry and government must insist on the goal
of interoperability to ensure that all devices on the system
are able to communicate. This is the same sort of common
information protocol that enabled the Internet. We believe that
Congress can help ``jump-start'' this effort through
encouraging the industry to develop uniform interoperability
protocols, the equivalent of open network architecture that
guided the development of today's telecommunications network.
Today, there are a plethora of agencies with jurisdiction over
some part of the Smart Grid--ranging from state PUCs, to the
Departments of Energy and Homeland Security to the Federal
Energy Regulatory Commission. We believe that a coordinated
effort among these agencies can help to reinforce industry
efforts at developing common protocols.
<bullet> Regulatory reform at multiple levels--We need
to look at the current methods in place to regulate retail and
wholesale utilities and identify any and all impediments to
Smart Grid implementation. For example, industry and regulators
must examine whether the timing and mechanisms currently used
to recover capital assets are impediments to investment in new
infrastructure and technology. We believe it is incumbent on
regulators to examine methods for regulating retail utilities
which might inadvertently be serving as impediments to
advancing energy efficiency and demand response. If utilities
are only economically rewarded for increasing throughput and
making new investment in traditional generation, transmission
and distribution plant, it will be difficult for them to
embrace a regime where the goal is less throughput and
increased consumption efficiencies.
In closing, we are on the precipice of requiring billions
of dollars of investment in the electric industry, including
billions of dollars in transmission infrastructure. This
investment is necessary to ensure the continuing reliability of
our electric infrastructure and hence, the well being of our
Nation's economy. The challenge and opportunity before us must
be to ensure that investments in technology and infrastructure
are transformational and will allow us to secure a reliable,
economically efficient and environmentally-responsible industry
future.
----------
Mr. Boucher. Thank you, Ms. Zibelman, and thank you to each
of the witnesses for what has been a very informative series of
presentations on your part. We have two votes pending on the
Floor of the House of Representatives and all of us are
required to respond to that. It is sometimes the most
disagreeable thing I have to do all day because I wind up
leaving very interesting conversations such as this in order to
do it. But we will be going to the House floor, and my
intention is to recess the subcommittee pending these two
votes. We should be back in about a half-hour, and so stay
where you are, if you will. Leave the room if you like, just
come back in about a half-hour. And as soon as the last vote is
over, perhaps 5 minutes following that we will reconvene this
hearing. Thank you.
[Recess.]
Mr. Boucher. The subcommittee will come to order, and
thanks for everyone's indulgence while we completed our
business on the House floor, at least for this period of the
day, and I am going to recognize myself for 8 minutes in order
to propound a series of questions to our witnesses.
Mr. Delurey, let me begin with you. We worked very closely
with you as we were placing in EPAct 2005, the energy bill that
was signed in August of that year, provisions relating to smart
meters and real-time pricing, and as you described in your
testimony, that provision required the States to at least
consider putting in place a regulation that would require real-
time pricing and facilitate the introduction of smart meters.
In your testimony today, you indicated that the States have
made some efforts to follow through on those proceedings and
consider rules, and I think you also said that of the States
that have done so, most have decided not to adopt rules
Mr. Delurey. That is correct.
Mr. Boucher. And I was somewhat concerned to hear that. Let
me get you, if you will, to tell us how many States have
followed the direction of EPAct 2005 and decided to undertake
at least an examination of whether or not a rule is necessary
and how many States are in that category, and among those that
have started such a proceeding, how many have decided to adopt
rules and how many have decided not to, and then finally, what
is the reason that the States have given for not adopting rules
and what I take are the very large number of instances where
they have not?
Mr. Delurey. Thank you, Mr. Chairman. The provisions that
you speak of indeed established a requirement for all States as
well as jurisdictional bodies with respect to co-opportunities
and municipal utilities and so on to conduct an investigation
but also importantly to make a finding as to whether or not
utilities under their jurisdiction should be required to offer
not just real-time rates but time-based rates and the smart
meters that are needed to go along with them. The legislation
gave them until August 2007 to complete their work and to make
a finding so there are still a large number of proceedings
underway. By our count, approximately 14 States have completed
their proceeding. Only one State has made a definitive
adoption, a clear adoption of the standards, but not all the
other States are complete rejection, at least I wouldn't want
to characterize them, and this is what I referred to in my
testimony where I think these provisions have had a big impact
in terms of building awareness and visibility for this entire
area and it has had States looking into this that have clearly
never looked into it before but most have rejected it. Some
have rejected it in a formal way but they have requested that
their utilities move forward in certain directions so I want to
be fair and state that.
In terms of why they haven't done it, in some cases they
have stated, and this is factual, that they have had these
types of rates ``on the books'' for a number of years and that
customers don't seem to be interested in them. But again, I
think that is looking backwards and not forwards. The type of
metering technology we are talking about today is what is
available over the years and it was very expensive to put a
customer on these types of rates. So I think those States
incorrectly looked backwards to cast forward instead of really
assessing the current situation.
Mr. Boucher. Well, it is not a very encouraging report but
I appreciate your making it nonetheless.
So let me ask the obvious question. What do we need to do
now in order to improve the situation and address the
shortcomings that exist and encourage both the time of use and
real-time pricing methodologies at the State level, and also
encourage the greater deployment of the smart meters? What is
our role in helping to narrow that gap and move all of this
forward?
I would ask that question of everyone, not just one.
Mr. Delurey. One of the things I would say, and this also
perhaps is an additional answer to the question of why it
hasn't happened to a greater extent than it has, and that is,
your average State utility commission, I think the challenges
of trying to put all this together, the many moving parts of
demand response and the smart grid, the technologies, the
prices and all of that, that can be a challenging endeavor and
I know from having witnessed some of these proceedings that
they haven't necessarily had the resources, the training, the
technical assistance, the tools and so on to be able to maybe
do the best job that they would otherwise could have.
Mr. Boucher. So the State commissions need better resources
in order to carry this forward?
Mr. Delurey. I believe so and I think that is an area where
the Congress could be of assistance.
Mr. Boucher. Do you have concrete recommendations for us on
that?
Mr. Delurey. Well, again, as I noted in my oral remarks
today and in my testimony, I think there are vehicles by which
you can create that type of supportive infrastructure, if you
will, to be able to do that. I think whether it be through the
establishment of a new temporary commission and a national
action plan in this area, I think that is one way to do it.
There are probably other ways as well.
Mr. Boucher. All right. Would other witnesses care to
comment? Ms. Zibelman.
Ms. Zibelman. A couple things that come to mind that we
have been talking about. One is this whole issue is just
education and I think with adding to it, as I was indicating,
we measure the impact of demand response on the markets because
we actually have that price information. I think something that
we would look forward to working with DOE and FERC and our
States on is, how do we get a consistent way of measuring it
because if the States could see the cost benefit, that would
enable them to answer to their constituents, why are we putting
this new investment in, what is the benefit back to us, so I
think having a consistent way of measuring it so everybody
understands how to do it and then the RTOs or the utilities can
come up with these measuring devices. We are already doing this
with renewables when we measure emissions and I think adding
this type of information would be helpful. I think the second
piece that we have identified is actually technological
obsolescence. One of the problems, as you are well aware from
the telecommunications industry, of moving from copper wire to
fiber optics is how do you deal with old technology that is not
depreciated. So rather than actually tax incentives, I would
think that looking at the rules of depreciation and encouraging
utilities to invest more in technologies which will depreciate
faster and having the structures that support that would also
be another way of moving forward.
Mr. Boucher. Is there any need for national uniform
standard setting with regard to smart grid technologies?
Ms. Zibelman. Absolutely. The other issue is, I think
looking at the national standard setting and the various
agencies that are going to be interested in that like Homeland
Security, DOE and FERC and coordinating that. We think it is
going to be very important. Our issue, as the witness from IBM
said, is going to be interoperability. It makes no sense for a
retail utility to put a meter on and that the device of that
meter can't communicate back to the brains of the energy
management system and vice versa. And so we need to move to an
open architecture system, very much like we have seen in
telecommunications, and we need to make sure, insist on
interoperability among all these devices, which is a common
information protocol and something this Congress can do is
insist on that as the first stage of developing the smart grid.
Mr. Boucher. Should we designate a lead agency, the FERC,
for example?
Ms. Zibelman. I think that looking at the national
institute standards, maybe with coordination of the DOE. The
challenge with the FERC is that they don't regulate all the
potential providers, namely municipals and co-ops, so I think
if you have a broader-based energy working with the FERC as
well as Homeland Security would be a good way to go.
Mr. Boucher. OK. Thank you.
Yes, Mr. Yeager, we will hear from you.
Mr. Yeager. Based on my own experience, I would underscore
the fact that you have a cultural issue in the regulatory
community to deal with. The regulators and their staffs view
themselves in effect as the agent of the customer and the
customers are commoditized, if you will, behind that. So any
time you talk about reducing that role and being the
representative, you run into resistance. So I think what you
have to recognize is that is part of the culture. I saw it in
California and I have seen it in other States as well.
Mr. Boucher. OK. Dr. Howard.
Mr. Howard. Let me just reinforce a couple of comments that
have already been made. From what we are seeing, there is not a
uniform standard and it is something that is certainly needed.
I spoke last week at Grid Week that was here in Washington
about the importance of a uniform standard so that you could
have plug and play, whether it is the meter or it is an air
conditioner or something else. If we didn't have that in the
computer industry, just imagine what it would be like on a USB
port. We wouldn't have one. And so we must move in that
direction on the smart grid, and part of what we are doing with
our IntelliGrid Initiative is to help reinforce that and lay
out the blueprint that would help develop some of these
standards, and I know that Mr. Bryson, his utility is certainly
leading that by looking at what they are doing on their
advanced meter and trying to standardize some of these so that
they are interoperable, they communicate together and they tie
with all the other devices that fit on the grid so that you can
truly have millions of sensors that work together, communicate
together to optimize the whole system.
Mr. Boucher. From my work in telecommunications, I am aware
of the IEEE and the outstanding job it does just on the private
side in national standard setting for new technologies. Is
there a role for IEEE or some parallel organization to help
with this?
Mr. Howard. Absolutely. In fact, we have been heavily
involved in several of those activities and working with other
government agencies and utilities but we all have to come
together to develop the right standard and----
Mr. Boucher. You are saying it is not happening fast
enough?
Mr. Howard. It is not happening fast enough. That is
correct.
Mr. Boucher. And so government has a role to play in order
to facilitate it moving forward more quickly?
Mr. Howard. Well, there is a role that the government would
play along with the utilities. Even manufacturers of equipment
have to come together and focus on a standard being
implemented, and that was a big part of my statement last week
at Grid Week.
Mr. Boucher. All right. I think we understand that. I am
trespassing on other members' time here.
Mr. Gammons, can you be very brief?
Mr. Gammons. Just one comment. Most of the times that
standards are adopted, it is driven by the industry itself so
it is really implicitly needed that the utilities, the
consumers of these products demand the standards. There are a
lot of standards, both international standards and U.S.-based
standards that are out there and working very well. The real
key is for the industry to demand those standards and the
interoperability and that will drive the standards change. That
has been key in every industry.
Mr. Boucher. Thank you all very much.
The gentleman from Illinois, Mr. Shimkus, is recognized for
5 minutes.
Mr. Shimkus. Thank you, Mr. Chairman.
