[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]



 
                 EFFECTIVELY TRANSFORMING OUR ELECTRIC
                    DELIVERY SYSTEM TO A SMART GRID
=======================================================================

                                HEARING

                               BEFORE THE

                       SUBCOMMITTEE ON ENERGY AND
                              ENVIRONMENT

                  COMMITTEE ON SCIENCE AND TECHNOLOGY
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 23, 2009

                               __________

                           Serial No. 111-46

                               __________

     Printed for the use of the Committee on Science and Technology



     Available via the World Wide Web: http://www.science.house.gov

                                 ______



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                  COMMITTEE ON SCIENCE AND TECHNOLOGY

                   HON. BART GORDON, Tennessee, Chair
JERRY F. COSTELLO, Illinois          RALPH M. HALL, Texas
EDDIE BERNICE JOHNSON, Texas         F. JAMES SENSENBRENNER JR., 
LYNN C. WOOLSEY, California              Wisconsin
DAVID WU, Oregon                     LAMAR S. SMITH, Texas
BRIAN BAIRD, Washington              DANA ROHRABACHER, California
BRAD MILLER, North Carolina          ROSCOE G. BARTLETT, Maryland
DANIEL LIPINSKI, Illinois            VERNON J. EHLERS, Michigan
GABRIELLE GIFFORDS, Arizona          FRANK D. LUCAS, Oklahoma
DONNA F. EDWARDS, Maryland           JUDY BIGGERT, Illinois
MARCIA L. FUDGE, Ohio                W. TODD AKIN, Missouri
BEN R. LUJAN, New Mexico             RANDY NEUGEBAUER, Texas
PAUL D. TONKO, New York              BOB INGLIS, South Carolina
PARKER GRIFFITH, Alabama             MICHAEL T. MCCAUL, Texas
STEVEN R. ROTHMAN, New Jersey        MARIO DIAZ-BALART, Florida
JIM MATHESON, Utah                   BRIAN P. BILBRAY, California
LINCOLN DAVIS, Tennessee             ADRIAN SMITH, Nebraska
BEN CHANDLER, Kentucky               PAUL C. BROUN, Georgia
RUSS CARNAHAN, Missouri              PETE OLSON, Texas
BARON P. HILL, Indiana
HARRY E. MITCHELL, Arizona
CHARLES A. WILSON, Ohio
KATHLEEN DAHLKEMPER, Pennsylvania
ALAN GRAYSON, Florida
SUZANNE M. KOSMAS, Florida
GARY C. PETERS, Michigan
VACANCY
                                 ------                                

                 Subcommittee on Energy and Environment

                  HON. BRIAN BAIRD, Washington, Chair
JERRY F. COSTELLO, Illinois          BOB INGLIS, South Carolina
EDDIE BERNICE JOHNSON, Texas         ROSCOE G. BARTLETT, Maryland
LYNN C. WOOLSEY, California          VERNON J. EHLERS, Michigan
DANIEL LIPINSKI, Illinois            JUDY BIGGERT, Illinois
GABRIELLE GIFFORDS, Arizona          W. TODD AKIN, Missouri
DONNA F. EDWARDS, Maryland           RANDY NEUGEBAUER, Texas
BEN R. LUJAN, New Mexico             MARIO DIAZ-BALART, Florida
PAUL D. TONKO, New York                  
JIM MATHESON, Utah                       
LINCOLN DAVIS, Tennessee                 
BEN CHANDLER, Kentucky                   
BART GORDON, Tennessee               RALPH M. HALL, Texas
                  JEAN FRUCI Democratic Staff Director
            CHRIS KING Democratic Professional Staff Member
        MICHELLE DALLAFIOR Democratic Professional Staff Member
         SHIMERE WILLIAMS Democratic Professional Staff Member
      ELAINE PAULIONIS PHELEN Democratic Professional Staff Member
          ADAM ROSENBERG Democratic Professional Staff Member
            JETTA WONG Democratic Professional Staff Member
         ELIZABETH CHAPEL Republican Professional Staff Member
          TARA ROTHSCHILD Republican Professional Staff Member
                      JANE WISE Research Assistant
                            C O N T E N T S