It is great to have you all here. I would concur based upon
the years here that we have to have national uniform standards,
especially if we move to hopefully a distributed system.
Otherwise that inhibits all the advancements and I think that
is something that we will work on with the chairman to ensure
that. I have got some questions that my staff didn't feed me.
There is a debate. On the next panel I have got one individual
from the Illinois Commerce Commission and of course Illinois is
going through some interesting electricity issues so let me
just pose this question. I am a competitive market guy and I
like wholesale wielding of power, retail folks, but the
question I pose is, are we best to get to this new era with the
investment required through a regulated monopoly or is the
competitive market system the best way to get to this next
generation of how we I think produce power because that is on
one end but also consume it and manage it on the other. And if
you can be real brief because the chairman only gave me 5
minutes, and anyone who wants to address that issue.
Monopolistic system or a competitive market model? Mr. Yeager?
Mr. Yeager. Thank you, sir. The Galvin Electricity
Initiative started by Bob Galvin, one of the leaders in your
State, is really based on opening up the system to
entrepreneurial competition just as was done with
telecommunications and computing, and it is in fact the last
network industry that is in this closed monopoly position.
There is a great deal of private money out there that can
increase the quality and reliability of service with the
creation of microgrids that connect the bulk power grid to the
consumer, bringing in all the technologies that my colleagues
here at the table have talked about but applying them in a
private sector environment that really raises the quality bar
on electricity. It uses the bulk power grid as the primary
energy source but does not be constrained by the reliability
and quality--there are tremendous numbers of very large
entities in the private sector who both need and are prepared
to provide and help in that whole effort.
Mr. Shimkus. Anyone else? And please be quick if you can.
Go ahead. Just go left to right.
Mr. Delurey. I will just quickly say that with demand
response and smart metering, in one sense it doesn't matter in
terms of making it happen. You can do it under a traditional
vertically regulated system or you can do it in a competitive
system. One note of history----
Mr. Shimkus. But the real question is capital formation.
How do you get the money and is that through a regulated price
increase set by the commission or by a market response on a
return on investment?
Mr. Bryson. We have competitive power generation in
Illinois there. We have the regulated utility in California. I
think California has taken a reasonably good approach to this
mix of competition where there are competitive advantages.
There are opportunities with a competitive system to introduce
new products and drive costs and innovation, and having a
regulated distributed system so they can work effectively
together, it is a question of thinking hard about which works
best and which model so fundamentally the distribution system
as a system that serves universally everybody is driven by
forces that innovation bring I think are working well in
California. Certainly that has contributed to our leadership on
all the smart grid technology.
Mr. Shimkus. Great.
Ms. Zibelman.
Ms. Zibelman. I would echo. The way we look at it is, the
distribution system will remain regulated but unless you have
the competitive markets that support the prices to the devices,
you won't get the customer response and so you do need to
continue on the march towards competition and true innovation.
Mr. Shimkus. And innovation, it is easy when you build a
new home to put in the new technology and the wiring stuff but
it is folks like me who have a home, want to stay there and
then rewiring, reconnecting and stuff to get to a smart system
and that is where we come in with maybe tax incentives and how
we do that.
Ms. Zibelman. And I think though that is where you can
change the model because if you have competition, it may not be
that the homeowner actually makes the investment but that
somebody else looks at your load and realizes that is valuable
in the market and actually pays you for your load, which is as
valuable to the market as generation. And so you are changing
the model of the industry from a commodity model to a service
model and that is really where the true innovation I think will
occur.
Mr. Shimkus. And Mr. Chairman, if I may, with one last
question. I also serve on the Telecommunications Subcommittee.
We see a convergence obviously in all this stuff in the digital
age. There is a lot of debate about high-speed Internet access
over electric wires. That is all part of this, isn't it? Or
could it be? Because if you are able to send digital
information over the current distribution and transmission
system, then that will help us in the interactivity that has to
be done with the metering systems and the individual
appliances. Is that a correct analysis?
Mr. Delurey. I would say that is correct. There is a number
of different communications technologies that all compete
today--power line technologies, wireless radio frequency--and
in terms of your own home, your existing home, there is a lot
of work that has been done for in-home wireless devices that
allow the meter to talk to other devices in the home as well as
through the existing power lines within your home.
Mr. Shimkus. Thank you, Mr. Chairman. I yield back.
Mr. Boucher. Thank you, Mr. Shimkus.
The gentlewoman from California, Ms. Harman, is recognized
for 5 minutes.
Ms. Harman. Thank you, Mr. Chairman. I think the testimony
of our witnesses exceeded expectations. This is a fascinating
subject and I continue to believe that if we only do one thing,
this is what we should do. But if course we should do more than
one thing.
Mr. Kamen, you have charmed us all and all of us want to
learn more about what you do. I just had a thought that maybe
one of your little black boxes ought to be used to power
Congress. We generate a lot of wasted heat here and some would
even say we can produce cow dung, and what we need here is some
light. So I would just like you to think about this. It might
be a project that would be worthy.
I have lots of questions but limited time and I do want to
direct a question to John Bryson. I hosted an energy expo in
California a couple of weeks ago at the large green industrial
facility that Toyota has and I think it is the largest green
industrial building in America and I commend Toyota for that.
Edison was one of the exhibitors and participated in panels on
what individuals can do and what are the big policy issues on
climate change. But there was a guy outside with his plug-in
hybrid and he showed how he had improved the engine of what was
a hybrid car to add the electric feature and he said that his
total energy costs per year for his car and his house, which
had solar panels on the roof, was $44. So in 3 minutes and 18
seconds, I would love to hear what these smart technologies
could do to move us all along to plus-in hybrids and other car
engines that would eliminate our dependence on oil and give us
clean and abundant energy.
Mr. Bryson. I appreciate the question and I will try to do
it within 3 minutes. This is an enormously exciting period of
time for those of us that love this field. We see electric
transportation as transforming. It can't take place unless it
is enabled by a smart grid. It just won't happen. So we have to
have the capacity as soon as possible to price to customers in
ways that reflect our true cost, and since our true costs are
so very low through the night, the plug-in electric vehicle is
a natural complement to an electric system. And by the way, the
electric system is so much more controlled environmentally
than, for example, the existing or future generations of
conventional gasoline-powered automobiles.
It doesn't matter what section of the country you are
talking about, even let us say it is coal-fired power
generation, the controls are sufficient that generating
electricity as a transportation fuel has huge environmental
benefits even with the dirtiest source of traditional fuels for
electricity.
But what can happen, wait for 15 years, have this lack of
transportation work in California? Now Ford Motors says it will
come forth by 2010 with a plug-in electric vehicle. General
Motors has a similar time frame. Toyota doesn't announce but
you know Toyota is doing a lot in this area so there has been a
kind of monopoly on gasoline and petroleum as fuels for
vehicles. That will change. The U.S. Department of Energy
itself did this study. It is an amazing study that said we had
this fundamentally wasted resource in the electric grid because
so much of it is built to serve only those needle-peak times
like California in the summertime when it is so strikingly hot.
In the inland we demand all the electricity. The rest of it
goes to waste. The electric vehicles could tie into that,
reflect the low cost of adding service to them with overnight
in the garage, simple plug-in. We could empower, the Department
of Energy says, over 70 percent. It just won't happen but it is
an image, over 70 percent of the vehicles existing today could
be transformed into electric vehicles and no additional demand
on the infrastructure of the electric system. So high
productivity, you bring in the additional revenues, you bring
down costs for everybody, so it would be economical, it would
be environmentally beneficial and it would provide
transportation alternatives.
Finally, as you know, Congresswoman Harman, it is not just
vehicles. There has to be electrification of transportation in
Los Angeles simply to meet air quality standards. The ports
have to change. Idling trucks in truck stops have to change. So
electrification with a smart grid can make a huge difference.
Oh, by the way, the last point, on the sell back, we have at
Southern California Edison a new program that would allow, for
example, plug-in electric vehicles, solar on rooftops, to sell
back into our system and reduce their net bill.
Mr. Boucher. Thank you very much, Ms. Harman.
The ranking member of the full committee, the gentleman
from Texas, Mr. Barton, is recognized for 5 minutes.
Mr. Barton. Thank you, Mr. Chairman. I am not going to take
that much time. I have got to go to the Texas delegation lunch
so I will just make a few comments more than a question. I
think this is an excellent area that we can work together on
with the stakeholders because it has such potential. The only
problem I see is the perennial problem, do we preempt the
States as we do this, but it is obvious that there is emerging
technology and technologies that are about to emerge that would
make our grid much more efficient and market sensitive, time
sensitive in terms of pricing and things like this. So you have
got three panels. I will try to get back for one of the other
panels later this afternoon but this is a very informative,
fact-based hearing and it is the kind of thing that we need to
be doing, and I want to commend our witnesses for being here,
especially Mr. Kamen, who I have worked with before on some of
his innovations for handicapped folks. I think we have got a
winner in this hearing today.
With that, Mr. Chairman, I yield back.
Mr. Boucher. Thank you very much, Mr. Barton.
The gentleman from Pennsylvania, Mr. Doyle, is recognized
for 8 minutes.
Mr. Doyle. Thank you, Mr. Chairman.
It is a fascinating hearing, and thank you to all our
panelists. I was just telling my good friend Jane Harman here
that Mr. Kamen, I would like to have one of your little boxes
in my home in Pittsburgh but I can't figure out where to put
the cow. I guess that is a technology issue.
Actually, we are delighted to have you here. I co-chair the
Distributed Generation Caucus with my good friend Lee Terry
from Nebraska and like you, I believe that distributed
generation technology can, should and must play an important
role here, and you know, when you look at some of the barriers
to widespread deployment of distributed generation, it
includes, No. 1, just a lack of public understanding about the
benefits of distributed generation, the higher cost up front to
the consumer and the lack of ability to sell excess generation
back into the electric market. I just want to get your
thoughts. What do you think we can do as a Congress to address
some of the barriers that exist to widespread deployment, and
in an ideal world, what role would you see distributed
generation technology playing?
Mr. Kamen. The first thing I can tell you is you don't need
the cow.
Mr. Doyle. We don't have a lot of them in Pittsburgh.
Mr. Kamen. Well, the great thing about that little engine
is, it is omnivorous. It likes hydrogen, methane, propane,
natural gas, diesel fuel, gasoline. It is external combustion.
It literally doesn't care. The cow worked just fine but you can
use whatever is in your house, which we think is critically
valuable and important and maybe to answer your question about
what you could do, I could tell you a short story. While we did
develop that thing for the world that has no grid, here where
we do have a grid I don't think it should be seen as a
competitor. Where you already have a grid, I think it is a
perfect complement, and I was very nervous this morning that I
would hear people saying quite the contrary but since everybody
recognizes the fundamental issue here, I would say one of the
great things about a little box like ours or anybody's that can
do combined heat and power since every home I know of needs a
kilowatt or 2 of electricity and at least 3 or 4 or 5 kilowatts
of heat and if you could use at least the fuel whatever is your
cheapest fuel, your gasoline, your heating oil, few people
would use electricity to make heat, until you run out of the
need for heat, you essentially used every unit of your energy
to first turn 20 percent of it into the electricity and then
the heat, you would have a system which is better for
everybody, not just the environment. It would be cheaper for
every homeowner and that is a good thing. You are not asking
anybody to do anything except save money here. That is good.
I took that story to someone who will remain nameless, a
CEO of another company, probably near the scale of Mr.
Bryson's, and said why don't we put this thing in people's
homes, why don't we try distributed power, and they are a
massive, massive organization that burns a lot of coal, and he
literally said to me, if I could put that thing in the rate
base, I would buy 10,000 of them right now. He had a lot of his
experts in the room with him. They started explaining the rules
to me including ones, and I may get this wrong, well, since we
are a power producer, of course we can't own the transmission,
something about regulation and deregulation, and all I am
literally thinking if this is like telling a doctor he can't
own a stethoscope.
And then he goes on telling me and his experts more and
more about the incentives or disincentives, the regulations,
the rules or barriers, but it all came down to what I think is
the good news, that these guys are saying look, if I could
incrementally add when I need generating capacity instead of 10
years later I got to add a gigawatt so in the meantime I spend
a few years with undercapacity, then I build it and it is
overcapacity and these days it takes 10 years to--for all sorts
of reasons he said for the billion dollars, if I could buy a
million machines, put them in a million homes, he ticked
through the same things I said. It would be way more convenient
for me. I could build my capacity incrementally. I could know
that I could put critical load capability and control in every
home, and we have heard, people are more and more concerned
about reliability. You are already at 99.96. You are only off
by 0.04. That is 200 minutes a year. You are not going to be
able to get those 200 minutes by even hundreds of billions of
dollars of spending because you are too close to perfect now.
But if you could put little boxes everywhere so that during
that 200 minutes your critical stuff wasn't the problem, you
turned a potential catastrophe into an inconvenience.
So all the issues that I thought I would have to sell him
on looking at the 21st century with the 21st century in mind
instead of a 19th century infrastructure, I thought he would
buy. He did but he ended up saying maybe this is what you guys
have to fix, I don't know how, your problem. He literally said
it is not clear whether a utility company could own such a box.
It is not clear how they would account for it. He had a load of
issues, and by the way, we are one of those few companies that
does do electricity and gas and heat but there is a lot of
places in the country that are different than that and they
have different vested interests, keeping them separate, and
your box sits at the nexus. You plug your cow, your natural
gas, your heating oil into one side, your electric into the
other. You are a hermaphrodite. We wouldn't know what to do
with it. And in the end, I left there thinking it is
interesting that once again technology got ahead of an old
system but what I would say and what I would hope you would
agree with is, we are not only not competitive to the utility
companies at this point but seeing what this country wants,
what people need, what costs are, what the global issues are,
we could help them extend the life of an aging grid that could
use a little support out there. We could solve a lot of these
other issues of reliability. And I personally think that even,
and I was saying that a few minutes ago, why I think this would
be so great for a utility company if you guys can encourage
them or at least not prevent them or discourage them from doing
it is, I think we have a society that has grown up with a grid.
In Bangladesh, everybody will be pure distributed. In the
developing world, there are more cell phones per capita than
here because the enemy of great is good. We have a pretty good
grid so the rest of the world is going to leapfrog, we stay
here.
But as I was saying, where does the grid fit, where does
the utility company fit. How do we make this work? If I knocked
on a door in this town or any town where you live and said to
Grandma who opens the door, I got this box, I am going to put
it in your basement, it will sit in that dark corner next to
the thing that makes hot water or the things that make
electricity and you never go down there and you don't worry
about it, I will give it to you free and it will save you money
on your electric bill and on your oil bill, I am pretty sure if
I could walk around giving them away free, I couldn't do it
because the average homeowner has grown up in a society where I
don't worry about that magical stuff down there but I really
care that my house stays warm and my lights stay on and that
big utilities, whatever it costs, they do this for me and that
is what I need. Even if I put these in production or any
private industry other than maybe the really, really big guys,
I don't think you could do it, but if I could give those boxes
to the utility company or those utility companies could go to
Grandma and say last month you spent $70 on electricity and $50
on oil, if I put this box down next to the other boxes you have
down there which you may own or I may own and she doesn't even
know, I am going to lower your monthly aggregate bill, I will
give you more reliable electricity and more heat and I will
take care of all of this and you don't have to pay for the box,
if a utility company was encouraged to do that, I think the
rate of adoption of distributed power because they could
control it, they would win, they get past the problem of who is
connecting to who because they are on both sides of that
connection, it would be simple and straightforward. You ought
to figure out how to do it.
Mr. Doyle. Ms. Zibelman, with 5 seconds left on my question
time, you operate a pretty big grid. What do you think about
what he just said?
Ms. Zibelman. I think that is the lead-in in terms of where
we need to go. We have a rule, we talk about it in terms of
behind-the-meter generation, which is what distributed
generation is, and I think one of the things that we can do
which is actually something within the congressional and
Federal arena is to make sure that the rules that are in place,
particularly where we have markets, is that behind-the-meter
generation is treated fairly in the markets both in terms of
maintaining reliability standards as well as the ability for
load to sell into the markets. If we do that so again from a
perspective is from a market administrator, we don't care if
that next megawatt of generation comes from a central station,
power plant or a distributed generator. We are just going to
optimize and then where the role of FERC can come in is making
sure that the rules around demand response in the organized
markets are fair and treat demand response as well as central
station generation and distributed generation in a way that
would eliminate any impediments to market participation.
Mr. Doyle. Fascinating stuff. Thank you, Mr. Chairman.
Mr. Boucher. Thank you very much, Mr. Doyle.
The gentleman from Utah, Mr. Matheson, is recognized for 5
minutes.
Mr. Matheson. Thank you, Mr. Chairman, and it has been a
fascinating hearing.
Mr. Bryson, in your testimony you noted some customers will
program their appliances to respond to smart meters and
automatically reduce usage when power costs rise. We have also
heard talk about we can have appliances that will automatically
do that and customers don't need to program it but of course
everyone already owns their appliances now and you are not
going to see everyone go out and buy the automatic ones right
away. I assume that is what you are talking about in terms of
customers who respond.
Mr. Bryson. Slightly different. What we see and I think
will evolve quite rapidly in California is customers that want
to have remotely controlled or automated appliances will have
these communicating appliances. Thermostats exist today, air
conditioners, dishwashers, electric dryers. But we will offer a
program in which a customer on a voluntary basis says to the
utility, will you please manage that at least cost for us, give
us some parameters, we will do it remotely with the aid of the
advance meter and the communication systems associated with it
or the computer, the individual homeowner's computer or
business owner's computer can do it without us being involved.
Mr. Matheson. As I look at the issue of smart meters and
sending price signals to consumers to affect behavior, one of
the impediments that I am trying to figure out and maybe the
panel can help us with this, is that right now we have time-of-
day metering and time-of-day rates for large industrial users
but at least where I live as a residential customer, I don't,
and I have no incentive to get a smart meter or any of this
until my utility adopts a rate structure that sends me those
price signals, and Congress isn't going to go out and tell all
the utilities to do this. It is up to the State regulators, as
I understand it, and I know this is probably a good topic for
the next panel actually. But isn't that really the impediment
to getting people, one of the impediments to having consumers
go out and embrace the notion of getting smart meters in their
home?
Mr. Delurey. That is part of the conundrum. You can't have
a smart meter and not do the pricing. You can't have the
pricing if you don't have a smart meter. And so a lot of that
does come down to the State regulator having to decide and many
of them have been politically concerned about changing what
have been decades of flat rates that customers are used to.
Even when presented with options where it would be voluntary
for those customers to be on those rates, there has still been
reluctance, and I think part of the remedy is what I talked
about before, we need more support in many different ways
provided to State regulators but also the State regulator as
the watchdog for how the money is spent in a State. Anything we
can do to buy down the cost of these technologies to get them
in more quickly would be useful as well.
Mr. Matheson. But when you talk about a conundrum, in my
mind this is not one of those which came first, the chicken or
the egg. I think you have to have the rates and the price
signals in place before people are going to get the meters.
Would you agree with that?
Mr. Delurey. Well, you actually can't do it that way
though. If you don't have a meter in place that measures on a
time basis, you can't bill on a time basis.
Mr. Matheson. Understood, but I am not going to go buy a
meter if the rate is not in place. Maybe I am missing something
here, but to me, the utilities have to indicate to me what a
cost is at 2 o'clock in the afternoon versus 2 o'clock in the
morning, and once I know that as a consumer, I can make an
informed decision and go out and buy one of these meters but I
am sure as heck not going to go buy a meter when the utility
says yes, some day we will tell you what the price is and we
will give you those price signals later, go out and buy your
meter now.
Mr. Bryson. The model needs to be that the utilities go
forth and put the smart meters and smart grid in, and I guess I
am at least cautiously optimistic about that. With what we put
out, we put out this, as I indicated, challenge to the market
and they have come forth. We are doing this on an open
architectural model. We have eight manufacturers in the last
year that have come up with this. We have utilities all over
the country, all over the world coming to our offices in
southern California to see how this is going. A Canadian
utility is moving with one part of this. So I don't want to be
overly Pollyannaish about this but I think this is coming and
coming fast.
Ms. Zibelman. If I could just add, you are absolutely
right. The only way you are going to have customers see the
value of participating is if they get the price information,
and then they become partners, and plus from the standpoint of
the operator, the operator needs to see the customer respond as
well because that is the only way we know that the system is
going to remain reliable so we need the price signal to get the
customer and then we need the signal back to the operator to
preserve reliability.
Mr. Matheson. Thank you, Mr. Chairman.
Mr. Boucher. Very good, Mr. Matheson. Thank you.
The gentleman from Washington State, Mr. Inslee, is
recognized for 5 minutes.
Mr. Inslee. Thank you. I really appreciate your ideas. One
of the reasons I appreciate your testimony is, you have
confirmed my prejudice, which is always comforting. I just
spent a year writing a book about clean energy and looked at
the great things people are doing right now in energy
efficiency, both business-wise and consumer-wise, and you are
sort of confirming this potential. I sort of hear you say there
is somewhere between a 5 and 20 percent reduction of electrical
usage while still enjoying our lifestyle that we now enjoy and
that is a huge number when you start looking at the challenges
we face on global warming and everything else. I really
appreciate your testimony.
I wanted to ask you if any of you had comments about the
idea of decoupling utilities to inspire them to start to make
investments in the smart grid or otherwise take actions to
really move to a more efficient system. Some of us have looked
at some other models where decoupling would suggest it would
help utilities move in that direction where there would be an
economic incentive to sell less product rather than more. The
current situation in most utilities is, the way the rate
structure is set up, there is an economic incentive to sell
more product and the more electricity you sell, the more money
you make, whereas our need in global warming is to quit wasting
energy and particularly that created by CO\2\-emitting
generating facilities. So it seems to me that is an
opportunity. I just wonder if any of you have any comments
about that. And I am sorry if you have talked about this
already. I was at a global warming hearing the rest of this
morning.