                             July 23, 2009

                                                                   Page
Witness List.....................................................     2

Hearing Charter..................................................     3

                           Opening Statements

Prepared Statement by Representative Bart Gordon, Chairman, 
  Committee on Science and Technology, U.S. House of 
  Representatives................................................     9

Statement by Representative Brian Baird, Chairman, Subcommittee 
  on Energy and Environment, Committee on Science and Technology, 
  U.S. House of Representatives..................................     7
    Written Statement............................................     7

Statement by Representative Bob Inglis, Ranking Minority Member, 
  Subcommittee on Energy and Environment, Committee on Science 
  and Technology, U.S. House of Representatives..................     8
    Written Statement............................................     9

Prepared Statement by Representative Jerry F. Costello, Member, 
  Subcommittee on Energy and Environment, Committee on Science 
  and Technology, U.S. House of Representatives..................     9

                               Witnesses:

Ms. Patricia Hoffman, Acting Assistant Secretary, Office of 
  Electricity Delivery and Energy Reliability, U.S. Department of 
  Energy
    Oral Statement...............................................    10
    Written Statement............................................    12
    Biography....................................................    17

Ms. Suedeen G. Kelly, Commissioner, Federal Energy Regulatory 
  Commission
    Oral Statement...............................................    18
    Written Statement............................................    19
    Biography....................................................    24

Dr. George W. Arnold, National Coordinator for Smart Grid Inter-
  operability, National Institute of Standards and Technology, 
  U.S. Department of Commerce
    Oral Statement...............................................    25
    Written Statement............................................    26
    Biography....................................................    32

Mr. Paul De Martini, Vice President of Advanced Technology, 
  Southern California Edison
    Oral Statement...............................................    32
    Written Statement............................................    34
    Biography....................................................    39

Mr. Jeffrey L. Ross, Executive Vice President, GridPoint, Inc.
    Oral Statement...............................................    39
    Written Statement............................................    41
    Biography....................................................    47

Mr. Michael A. Stoessl, Group President, Cooper Power Systems
    Oral Statement...............................................    47
    Written Statement............................................    51
    Biography....................................................    52

Discussion
  Anticipated Development Timeline...............................    53
  Features of Smart Meters.......................................    54
  Flexibility and Pace of Standards Development..................    54
  Net Metering...................................................    56
  Inter-operability Standards....................................    56
  National Security Concerns.....................................    58
  Energy Storage.................................................    60
  The Purpose of the Smart Grid..................................    62
  First Steps to a Smart Grid....................................    63
  Potential Energy Production Savings............................    66
  Potential Energy Savings.......................................    68
  Financial Benefit to Consumers.................................    68
  Job Creation and Workforce Development.........................    69
  Incorporating Social Behavioral Aspects........................    72
  Electromagnetic Pulses.........................................    74
  Superconduction................................................    75
  Public Education...............................................    76
  Interagency Coordination.......................................    77

             Appendix 1: Answers to Post-Hearing Questions

Ms. Patricia Hoffman, Acting Assistant Secretary, Office of 
  Electricity Delivery and Energy Reliability, U.S. Department of 
  Energy.........................................................    80

Ms. Suedeen G. Kelly, Commissioner, Federal Energy Regulatory 
  Commission.....................................................    82

Dr. George W. Arnold, National Coordinator for Smart Grid Inter-
  operability, National Institute of Standards and Technology, 
  U.S. Department of Commerce....................................    83

             Appendix 2: Additional Material for the Record

Statement of Katherine Hamilton, President, The GridWise 
  Alliance.......................................................    86

Statement of Gordon W. Day, Ph.D., 2009 President, the Institute 
  of Electrical and Electronics Engineers--United States of 
  America (IEEE-USA).............................................    90

 
 EFFECTIVELY TRANSFORMING OUR ELECTRIC DELIVERY SYSTEM TO A SMART GRID

                              ----------                              


                        THURSDAY, JULY 23, 2009

                  House of Representatives,
            Subcommittee on Energy and Environment,
                       Committee on Science and Technology,
                                                    Washington, DC.