Mr. Bryson. I would be pleased, in fact excited to respond
to what I think is an incredibly important issue and question,
and I will give you just a little personal--California has
decoupled so there is no linkage between the opportunity for
revenues or more importantly for net income for investor-owned
utilities in California associated with additional sales of
electricity. That goes all the way back to the second oil price
spikes of 1979. Just a personal note, I was made chairman of
the California Public Utilities Commission at the time. I had
this environmental background. But we did that in 1981 and it
has been true with a short lapse ever since. That I think in
turn has enabled a lot of the programs that we have in
California so it is in my testimony but our company was very
pleased that the Department of Energy has given us this
recognition. We, through what I think have been cost-effective
programs of energy efficiency and energy conservation, support
from the utility had much higher level of energy conservation
and efficiency associated with our programs than any utility in
the United States but that delinkage is essential because
otherwise we have these conflicting incentives. That is the
reason it was changed in 1981 and the California Public
Utilities Commission is now looking at a proceeding as
indicated. It will not only make it neutral with the decoupling
so it is neutral to the opportunity for a utility to earn but
will affirmatively incentivize it so as of something like
August of this year, it is anticipated that the State of
California for investor-owned utilities will provide an
affirmative earnings opportunity for efficiency programs.
Mr. Inslee. Does anyone else want to comment on that? Yes?
Mr. Yeager. I would just observe that I think we are
entering into a period that is going to force considerable
change at the regulatory level and introduce the kind of smart
technology we are talking about, and it is basically that rate
cases are a political third rail for regulators and usually for
the governments in the State. We have frozen rates for years,
decades. They cannot be frozen any longer and I think if the
commissions go to their communities and say we are going to
double your rates but we are not going to give you any better
service and we are not going to give you any control over your
bill, I hope there is considerable pushback. In fact, I have
seen that here in Maryland recently. I think you are going to
see that all over and basically this is an offer that can't be
refused. We can offer you much better service, we can offer you
the ability to control your bill and we can also fundamentally
reduce the cost of the infrastructure we have to put in because
we are going to effectively have the customer build some of
that infrastructure and also reduce the demand. So I think
there is a window of opportunity here but I think that the
commissions really have to be, I don't want to use the word
educated but I think that their consciousness and they have to
be encouraged to move in this direction.
Mr. Inslee. Thank you. The witnesses have all been helpful.
I want to leave you with some optimism today. Things are
happening here in Congress and you are helping that. I have
introduced several bills that I think would advance this
agenda, a net metering bill which I have been trying to pass
for 4 years, we now have a good chance of passing that to help
the smart grid develop, a plug-in hybrid bill to incentivize
the creation of plug-in hybrids which will give us a large
battery to use our generating capacity. It is incredible. This
study came out saying we got enough capacity, idle capacity at
night if we have a storage facility for all that energy, we
don't have to build any more plants. In the western United
States, we have got existing infrastructure built that we just
need a storage capacity. The Low Carbon Fuels Act, which will
create a standard for low-carbon fuels which will incentivize,
making the grid more efficient, so I appreciate your testimony.
I think we are going to get some things done here, and thank
you for your work.
Mr. Boucher. Thank you very much, Mr. Inslee.
I would like to again express the committee's appreciation
to this panel for your excellent presentations here today. This
is one of the more interesting panels we have had the privilege
to hear from, and we are grateful for your taking time to join
us here. There probably will be some additional questions that
other members would like to propound to you. That will be done
in writing. And when you receive a letter, if you could respond
to it promptly within a matter of a week to 10 days, that would
be much appreciated. And the record shall remain open for the
purpose of those questions and answers. With the committee's
thanks, this panel is excused.
We now welcome our second panel of witnesses consisting of
three witnesses. The Honorable Jon Wellinghoff is a
commissioner of the Federal Energy Regulatory Commission who
has been very active on the issue of advanced metering and
smart grid development. The Honorable Robert F. Lieberman is a
commissioner with the Illinois Commerce Commission. Mr. Kevin
Kolevar is the director of the Office of Energy Delivery and
Electricity Reliability at the U.S. Department of Energy. I
want to say welcome to each of our three government
representatives today. We appreciate your taking time to
testify before us. Your prepared written statements will be
made a part of the record and we would welcome your oral
summaries hopefully kept to approximately 3 minutes.
We will be pleased to begin with Commissioner Wellinghoff
from the FERC.
STATEMENT OF JON WELLINGHOFF, COMMISSIONER, FEDERAL ENERGY
REGULATORY COMMISSION, WASHINGTON, DC
Mr. Wellinghoff. Thank you, Chairman Boucher and members of
the committee. I first want to indicate that I am testifying
here today on my own behalf and not on behalf of the Commission
but I would like to thank you all for inviting me here to
testify before you on this very important issue, the smart
grid. I actually found the last panel fascinating. I am going
to send all my remarks right out the window. I know you are
going to put them in the record. I am going to sort of shoot
from the hip here a little bit with respect to a few comments
that I have on the last panel and some of the things that were
said.
As you are all I am sure aware, the FERC does regulate
wholesale rates and the wholesale electric markets. We are very
interested in ensuring that those markets work effectively and
work on behalf of consumers. We think we can do that with
competition but we think competition has to be on both sides of
the meter. We have to have competition on the supply side and
we have to have competition on the demand side. With respect to
demand response, we heard earlier Mr. Delurey talk about it. I
think that it is important that demand response have an equal
place to play in those competitive markets and I think by doing
that, we can enable the smart grid. We need to give consumers
the opportunity and the tools to respond to a smart grid. As
you heard from the earlier panel, we do need to have price
signals correct but consumers have to have means to respond to
those price signals, and the way they can respond to those
price signals best is, No. 1, have regulatory tariffs in place
that allow them for economic benefits for responding to them
and No. 2, have the technology in place to be able to respond.
We heard about some of the technologies that I think are very
important to recognize. One that Mr. Gammons talked about that
the Pacific Northwest National Labs is doing, the Olympic
Peninsula experiment that they have done, very interesting work
by embedding in appliances in homes certain types of chips that
can respond to the grid and frequencies in the grid and price
signals from the grid. Those things need to be enabled so that
consumers have opportunities to respond.
Mr. Kamen's box I think is fascinating and I think it is
complementary to the grid. We need to figure out how to enable
distributed generation and look at choices between capital
flows between centralized generating plants and more
distributed generation. I think distributed generation in fact
can be an enabler for the smart grid because when consumers in
fact put distributed generation in their facilities both their
commercial and residential facilities ultimately will allow
more smart grid technology to be pulled in.
And then finally, I would like to mention plug-in hybrid
electric vehicles. I think those vehicles also can be an
enabler for the smart grid because we can use them not only to
charge from off-peak times and also do things like integrate
better in wind technology and other renewables into the grid
but we can also use them to provide power back to the grid, do
things like regulation and spending reserve. In fact, there was
a recent study that came out by the National Renewable Energy
Lab that indicated that payments could be provided back to an
individual owner of a plug-in hybrid electric vehicle as much
as $2,000 to $4,000 per year per vehicle for spending reserve
and regulation services. This could in fact allow consumers to
buy these vehicles at cost that would be similar to a gasoline
vehicle and also provide for efficiency of the grid. If we can
make the grid just 5 percent more efficient, we can ultimately
reduce the need for 85 large coal plants. That is power we
don't have to use, emissions we don't have to make.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Wellinghoff follows:]
Testimony of Jon Wellinghoff
Good morning, Mr. Chairman, Ranking Member Hastert, and
members of the subcommittee. My name is Jon Wellinghoff, and I
am currently serving as a Commissioner on the Federal Energy
Regulatory Commission
I would like to thank you for inviting me to appear before
you to discuss a vitally important issue: the potential of a
smart electric transmission grid that employs advanced
communications and control technologies to enable and utilize
bidirectional flows of information. Before addressing that
issue, however, I wish to indicate that I am speaking only on
my own behalf and not on behalf of the Commission. By way of
background, I have 32 years of experience in the field of
electric utility regulation and electric system analysis and
oversight. I authored the Nation's first comprehensive
integrated resource planning statute for electric utilities
(enacted in Nevada in 1983), as well as one of the Nation's
first electric utility portfolio standards that combines
renewable energy and energy efficiency in a single portfolio
(enacted in Nevada in 2005). A copy of my biography is attached
to my testimony.
The electric transmission grid in the United States is one
of the largest and most complex machines in the world, capable
of carrying over 850 gigawatts of energy. Unfortunately, a
decades-long decline in transmission investment and a
precipitous decline in investment in demand response, primarily
in the last decade, now threaten to impair the reliability of
that machine and cause billions of dollars in congestion costs.
This large and complex machine and our associated energy
infrastructure are in desperate need of improvement. However,
it is essential to recognize that we cannot simply build our
way out of these problems. The primary impetus of change in the
past, and no doubt, of change that we will see in the future,
is technology. Therefore, as we invest in new energy
infrastructure, we must spend smartly. We must spend
efficiently. We must promote investment in efficient
transmission facilities and state-of-the-art transmission
technologies, as well as facilitate demand response and
distributed generation, in order to address the Nation's energy
challenges and ensure the greatest benefits for consumers. As
an example, if we could make the electric grid even 5 percent
more efficient, we would save more than 42 gigawatts of energy:
the equivalent of production from 42 large coal-fired power
plants. Those are plants that we would not need to build and
emissions that we would not produce.
In the Energy Policy Act of 2005 (EPAct 2005), the
Congress emphasized many of these same principles. In
particular, the Congress required the Commission to promote
reliable and economically efficient transmission and bulk power
markets by, among other things, encouraging deployment of
advanced technologies. Indeed, in section 1223 of EPAct 2005,
the Congress provided the Commission with guidance as to types
of technologies to encourage, including, among others,
controllable load such as demand response; distributed
generation, including fuel cells, microturbines, and
photovoltaic energy systems (like the one now under
construction at Nellis Air Force Base in Nevada); energy
storage devices; and enhanced power device monitoring.
The Congress recognized the benefits of these technologies
and emphasized the need for their wider deployment. These types
of distributed resources can discipline peak market prices,
provide a hedge against volatile fuel prices, alleviate
congestion, improve reliability, and potentially be a cost-
effective means to complement or defer transmission expansion
or improve the efficiency of transmission upgrades.
Benefits of Demand Response
I would like to focus first on demand response, which the
U.S. Department of Energy defined as follows in a February 2006
report to the Congress:
Changes in electric usage by end-use customers from their
normal consumption patterns in response to changes in the price
of electricity over time, or to incentive payments designed to
induce lower electricity use at times of high wholesale market
prices or when system reliability is jeopardized.
The Commission's Staff has reported that the total level
of demand response reductions achieved by independent system
operators (ISO) nationwide on peak days during the summer of
2006 was approximately 8,800 megawatts. These reductions
represented between 1.4 and 4 percent of ISO system peaks, with
reductions in load pockets such as Southwest Connecticut
approaching 6 percent. The corresponding reductions in
wholesale market clearing prices were between $100 and $300 per
megawatt hour. These price reductions mean that consumers saved
hundreds of millions of dollars last summer alone due to the
use of demand response by the ISOs in these wholesale markets.
The benefits of demand response are also the subject of a study
that Dr. Ahmad Faruqui of The Brattle Group presented at last
week's National Town Meeting on Demand Response, which found
that just a 5 percent reduction in U.S. peak demand is worth
$31 billion (NPV) over a 20-year period, based only on avoided
costs.
We should not underestimate the power of consumers to
drive smart-grid technologies. The more that consumers see
economic benefits of demand response, the more they will want
demand response opportunities and the more they will support
investments in the smart electric grid that makes more demand
response possible. Thus, not only does a smart grid enable
wider use of demand response, but demonstrating the benefits of
demand response to consumers also brings us more rapid
implementation of the technologies necessary to enable a smart
grid.
Commission Action on Demand Response and Other Advanced Technologies
The Commission has taken to heart the Congress's directive
to encourage wider deployment of demand response and other
advanced transmission technologies. Over just the past eight
months, the Commission has taken several steps to develop a
platform to support a smart electric grid. For example, in
February of this year, the Commission reformed its open access
transmission policies to, for the first time, put demand
response and other distributed resources on equal footing with
other resources in directly contributing to the reliability and
efficient operation and expansion of the electric transmission
system. The Commission's Order No. 890 provides that demand
response and distributed generation may provide a variety of
ancillary services when they are capable of doing so. The
Commission also found that when such resources are capable of
performing needed functions, they should be permitted to
participate on a comparable basis in open, transparent
transmission planning processes, and that stakeholders should
have a forum to come forward with demand response project
proposals that they wish to have considered in development of a
regional transmission plan.
The Commission has also taken steps to integrate demand
response into new mandatory electric reliability standards, the
development of which is one of the most important
responsibilities that the Congress placed on the Commission in
EPAct 2005 (section 1211). In March, the Commission issued a
Final Rule that found that demand response should be allowed to
be used to comply with reliability standards governing
contingency reserves, reactive power, emergencies, and planning
the reliable bulk power system. The Final Rule also makes clear
that demand response must be technically capable of providing
the function required by a reliability standard. The Electric
Reliability Organization (ERO) will develop the process for
determining such technical capability through its standards
development process.
Last fall, the Commission and the National Association of
Regulatory Utility Commissioners (NARUC) jointly launched a
Demand Response Collaborative to explore how to better
coordinate approaches to demand response policies and
practices. The Collaborative has laid a solid foundation in its
initial meetings, and I look forward to further discussions
this summer. Initiatives are also underway at the Commission
and several ISOs and regional transmission organizations (RTO)
under our review to integrate demand response into energy and
capacity markets. In addition, the Commission is conducting a
series of conferences to examine the state of competition in
wholesale electric markets and to explore the role of demand
response in those markets. The Commission is also developing a
plan for a new staff unit that will focus on demand response in
order to create additional expertise within the Commission on
such innovative technologies.
On a related matter, the Congress directed the Commission
in section 1241 of EPAct 2005 to provide incentives for
transmission investment that promotes reliable and economically
efficient transmission and generation of electricity and to
encourage deployment of transmission technologies and other
measures to increase the capacity and efficiency of existing
transmission facilities. In its rule implementing that
directive, the Commission highlighted the importance of
investment in economically and technologically efficient
transmission infrastructure. I have emphasized in a number of
subsequent cases that the Commission should target incentives
that increase an applicant's return on equity to investments
that provide incremental benefits, such as gains that result
from the deployment of best available technologies that
increase operational and energy efficiency. Targeting
incentives in this manner would encourage the deployment of
smart grid technologies.
Further Steps toward a Smart Electric Grid
Thus, the Commission is moving forward in developing a
regulatory framework to enable an efficiently designed, smart
electric grid. It is my hope that States will examine how their
consumers can benefit most from that framework, including the
opportunities for demand response to participate in wholesale
electric markets.
There is much more work to do, however, if we are to
achieve the full potential of a smart electric grid. For
example, widespread deployment of advanced metering technology
will empower more consumers to take advantage of opportunities
that are available for demand response in the wholesale
electric markets under the Commission's jurisdiction. It is my
understanding that other witnesses will discuss in greater
detail the provisions of EPAct 2005 that address advanced
meters, including provisions related to the responsibilities of
State regulatory authorities. I would like to highlight briefly
an August 2006 report that the Commission's Staff prepared in
response to a directive in section 1252(e)(3) of EPAct 2005. In
preparing that report, the Commission's Staff developed a
comprehensive national survey on demand response and advanced
metering. The report concludes that demand response has an
important role to play in both wholesale and retail electric
markets, and that the potential immediate reduction in peak
electric demand that could be achieved from existing demand
response resources is between 3 and 7 percent of peak electric
demand in most regions. Unfortunately, the report also found
that technologies such as advancing metering that are needed to
support significant deployment of demand response resources
have little market penetration.
I agree with the conclusion reached by the Commission's
Staff that demand response has an important role to play in
both wholesale and retail electric markets. I also see that
conclusion as reinforcing the need for coordination of Federal
and state approaches to this issue. The Demand Response
Collaborative launched by the Commission and NARUC marks a
promising step toward that goal. It also would be valuable to
more formally establish this coordination. I encourage the
Congress to establish a Federal-state working group through
which the Commission and interested state representatives would
be tasked with identifying best practices and developing
consistent standards for demand response.
Lastly, I would like to highlight two recent projects and
an emerging technology that illustrate how a smart electric
grid can benefit a wide range of consumers. The two projects
are initiatives pursued by Pacific Northwest National
Laboratory (PNNL), which I had the opportunity to visit earlier
this year. First, the Olympic Peninsula Distributed Resources
Demonstration showed that residential, municipal, and
commercial consumers equipped with automated control technology
took advantage of a virtual real-time market in which they
could see real monetary benefits to adjusting their consumption
during times of peak demand. These demand response adjustments
not only provided economic benefits to particular consumers,
but also created wider benefits by relieving congestion.
Second, the Grid Friendly Appliance Demonstration showed that
smart appliances improved reliability by detecting fluctuations
in frequency when the grid was under stress and responding
automatically within seconds by turning off some functions for
short periods. That automation increases the appeal and the
benefits of demand response. These projects, which PNNL
conducted with support from DOE and other partners, hint at the
full potential that could be achieved through wider deployment
of demand response enabled by a smart grid.
The emerging technology I would like to highlight is a
plug-in hybrid electric vehicle with vehicle-to-grid (V2G)
capability. Substantial research has been conducted on this
technology, and important issues remain to be resolved before
these vehicles will be ready for large-scale commercial
availability. Nonetheless, the potential of this technology is
enormous. Plug-in hybrid electric vehicles could create
widespread demand response opportunities and offer emergency
power supply through energy storage, as well as smoothing the
integration into the grid of renewable resources such as wind
generation. With V2G capability, plug-in hybrid electric
vehicles would improve efficient grid management by providing a
variety of ancillary services and thereby improve power plant
efficiency. Because these additional services could also create
payment streams to individual vehicle owners that would
significantly offset the incremental first costs associated
with these vehicles, V2G capability could be an enabler of both
plug-in hybrid electric vehicles themselves and the smart
electric grid.
In these ways, plug-in hybrid electric vehicles with V2G
capability exemplify the benefits of demand response and a
smart electric grid. We have only begun to capture those
benefits, and doing so is essential to making the complex
machine that is our electric grid function in the efficient
manner that will bring the greatest benefits to American
consumers and address our Nation's energy challenges.
----------
Mr. Boucher. Thank you very much, Mr. Wellinghoff.
Mr. Lieberman, we will be happy to hear from you.
STATEMENT OF ROBERT F. LIEBERMAN, COMMISSIONER, ILLINOIS
COMMERCE COMMISSION, OAK PARK, IL
Mr. Lieberman. Thank you, Mr. Chairman. I have to say,
after the sort of spanking that State commissions got from the
other panel, I ought to be clear that I am here representing
only myself. I as well am going to throw out my written remarks
because the panel this morning was really quite good and
covered a lot of what I was going to say.
I do want to say a couple of things quickly though. In
anticipation of this discussion, I actually went and looked at
half a dozen of the EPAct smart metering dockets sort of from
around the Midwest and I want to sort of follow up on your
questions this morning. The three things that come across
pretty clear when you read those dockets, and again, they are
not all done and they may end up differently but at least the
stuff that is in the record to this point, there is really
three things and I think these three things represent from the
State perspective the barriers and I think lead to
opportunities that the Federal Government could take advantage
of.
The three things are, there is really sticker shock. If you
look at the dockets, people go, ``man, these are expensive.''
These new shiny gizmos that we want to install, they are really
expensive. Even if they lead to better price signals, all of
the things that people said, I think the first response that
you get out of the EPAct dockets is man, this is expensive to
do, and this is in the context of course of rising energy
prices and it would take a brave commission to throw additional
costs on in light of that. Second, I think the issue of what
are the benefits, how do we measure them, is absolutely
critical. In all of the dockets that I looked at, people said
we don't know how to measure these benefits. We don't know what
the value of doing this is. Commissions are used to thinking in
a sort of deterministic way. They are used to thinking about we
can measure what the benefits are if we can measure the costs
and in a sense what we are doing here is, we are saying we can
measure the cost but the benefits could be huge, they are
great, everybody thinks they are wonderful, and I think until
we come up with some systemic way to talk about the benefits,
it is going to be difficult to do. The third, and I thought
this was pretty interesting. The third was kind of across the
board. In these dockets people are saying no one is asking us
for this, no one is asking us for these, there is no demand for
these meters, which reminds me a little bit of 1979, the what
would I do with a computer on my desk problem but the dilemma
is that we don't really know, there is no demand for this. In
many States there has been a demand for wind power and so
people have started to think about how to provide wind power,
but this is very geeky and no one is going damn, I want one of
those meters.
So I think those are the three problems. Let me suggest
three approaches to getting to them. Without seeming hopelessly
naive, I would suggest that if putting in the smart grid and
smart meter was a serious Federal priority, I would think about
a subsidy to utilities, a subsidy in some way that Congress was
recently very generous to the nuclear industry and to the wind
industry and I think if we were actually serious about a cost-
effective energy policy that provided energy independence and
environmental benefits, we would seriously think about
subsidizing, getting over the sticker shock, helping States to
get over the sticker shock. Short of a direct Federal subsidy,
we are not proud, we will take an indirect Federal subsidy. I
think the depreciation question that was raised earlier is an
excellent idea. The question of the benefits, I have done a lot
of work with Kevin Kolevar's division at DOE and I have a lot
of respect for them. I think that if they could provide
additional resources to help States understand what the
benefits are, develop models, I think that would be
extraordinarily useful. We don't have the resources to do this
and I think until those resources are provided, it is going to
be very difficult.
Let me close by saying we are all real smart and we know
that energy prices vary by the hour and we know that most of
the hours out of the day, the price of electricity is really
low in the wholesale markets. I will go out on a limb and say
that 98 percent of the people in Illinois don't know that.
Ninety-eight percent of the people in Illinois think the price
of electricity is what they pay the utility and I think that
until people understand that there is a lot of inexpensive
electricity out in that market that they can't get because the
technology is not installed, I think you have to create a
demand for the meter, and the way you create that demand for
the meter is, you start making that transparent and you start
educating people about the value that would be available to
them. The reality is, their prices would be lower if they could
get hourly prices. But they can't because those aren't
available. Just as an example, and I say this only half
facetiously, which means I guess the other half is not
facetious, but imagine if DOE were to purchase time on the
Weather Channel so that every time they gave the weather for
Chicago or Pittsburgh or Montpelier they told you what the
hourly electricity price was. You start driving the fact that
the low-cost power up there to people--right now people have no
idea that that is available. I think that using mechanisms to
make those prices transparent and to get people saying why
can't I have that, I am interested in that, and I think that
would be a public education campaign that if DOE had the
resources to run in conjunction with the States to identify the
opportunities to get people interested would motivate
commissions in ways that we haven't seen up to this point. When
people don't see any demand, they don't see any reason to take
the regulatory risk.
Thank you. I am happy to take any questions.