    The Subcommittee met, pursuant to call, at 10:08 a.m., in 
Room 2318 of the Rayburn House Office Building, Hon. Brian 
Baird [Chairman of the Subcommittee] presiding.


                            hearing charter

                 SUBCOMMITTEE ON ENERGY AND ENVIRONMENT

                  COMMITTEE ON SCIENCE AND TECHNOLOGY

                     U.S. HOUSE OF REPRESENTATIVES

                 Effectively Transforming Our Electric

                    Delivery System to a Smart Grid

                        thursday, july 23, 2009
                         10:00 a.m.-12:00 p.m.
                   2318 rayburn house office building

Purpose

    On Thursday, July 9, 2009 the Subcommittee on Energy and 
Environment will hold a hearing entitled: ``Effectively Transforming 
Our Electric Delivery System to a Smart Grid.''
    The hearing will explore the roles of both the Federal Government 
and industry in transitioning our aging power generation and 
distribution infrastructure into a smart grid. A smart grid will 
function as a two-way communication system offering utilities and 
consumers more information regarding electricity supply, consumption, 
and price which would ultimately modify patterns of electricity usage. 
Continued efforts to research and develop innovative smart grid 
technologies and establish the appropriate inter-operability standards 
to enable all these devices and systems to communicate with each other 
are necessary to make this transformation and realize significant 
efficiency, reliability, security and environmental benefits. Today, 
our massive interconnected power grid is a century old and over-
burdened. It is imperative that we modernize our electric delivery 
system so that our economy can thrive and growing power needs will be 
met efficiently and reliably.

Witnesses

  Ms. Patricia Hoffman is the Acting Assistant Secretary for 
the Department of Energy, (DOE) Office of Electricity Delivery and 
Energy Reliability. Ms. Hoffman briefly will describe the Department's 
vision for development of a smart grid and offer testimony on the 
current research, development and demonstration activities at DOE to 
achieve widespread use of innovative smart grid technologies. She will 
discuss the challenges associated with a successful transition to a 
smart grid and how DOE is working with other federal agencies and 
stakeholders to address these issues. She also will describe the 
Department's strategy and timeline for distributing funds available 
under the American Recovery and Reinvestment Act for smart grid 
demonstrations, investment grants, transmission planning and other 
related initiatives.

  Ms. Suedeen Kelly is a Commissioner at the Federal Energy 
Regulatory Commission (FERC). She will provide a brief overview of 
FERC's actions and programs designed to modernize our electric delivery 
system and the issues that we must address to ensure we have a 
successful transition to a smart grid. She will describe FERC's 
collaboration with NIST to develop inter-operability standards for 
smart grid devices and systems. In addition, she will explain the 
important role of the states in this transition and the tools FERC has 
available to help the states implement smart grid strategies.

  Dr. George Arnold is the National Coordinator for Smart Grid 
Inter-operability at the National Institute of Standards and Technology 
(NIST). Dr. Arnold will offer testimony regarding NIST's progress 
toward facilitating the development of a framework for standards and 
protocols to achieve inter-operability of smart grid devices and 
systems. He will discuss some of the technical challenges presented 
with standards development and how NIST will address those issues. In 
addition, he will describe how NIST is working with other federal 
agencies and interested stakeholders to achieve widespread use of 
innovative smart grid technologies.

  Mr. Paul De Martini is Vice President of Advanced Technology 
at Southern California Edison (SCE). SCE is the largest subsidiary of 
Edison International and supplies electricity to eleven million people 
in southern California. Mr. De Martini will testify about SCE's 
research, development and pilot programs related to advancing smart 
grid technologies and modernization of our electric grid. He also will 
give an overview of SCE's strategy to deploy innovative smart grid 
technologies, their work with DOE and NIST, provide a utility 
perspective on integrating these new technologies with existing 
technologies, and discuss some of the benefits anticipated for the 
company and consumers as that strategy is implemented.

  Mr. Jeff Ross is the Executive Vice President at GridPoint. 
GridPoint is a technology company engaged in the development of 
innovative smart grid platform that enables utilities to optimize 
electrical grid management. Mr. Ross will discuss GridPoint's 
technology portfolio to illustrate the type of innovation that will 
facilitate the modernization and advancement of the Nation's 
electricity system, as well as some of the challenges encountered along 
the way. He will also describe GridPoint's experience in the smart grid 
demonstration in Boulder, CO.

  Mr. Michael A. Stoessl is the Group President for Cooper 
Power Systems. Cooper Power Systems engineers and manufactures medium 
and high-voltage electrical equipment, components, and systems that 
deliver reliable electric power to homes, industries, businesses, and 
institutions worldwide. The company is a member of the National 
Electrical Manufacturers Association (NEMA) and he will testify on 
NEMA's behalf. Mr. Stoessl will provide a brief overview of NEMA and 
its history in developing standards for power equipment and the grid. 
He will discuss how the association is fulfilling its Congressionally-
directed role to work with federal agencies and accelerate the 
deployment of innovative smart grid technologies. In addition, he will 
describe the technical challenges of integrating new smart grid 
technologies with the current grid and provide examples of successful 
deployment.

Background

    In the 20th century, widespread electrification brought power to 
our homes, businesses, farms and cities, changing our lives 
dramatically. In 1935 President Roosevelt established the Rural 
Electric Administration (REA) and directed the agency to electrify the 
continent. As part of that massive undertaking, innovations were 
undertaken that included standardized designs for distribution lines, 
mass production and construction techniques, system protection and wide 
area distributed power planning. Now, nearly seventy-five years since 
the REA was created, we still consider electrification one of the 
greatest engineering achievements of the 20th century.
    Electricity has to be used the moment it is generated. While this 
system has worked for decades, it is not very efficient. Demand for 
power varies greatly throughout the day and throughout the year as 
demands for lighting, heating and cooling fluctuate through the 
seasons. Because the capacity for generation of power matches the 
consumption of power, the electricity supply system must be sized to 
generate enough electricity to meet the maximum anticipated demand 
(e.g., peak demand). This inefficiency becomes more evident when 
considering that it is possible the peak electricity demand for any 
given year could be for a very short period--a few days or even hours. 
The deployment of innovative smart grid devices is intended to reduce 
this inefficiency.
    Our century-old power grid is the largest interconnected machine on 
Earth consisting of more than 9,200 electric generating units with more 
than one million megawatts of generating capacity connected to more 
than 300,000 miles of transmission lines.\1\ Currently, our electric 
grid is a centralized, generator-controlled network where electrons and 
information flow in one direction, from generator to end-user. The 
transition to a smart grid will change this completely. A modern power 
grid is envisioned to operate more like an energy internet with a two-
way flow of electricity and information that will be capable of 
monitoring everything from power plants to customer preferences to 
individual appliances. This transformation will give utility operators 
and customers the proper tools and information so that electricity 
generation is better-managed and consumer choices are exercised to 
control costs and lower electric bills.
---------------------------------------------------------------------------
    \1\ The Smart Grid: an Introduction. Prepared by Litos Strategic 
Communication for the U.S. Department of Energy, 2008, page 5.
---------------------------------------------------------------------------
    Smart grid technologies, including energy storage technologies will 
offer operators new opportunities for managing distributed power 
production and zero-emission power generation from solar and wind 
sources. Also pushing modernization of our electric infrastructure is 
the increasing demand for electricity driven by population growth, 
bigger homes, and greater appliance use. While our electric grid is 
considered one of the most reliable in the world, there have been five 
massive blackouts over the past forty years, three of those occurring 
in the past nine years. The recent Northeast blackout of 2003 resulted 
in a $6 billion economic loss to the region.\2\ Further compounding the 
reliability risks is the trend in our economy to become ever-more 
digital and to be more reliant upon electronic equipment and automated 
manufacturing. These trends place increasing demand on our electric 
delivery system.
---------------------------------------------------------------------------
    \2\ Ibid, page 7.