[The prepared statement of Mr. Lieberman follows:]
Testimony of Bob Lieberman
My name is Bob Lieberman and I have been a utility
regulator in Illinois since February 2005. I am currently the
Chairman of the Midwest Demand Response Initiative, a
collaborative effort of 14 Midwest state regulatory
commissions, utilities and other stakeholders trying to educate
and learn from each other about how to implement regional price
responsive retail demand. I am also on the executive committee
of the Organization of MISO States (OMS), a Regional State
Committee working together to ensure that the regional RTO--the
Midwestern ISO--works in the interests of customers as well as
suppliers.
Before that, for nearly ten years, I ran a Chicago-based
not-for-profit called the Center for Neighborhood Technology
where we created and managed community-based demand response
and energy efficiency programs in partnership with Commonwealth
Edison, the local Chicago utility. As part of that effort, we
introduced the first in the Nation hourly pricing pilot for
residential customers, the success of which prompted the
Illinois General Assembly to recently mandate that electric
utilities offer such a program to all residential customers in
the state. Prior to that, among other things, in the mid-1980's
I worked with then-State Representative Hastert on re-writing
the Illinois Public Utility Act, a generally thankless if
necessary task.
In testifying before you today, I do not represent the
views of the Illinois Commerce Commission, the Organization of
MISO States nor the National Association of Regulatory
Commissioners. My perspectives today are mine alone.
The question I was asked to address relates to possible
actions that the Federal Government might take to create
incentives for state public utility commissions to move more
rapidly to upgrade retail electricity distribution information
systems from their current state of the art 1920's technology
to something that more closely resembles early 21st century
technology, i.e. systems that are digital rather than analog,
two way rather than one way, open rather than closed and
network-based rather than hierarchical.
Unfortunately, I have no easy answers. This is, in fact, a
very difficult question to answer as it goes right to the heart
of the well-documented legal and institutional eccentricities
of our current regulatory and governance system for electricity
markets.
In anticipation of this conversation and in order to more
precisely underscore some of the barriers to implementation, I
have recently reviewed a few of the docketed cases from Midwest
states that were initiated to address the Epact smart metering
standard. To be fair, many of these dockets have not been
completed, but I think there is enough in the record at this
point to be able to summarize what some of the major issues
are.
In short, most of the dockets express--roughly--the
following concerns.
These new gizmos are really expensive; We have no way to
measure the benefits, or alternatively--in some of the dockets,
there is no discussion of benefits at all; There is no demand -
no one is asking us for these meters;
Let me examine these barriers one at a time.
Expensive gizmos: I think it is fair to say that in many
cases state commissions and their staffs--when seeing the
initial cost of a ``smart grid'' deployment--suffer from
sticker shock. The subtext, of course, is that in an era of
rising energy prices, it takes a brave Commission to pile more
costs on, particularly given the indeterminacy and uncertainty
of the benefits, even in the name of possible lower system
costs and more accurate customer incentives in the long run.
Despite the fact that the costs of deployment have fallen
dramatically over the past ten years, and are likely to
continue to fall, the initial costs still seem high.
Unknown or unknowable benefits: The benefits are uncertain
and hard to calculate. Most public utility regulatory
commissions are--largely by history, design and culture--what I
will call ``practical and practicing incrementalists.'' Vision
and imagination are not our strong suit. We can only decide on
the basis of the record before us, and we generally react to
the petitions of others. Future calculated benefits have to be
greater than real visible costs. Rates have to be deemed just
and reasonable.
In the old days, before restructuring, state commissions'
assumed away the future uncertainty implicit in their decisions
and pretended to know what the costs and benefits would be in
the future. It was never a particularly good assumption, but at
least it allowed decisions to be made within the static
analytic tools and existing legal frameworks that were
available. After restructuring, however, along with the rise of
organized regional wholesale markets, the ability to simply
assume away the uncertainty disappeared. Also, some state
commissions may be more willing to shift the uncertainty to
some vague market mechanism to deliver benefits or costs,
rather than take the explicit responsibility for waving
significant new costs into rates. In either case, state
commissions can no longer assume that we know what the future
looks like. The condition of indeterminacy--a constant reality
of the world outside of the regulatory process -is not the
regulator's friend. The inability to predict the behavior of
some critical variable vastly complicates the regulator's job
and in large measure stymies the analytic tools regulators and
their staff's have at their disposal.
Lack of demand: One gets a sense that regulators are
reluctant to take the initiative because they don't perceive
much of a demand from end-users for the increased capacity and
functionality that a wide-spread smart grid and smart meter
deployment would provide. Why should they impose costs on
customers when the customers aren't asking for functionalities
that the costs would support. Doesn't this remind you of the
early days of telephone deregulation when you heard such things
as ``plain old telephone service'' and no one wanted to pay for
network upgrades to digital technologies?
For all these reasons--and given the context in which state
regulators function--a ``transformational'' technology
innovation that requires a significant up-front investment to
achieve an uncertain level of future benefits like ``smart
meters'' or ``smart grids'' is viewed with some perhaps not
unreasonable skepticism and trepidation.
So what is to be done?
First, I would suggest that--if possible - you deal with
the sticker shock problem. I don't want to pretend that I
understand the intricacies of the Federal budget process nor do
I want to be seen as utterly naive, but if achieving a more
rapid deployment of smart grid technologies was a high Federal
priority, nothing would get it to move faster than some kind of
Federal subsidy. I have no idea what the likelihood of such a
policy might be, but it occurs to me that the Congress was
recently quite generous--in the name of increased energy
security and environmental improvement--to various electricity
production technologies, including nuclear, coal and wind
power. If we were really interested in a policy of cost-
effective energy security and environmental improvement--we
should be at least as generous with ``smart grid'' deployment
as we are with nuclear and wind. Giving consumers the
information and tools that they need to consume energy more
efficiently and smarter is by far the most cost-effective
energy production, security and environmental improvement
policy we could adopt. As far as I'm concerned, the ``smart''
in smart grid and smart meters applies not only to the
technology but to consumers as well. Consumers, themselves, are
a grid resource, just like a peaking turbine. What we need are
smart and efficient consumers--``smart'' grids and ``smart''
meters are--in part - a tool to achieving that end.
In addition, a Federal subsidy could help to ensure
interoperability and other important national criteria through
the establishment of outcome-based performance standards for
the receipt of the subsidy.
However, we are not proud. Short of a direct Federal
subsidy, we will take indirect Federal subsidies. One of the
problems often cited as a barrier to rapid deployment is the
fact that existing investments in traditional metering and
distribution information technologies are still in service and
have not been fully depreciated. To remedy this so-called
stranded cost barrier, for example, Congress could tell the IRS
to allow accelerated depreciation for old transmission and
distribution assets if they are replaced with new ``smart
grid'' assets.
State public utility commissions may be encouraged by this
action to follow suit and approve rate treatment that
accelerates removing these antique meters from the utility rate
base.
Second, we need to deal with the uncertainty about the
level of benefits that will be achieved. Frankly, state
regulatory commissions have limited staff and extremely limited
resources to take on new ideas and to develop new tools and
methods. In Illinois, we are so overwhelmed with our current
assignments that the idea of trying to develop the extensive
knowledge base to adequately address these new technologies and
new ideas is simply outside the realm of our current reality.
In my conversations with other regulators, this is the case in
many other states, as well. It is my sense that when Congress
simply tells the states to study this or study that, the result
is an effort commensurate with the State's staffing and budget
resources, which--all other things being equal - usually
provides for a less than satisfactory outcome.
So we need help. We simply don't have the resources to
develop the knowledge or the expertise on our own. We need help
in developing the tools, analytic methods and models that would
allow us to understand how to manage uncertainty instead of
being overwhelmed by it, and how to estimate the benefits of a
rapid deployment of smart grid technology on a probabilistic
basis. We need access to the best thinking from around the
country in this regard.
To this end, I want to note that I have great regard for
Kevin Kolevar, and the staff at the Office of Energy Delivery
and Electricity Reliability for the excellent work they have
done to educate stakeholders on the intricacies of these
difficult issues and to support regional efforts like the Mid-
Atlantic Distributed Resources Initiative and the Midwest
Demand Response Initiative. In the future, it would be
enormously helpful if they had the additional resources to
provide state commissions with the kind of on-going technical
assistance I mentioned above.
Finally, and maybe most importantly, we need to deal with
the problem of the lack of demand for the new functionalities
provided by the new technologies. It really is no surprise to
me that there is not a rising clamor among the population for
smart meters. For eighty years, we have lived--and prospered--
with a dumb network and dumb meters. Other than the geeks among
us, why would we even know enough to want to change?
In this context, one of the real successes of the organized
wholesale electricity markets over the last decade--and a
success that I think has been largely under-appreciated--is the
development of a visible and transparent hourly price. If you
know where to look, you can determine the value of electricity
at any hour. If you look at those hourly prices over time, you
know that as much as 98% of the hours, the prices are really
low--in fact, often lower than the hedged same-price every hour
electricity product offered at retail by the distribution
utilities. And if you take the average of the hourly prices
over the course of almost any year, they are almost universally
lower than the hedged same-price-every-hour retail price.
But I would argue--based on my experience in Illinois--that
95% of all customers--residential, small commercial,
municipal--have absolutely no idea that the price of
electricity varies by the hour and that the average of the
hourly prices is likely to be significantly lower than the
hedged retail price they have traditionally seen. And until
they know that, they won't realize that there is something in
it directly for them; that investing in smart meters will give
them access to lower cost electricity. Unless they are informed
of these benefits, why would they be willing to start asking,
and more importantly, start paying for the technologies that
would allow that to occur?
In many ways, therefore, it seems to me that the single
most cost-effective way to move state commissions to more rapid
deployment is to increase the demand for these technologies,
and the most direct way to increase the demand is to explain to
consumers what they are missing. What we need is an independent
third party to make consumers aware of what the hourly prices
are, to make them aware that there are lower prices available
and that they can't have access to them because the technology
to give them access to those lower prices is not in place.
State commissions or state energy offices are perfectly suited
to this educational role with DOE providing resources and
technical assistance
I say this only half facetiously--I guess the other half is
serious--but imagine the RTO or DOE buying time on the Weather
Channel so that every hour--when they give the weather for
Chicago, or for Cleveland, or for Philadelphia or for
Washington DC, they also told you what the local wholesale
price of electricity was for that hour. Or every time you
checked the weather for your hometown on Yahoo, you also got
the hourly electricity price?
Until we make these markets transparent and the wholesale
prices visible to retail customers--until we educate customers
so that they understand what's in it for them to invest in
these new technologies--we are unlikely to get a national
deployment any time soon. We will continue to talk about
actions needed rather than seeing a smart grid implemented.
Thank you for your attention. I will be happy to answer any
questions.
----------
Mr. Boucher. Thank you very much, Mr. Lieberman.
Mr. Kolevar.
STATEMENT OF KEVIN KOLEVAR, DIRECTOR, OFFICE OF ENERGY DELIVERY
AND ELECTRICITY RELIABILITY, U.S. DEPARTMENT OF ENERGY,
WASHINGTON, DC
Mr. Kolevar. Thank you, Mr. Chairman and members of the
committee for the opportunity to testify before you today. I
will also truncate my remarks as the first panel covered a lot
of ground in a particularly effective fashion.
The Department of Energy embraces its role as helping to
lead national efforts to modernize the electric grid by
researching, developing and demonstrating next generation
technologies for the grid. To advance grid modernization, our
approach is to assess the grid from a systems perspective,
taking into account electricity supply, to electricity delivery
and incorporating energy efficiency measures throughout the
system including demand response to produce peak loads. We
recognize that a change at one point in the system will affect
the whole system.
In the Office of Electricity, we sponsor a range of
research and development for grid modernization in areas such
as advanced communications, energy storage, grid visualization
and control technologies. For example, our office has helped
develop an autonomous storm detection system that adjusts
system default levels during thunderstorms and automatically
resets them after the storm is past. So how do we transition to
a smart grid? First we need to recognize that grid
modernization is a major undertaking for our Nation and that it
will only be realized through the dedicated involvement and
cooperation of Federal and State governments, industry
partners, academia and investment communities. Historically,
the Federal Government has had few tools available to help with
the transition to the smart grid as compared to those certainly
in the 50 States and the District of Columbia. Notwithstanding
this historical State primacy in regulating electricity
distribution, the Federal Government should be active in
encouraging the needed transition to a 21st century grid.
Consider for a moment the implications of 51 different
jurisdictions taking separate action. Put simply, the Federal
and State governments need to work together to address the
challenges before us.
I am pleased to report that we already see positive
movement toward collaboration. Some State regulatory
commissions are engaging in a smart grid issue, in part as a
result of provisions such as EPAct section 1252 on smart
metering. In addition, a handful of States are or will be
considering deploying smart and advanced electric meters in
residential and small commercial sectors. The FERC and the
National Association of Regulated Utility Commissioners have
jointly established a collaborative informal working group to
consider all aspects of integrating demand respond between
retail and wholesale markets. This effort is co-chaired by
Commissioner Wellinghoff of the FERC and Commissioners Irvin
and Reha of North Carolina and Minnesota, respectively. Jon is
too modest to mention this effort. I hope you will give him the
opportunity to address it in Q&A. It is a very effective forum.
Commissioner Lieberman has also played a role, a key role in
evaluating what is improved demand response through the new
Midwest Demand Response Initiative. This kind of activity needs
to continue and grow if we are to effectively identify the
types of practices to be undertaken by the State and Federal
Governments that will complement one another to facilitate the
development of an intelligent, resilient and reliable grid.
I would also like to announce that on April 26, the
Department released a competitive solicitation to work with
utilities to implement smart grid technologies that achieve a
15 percent peak load reduction on a feeder system.
So Mr. Chairman, I will conclude my statement by reflecting
on an event that amply demonstrated the growing momentum behind
the development of a smart grid. Last week the DOE was a
partner in hosting a 4-day national conference dedicated to
advancing grid modernization entitled Grid Week. This event
provided a forum for the individuals and organizations that are
already working on various aspects of the smart grid concept to
network and catapult the electricity grid into the 21st
century. We thank you for your participation in this event,
sir, and we believe it is extremely promising that these key
participants are now united in the vision of bringing about the
smart grid. It is now incumbent upon all levels of government
to work together to develop and implement this vision.
This concludes my statement, Mr. Chairman. Thank you.
[The prepared statement of Mr. Kolevar follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Boucher. Thank you to each of the witnesses.
Mr. Kolevar, let begin with you and ask if your department
has any legislative recommendations for us with respect to what
we might do in order to facilitate advancement of the smart
grid.
Mr. Kolevar. Sir, at this time we do not. There are
discussions within the administration on this matter but I do
not have anything for the committee today.
Mr. Boucher. Do you think you might have something in the
near time frame or is this something that has a longer
incubation period for you?
Mr. Kolevar. I think the decision to forward
recommendations to the Congress will be made by others above me
so I would hesitate to jump to conclusions about the
availability of recommendations, sir.
Mr. Boucher. A very cautious and wise answer.
Mr. Kolevar. Thank you, Mr. Chairman.
Mr. Boucher. Mr. Lieberman, you and Congressman Matheson
touched on what I think is a very key point and that is that in
the absence of real-time pricing and a price signal sent to
consumers, there is going to be essentially no demand for smart
meters, and I listened carefully to your explanation of the
kind of commentary coming out of the various commissions that
reflect their concerns. You indicated that smart meters are
expensive and they don't want to impose a cost in the absence
perhaps of a demand or greater knowledge about the benefits
that could be derived. You indicated that they can't really
measure those benefits and then you focused on the fact that
there really is no demand at the present time. But it seems to
me that all of this has to start with a regulatory regime that
says that utilities need to make electricity available at
variable prices at different times of the day depending upon
what the real cost of electricity is at that hour as determined
by whether it is high peak time or low peak time, and why can't
there be a bifurcation of the approach so that you get the
regulation in place first without having to incur any cost at
all with regard to smart meters? I think the regulation writing
exercise perhaps for the State would not be particularly costly
or burdensome, a little controversial perhaps but maybe not
costly and burdensome, so why not take that step first and once
that price signal is there and can be sent, the demand will
begin to grow for the smart meters and then people are less
concerned about taking the next steps in order to make them
available? What is wrong with that kind of step-by-step
approach?
Mr. Lieberman. I think the idea of price transparency, the
idea that these prices exist in the world and you don't see
them and you can't have them, which is really the circumstance
we are in today. Not only can't you have them, you don't even
know they are there. And I think that is really the first step
in sort of generating a reason for customers, a reason for
consumers to say why can't we have this. Before I got the
regulator's job, I ran a not-for-profit in Chicago where we put
in place the first real-time pricing program for residential
customers in the country as a pilot in conjunction with
Commonwealth Edison, a program that was so successful, I say
modestly, that the Illinois General Assembly recently mandated
that utilities offer this to all residential customers. But the
key point that I took away from that experience was that people
had no way to know that there was value for them given the
information systems that we have today. They didn't know that
prices in the summer in the afternoons in July were high and
that the rest of the time that they were low. And once you
started telling people about that, once you started talking to
that and once you started explaining to people how they could
manage that, they became very interested. The pilot we ran had
98, 96 percent sign-up rate. People kept signing up. And so I
think the price transparency question, and this was an issue
perhaps for FERC or DOE or the RTOs because they really are
the--the prices--one of the successes of the wholesale markets,
of the organized wholesale markets has been the development of
this hourly price.
Mr. Boucher. Let me come back to maybe a more precise
formulation of the question. You don't have to get, if you are
a State commission, to the question of how expensive the meter
is or the fact that there is no demand for it until you have
addressed the question of making sure that the real-time
pricing is made available and that it is advertised
sufficiently so the consumer knows about it, and once you have
done that, then you can perhaps expect to see the demand
develop and then the consumer can make a choice about whether
or not he wants to incur costs in order to purchase this meter,
and I am going to ask you also basically how much this meter
costs. We don't have that information. But don't you agree that
that step-by-step approach makes sense and that commissions at
the State level could be encouraged and should be perhaps not
required but we are a little reluctant to take that step here
for jurisdictional reasons but at least encouraged to put the
real-time pricing regulation in effect and to make sure that
that price signal gets sent and that customers are made aware
of the fact that it is available on that variable price basis?
Mr. Lieberman. I go into this in some more detail in my
written testimony. I think we are essentially saying the same
thing. Until people can see what the value is, they are not
going to do it, whether you call it actually developing a rate
or publicizing the hourly price. One way or another, you have
to make it transparent. You have to give people an opportunity
to see what they are getting into.
Mr. Boucher. Well, I think we all agree with that, but I am
asking a process question.
Mr. Lieberman. Without the meters in place, developing the
rate, I suppose we could. Well, in Illinois' case, we do have
the rate and people who ask for I can get a meter and we will
see over the next few years what the level of demand for that
is and I guess----
Mr. Boucher. So how long have you had that in place?
Mr. Lieberman. Since January 1.
Mr. Boucher. OK. So that is really very new.
Mr. Lieberman. It is very new.
Mr. Boucher. And you don't have any experience yet----
Mr. Lieberman. It is very new, and as Congressman Shimkus
pointed out----
Mr. Boucher. How many States have done what you have done?
How many States have put it in place that way?
Mr. Lieberman. I actually don't know. Not very many.
Mr. Boucher. Well, I think maybe I should call on my
colleague. All right. This is helpful and I thank you.
Mr. Shimkus.
Mr. Shimkus. Thank you, Mr. Chairman.
The premise of these hearings is getting to an energy
security bill which as the panel before and EPRI would talk
about CO\2\ and these wedges, so energy efficiency issues like
smart grid technologies, these things help us on that
efficiency slice. That is why it is important and that is why
we are pursuing it I think somewhat aggressively in trying to
pin down good responses, and there are a lot of distributed
issues on generation which there are a lot of things that
happened in Illinois recently that have caused great interest
and consternation and problems but we experienced over the last
year two major power outages that lasted over a period of 7 to
10 days, and I personally was affected in the first one for
about a week and my parents, who live about a mile way from me,
were. Mine was in the hottest part of the summer and hers was
the coldest part of the winter. So there is for distributed
generation issues, there is a signal being sent when you fall
under catastrophic outages and I know that people are looking
at, solar panels, battery ability to at least have a minimal
capability of power and I think that would transmit into
distributed if we got to that point or whether that generation
hooked up to natural gas for electricity much like Mr. Kamen's
own power plant but this is a separate power plant. So there
are other signals than just price if you experience them. We
hope people don't experience catastrophic outages, but when you
do, you start thinking about other aspects of this debate which
I think are helpful in a full picture. I was going to continue
on the line, Mr. Lieberman, on this smart metering thing but I
think the chairman really kind of cleared that out as far as we
are relatively new and we will see how the response--I think it
is going to be very positive. In Illinois, we are in difficult
straits because we moved to deregulation. We required the
utilities to cut retail consumer costs 20 percent and then we
froze those rates for 10 years. Eventually that ends. And we
have had astronomical price increases and we have had,
especially homes that were incentivized to go all electric, it
is sad and there is a lot of pressure on the State legislators
to freeze that even further, and if you don't have a capital
investment to expand or do even this new technology, you are
always going to be behind the eight ball so it is always
capital formation. That is why I asked the question earlier of
what is the best way. I believe the capital markets through a
competitive system but you have got to have the price signals
to allow that to occur. So I don't really have much more. I was
going to highlight the net metering and issues, Mr. Chairman,
but I just wanted to make those points that there is,
especially in my part of the State where we have had
catastrophic power losses over multiple days, there is a new
variable in distributor power or net metering or battery power
or solar or other generation that somehow, I don't know how you
throw in a price signal but we should at least recognize that
and put that in maybe in report language or just as an
important aspect of energy security so that if there is--even
in the terroristic aspect. We talked about it during September
11, if someone takes down transmission lines, distributor power
is going to be pretty important.
So I am waxing philosophically, Mr. Chairman, and I will
just yield back my time. Thanks to the panel for being here.
Mr. Boucher. You are welcome to wax on for at least another
30 seconds. Well, thank you very much, Mr. Shimkus.
Mr. Lieberman, let me come back to you and I am so glad we
have you here today because Illinois does in fact have the kind
of program now in place since January that we had hoped to see
other States put in place and I understand about seven States
have done something comparable to what Illinois has done. Is
that correct?
Mr. Lieberman. I can't really respond to that. I know that
there are a number of States that are experimenting with time
use and real-time rates but there are some pilots going on.
Mr. Boucher. OK. How expensive are these smart meters? You
mentioned cost, and we don't have that number.
Mr. Lieberman. It really depends who you talk to and it
depends what functionalities you want in the meter and it
depends how you frame them. The ones that we have been looking
at in Illinois are in the $100 to $150 range, and I think it is
important to note that meters with far less functionality 5
years ago cost $750 and that in a way these devices are falling
in price rapidly and--but $150, if you don't know what you are
getting it for seems like a lot of money.
Mr. Boucher. True, and so what is the deployment
methodology for these meters? Do the utilities take the
responsibility for making them available to their customers on
an optional basis so that a customer who wants to take
advantage of real-time price can acquire from the utility for
this $150, the meter, and then I guess that cost is built into
rates until it is paid off or something like that?
Mr. Lieberman. Two things. The utility is responsible for
the meter and the utilities remain the monopoly distribution
company so that there are no sort of free market meters. The
meters are all owned by the utility. They put it in. We had to
demonstrate in Illinois that there was value for everyone in
the customers--that the whole rate base, all the customers
benefited from a reduction in peak and that therefore we could
spread some of the costs across the whole rate base so in a
recent case before the Illinois Commission the proponents
demonstrated that everybody was better off if we cut the peak
and therefore their cost would not go up if they in a sense
spread the cost of the meter around. So basically the way it is
structured in Illinois today is that the person taking the
real-time price pays for half the cost of the meter and the
other half is spread over the rate base. And I think that the
issue, the methodology to show that is critically important and
one of the things in terms of benefits that I was trying to
talk about earlier is I think that that is a tool that needs,
that DOE could help develop and give to States because the
States don't have the capacity to do that, in part.
Mr. Boucher. I am sorry. What is the ``that'' in that
sentence?
Mr. Lieberman. It is measuring the tool, the methodology
actually, the model to sort of demonstrate that there is a
value to this.
Mr. Boucher. Mr. Kolevar, are you listening?
Mr. Kolevar. Yes, sir.
Mr. Boucher. OK.
Mr. Lieberman. Mr. Kolevar's office and his staff----
Mr. Boucher. I didn't mean that in a scolding way.
Mr. Lieberman. No, they have been very helpful. They have
been remarkably helpful in sort of building whatever capacity
is out there but I think that significant more capacity is
needed. I know in our case they have been very helpful in
giving us access to people at Lawrence Berkeley who know about
this stuff in ways that you can't really find. So I think that
the next step for me, if I were king would be to say we need
these methodologies so that it is easier for the State
commissions to understand and to develop what the values are.
Because that is one of the big things that holds this is up is,
nobody knows how to estimate what the value is.
Mr. Boucher. I have one other question and that relates to
some national standard for smart meter technology and for other
equipment that would help facilitate the smart grid, and I
would like to have the comments of each of the three witnesses
concerning the value of that, the extent to which the Federal
Government already is involved in encouraging this or other
ways facilitating it, and what in the future you might be
considering doing with regard to a Federal role to help
establish a national standard for this. So who would like to
begin and comment on that process? Mr. Wellinghoff.
Mr. Wellinghoff. Yes. Thank you, Mr. Chairman. In my
testimony that was submitted to the committee, I did recommend
with respect to this working group that Mr. Kolevar referenced,
it is an informal group that FERC and NARUC have put together
to collaborate on demand response issues and I would indicate
that I think it would be helpful for Congress to further
encourage and focus that work by establishing a Federal-State
working group through which the commission and State
representatives would be tasked with identifying best practices
in developing consistent standards for demand response. I think
that would be helpful in encouraging that industry overall
because certainly if we have these demand response aggregators
operating one region of the country, one RTO, they want to know
if they can go to other regions of the country, in essentially
operate utilizing the same communication protocols and the same
standards to be able to aggregate customers to participate in
demand response in the wholesale market. So I think that could
be very helpful, very useful, and we would appreciate that
assistance.
Mr. Boucher. OK. Mr. Kolevar.
Mr. Kolevar. Mr. Chairman, I think the Department could
play a very useful role in working with the innovators who are
developing these technologies, who have developed a lot of
these technologies today. I hesitate to say that development of
standards, performance standards, metric standards would be the
best way to go. My initial concern with that would be that we
might be unintentionally inhibiting innovative development and
future generations of smart grid technologies. Of course, the
Department assists with this kind of development right now. We
do do a great deal of testing with respect to some technologies
to determine what their level of performance is versus standard
equipment and infrastructure today. I think that there will be
an ongoing role for the Department in that respect.
Mr. Boucher. Well, that is the classic tension of course
between the need to have uniformity on the one hand and to
encourage continued innovation on the other. The previous panel
testified I thought rather generally that having some national
standards would be helpful and appropriate in terms of
facilitating the introduction of smart grid applications.
Mr. Kolevar. Mr. Chairman?
Mr. Boucher. Yes, Mr. Kolevar.
Mr. Kolevar. Mr. Chairman, if I could mention one point.
Mr. Boucher. Certainly.
Mr. Kolevar. I think we would be interested in seeing work
go on at the State level and in cooperation with the Federal
Government to try and establish methodologies for incentivizing
greater and greater and greater performance. That might be one
of the better tools. And then certainly if ether are questions
about whether or not technologies are capable of meeting some
specific levels of performance, I think the Department of
Energy would play a role in helping that kind of test.
Mr. Boucher. All right. Thank you very much.
Mr. Markey is recognized for 5 minutes.
Mr. Markey. Thank you, Mr. Chairman.
Mr. Wellinghoff, on the question of smart grid technology
to facilitate the use of plug-in hybrid vehicles technologies
to store electric energy, you say that these vehicles would
help smooth the integration into the electric grid of renewable
generation resources such as wind generation. Can you explain
to us how that would occur?
Mr. Wellinghoff. Yes. Ultimately when wind generation would
be providing into the grid at an amount that might be excess,
in some instances they might have to dump that wind generation
or it may not be able to fully integrate into the grid because
of the low loads on the grid. These smart plug-in hybrid
electric vehicles could be used as storage devices in essence
to help integrate it better into the grid. There has been a
number of papers written by Dr. Willet Kempton of Delaware and
I would commend you to Dr. Kempton's papers. In fact, I will be
happy to provide them to the committee. In fact, he explains
exactly how this integration could better work and better
integrate in renewables using the plug-in hybrid smart vehicle.
Mr. Markey. Would this type of innovation allow us to
reduce the number of very large, new central power stations
that we have to build and allow us to avoid the cost and the
pollution that would be associated with such plans?
Mr. Wellinghoff. In my opinion, yes, it would. And I
mentioned earlier, to the extent we can make the grid more
efficient, if we could make an 850-gigawatt grid just 5 percent
more efficient, we could in fact save the output of 42 large
central plants.
Mr. Markey. Wow. Are there any estimates that you have seen
about the potential scale of the demand response and power
storage opportunities that widespread deployment or plug-in
hybrids could lead to?
Mr. Wellinghoff. Well, we know that plug-in hybrids, if you
took all the automobiles on the road today and you converted
them into kilowatts instead of horsepower, I think it is like
eight to 10 times the total energy capacity we currently have
on our grid. So you can see the opportunity there is vast if
you converted them into storage vehicles in essence for the
grid.
Mr. Markey. So you wouldn't have to build a single new
power plant? Is that what you are saying?
Mr. Wellinghoff. I am not saying that but I am certainly
saying that between distributed generation and large amounts of
storage through plug-in hybrid electric vehicles, you would----
Mr. Markey. Could you cut it in half, the number of plants?
Mr. Wellinghoff. I don't have an exact number, Congressman
Markey, but I can tell you it would be substantial.
Mr. Markey. You are making me feel good. That is good
enough. You also suggested plug-in hybrids could provide a
variety of ancillary services and thereby improve power
efficiency. Can you be more specific? What are the ancillary
services that these plug-in vehicles could provide?
Mr. Wellinghoff. I can. The two primary ancillary services
are spinning reserve and regulation which are the services that
are required now by generators to provide the grid to maintain
a very narrow frequency level so the grid can remain stable.
Generators now have to ramp up and down to provide spinning
reserve and regulation services. These services, and I think it
was indicated by Mr. Gammons earlier, PNNL has demonstrated
that appliances in essence can in part provide these services
through microprocessors that PNNL has demonstrated on the
Olympic Peninsula. But going beyond that, a plug-in hybrid
electric vehicle could in fact do these services, provide them
to the grid and that way obviate the need of generators have to
ramp up and down, ultimately making those generators run more
efficiently so ultimately make the grid more efficient by
putting in these plug-in hybrids to substitute for them, for
these----
Mr. Markey. How would the owner of one of these hybrid
vehicles be compensated for services that their vehicle would
be providing back to the grid?
Mr. Wellinghoff. I think somebody this morning talked about
millions of sensors and massive amounts of data. We have
millions of sensors and massive amounts of data right here. It
would be similar to how a cell phone operator keeps track of
your length of calls and how much the call costs.
Mr. Markey. And by the way, do you think we need more
privacy laws if we are going to allow that kind of information
about the personal habits of Americans be gathered?
Mr. Wellinghoff. Certainly the data would have to be
encrypted and there would have to be privacy issues that are
addressed. There is no question about that, but ultimately----
Mr. Markey. Do you think the Federal Trade Commission
should implement the rulemaking that does provide the
protections that they are already required to do?
Mr. Wellinghoff. I couldn't speak to the Federal Trade
Commission, Congressman.
Mr. Markey. Do we need more protections?
Mr. Wellinghoff. We may, yes.
Mr. Markey. You are not sure we do? OK. What regulatory
obstacles do you see to widespread commercial deployment of
such vehicles?
Mr. Wellinghoff. The regulatory obstacles are ensuring that
we have the tariffs in place so these vehicles can in fact get
the payments that would be necessary to provide these services
and we starting to do that already in the organized markets in
the RTOs and ISOs through allowing demand response in fact to
participate in spinning reserve regulation, other types of
services. So the regulatory tariffs have to be place so that
the consumers in fact can get the payments and the settlement
processes have to be set up in the wholesale market so in fact
they can have those payments provided back to them.
Mr. Markey. I thank you. I see my time is expired. I am
going to point out that the Federal Trade Commission, when I
contacted them recently, indicated that they are not going to
issue any implementing regulations whatsoever to protect the
privacy of consumers' electricity bills or to combat slamming
and cramming. They have that authority, and what I am going to
do is, I am going to organize an effort to put the pressure on
the Federal Trade Commission to build these privacy protections
into the law because concomitant with the development of a
capacity to gather all of this information which gives a
detailed profile of who Americans are and their use of
electricity, when they are home or not, very interesting for a
crook to know what your electricity habits are. They would be
able to figure out when you are home or not, and I just think
that the Federal Trade Commission has a responsibility to act
in that fashion.
I thank the chairman.
Mr. Boucher. Thank you, Mr. Markey.
We want to thank this panel of witnesses. We very much
appreciate your sharing information with us today and thank you
for your patience. It has taken a while to get to you this
afternoon, and you have been very helpful in your answers to
questions. There are potentially other questions members may
want to submit to you in writing, and if so, we would
appreciate your prompt response.
So with the thanks of the committee to this panel, this
hearing is adjourned.
[Whereupon, at 1:10 p.m., the subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
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