---------------------------------------------------------------------------
    Even as we anticipate continued rising demand for power, under-
investment in the upgrading of our electric infrastructure has left the 
grid overburdened and inefficient. According to the Department of 
Energy, if the grid were just five percent more efficient, the energy 
savings would equate to permanently eliminating the fuel and greenhouse 
gas emissions from 53 million cars.\3\ The American Recovery and 
Reinvestment Act (ARRA) authorized the Department of Energy to spend 
approximately $4.5 billion on smart grid projects under programs 
established in Title XIII of the Energy Investment and Security Act of 
2007 to begin to address these needs.
---------------------------------------------------------------------------
    \3\ The Smart Grid: An Introduction. Prepared by Litos Strategic 
Communication for the U.S. Department of Energy, 2008, page 7.
---------------------------------------------------------------------------
    From the funds made available by the ARRA, the Department of 
Energy's Office of Electricity Delivery and Energy Reliability (OE) has 
issued Funding Opportunity Announcements for smart grid demonstrations, 
smart grid investment grants, and a smart grid information 
clearinghouse. The goal of the demonstration projects is to verify 
smart grid technology viability, quantify smart grid costs and 
benefits, and validate new smart grid business models at a scale that 
can be readily adapted and replicated across the Nation. These projects 
could fund different energy storage technologies, including battery 
storage, compressed air energy storage and other new promising storage 
options. In addition, these projects could demonstrate synchrophasor 
measurement technologies and approaches to improve transmission system 
reliability through large-scale deployment of synchrophasor technology. 
These synchrophasors or ``phasors'' have the potential to significantly 
improve transmission reliability because they take data measurement 
with Global Positioning System (GPS) timing. The gathered data allow 
grid operators to see dynamic conditions on the grid in a more real-
time (time and location) manner and with greater accuracy. As a result, 
the operators have better system control and earlier detection of 
potential grid disturbances for better mitigation.
    The Smart Grid Investment Grant Program is intended to gain 
improvements in cost and performance of smart grid technology. The 
program will provide federal assistance to fund up to 50 percent of 
investments by electric utilities and other entities for projects that 
promote the goal of deployment of smart grid technologies. The 
investments are designed to help implement the necessary digital 
upgrades to the electric grid enabling it to work more efficiently and 
make it better able to effectively integrate power generated from 
renewable energy technologies, energy efficient technologies, and 
demand management practices. Demand Response or load management is 
defined as the planning, implementation, and monitoring of utility 
activities designed to encourage consumers to modify patterns of 
electricity usage, including the timing and level of electricity 
demand. These practices or programs refer only to energy and load-shape 
modifying activities that are undertaken in response to utility-
administered programs and not the normal operation of the 
marketplace.\4\ Demand response practices are used today, but will be 
ever-more prevalent as we transition to a smart grid.
---------------------------------------------------------------------------
    \4\ Keeping the Lights On in a New World, Electricity Advisory 
Committee, January 2009, page 84.
---------------------------------------------------------------------------
    The Smart Grid Information Clearinghouse is intended to consolidate 
public technical, legislative, and other information on smart grid 
development and practices, and direct web site users to additional 
information sources both in the United States and internationally. The 
goal is to facilitate coordination among all smart grid stakeholders to 
support the development and deployment of smart grid technologies.
    EISA also authorized a federal Smart Grid Task Force that is led by 
DOE's Office of Electricity Delivery and Energy Reliabilty to 
coordinate federal activities related to smart grid technologies and 
practices. The Task Force works closely with the Federal Energy 
Regulatory Commission and the National Institute of Standards and 
Technology. The Department also established an Electricity Advisory 
Committee which issued a report in January 2009 entitled: ``Keeping the 
Lights On in the New World.'' The report discusses current trends for 
our electricity infrastructure related to both power demand and supply, 
and it offers options for meeting future electricity needs with 
recommendations for specific actions by DOE.
    The Recovery Act also included $10 million for NIST to conduct its 
work on inter-operability standards for smart grid devices and systems. 
This standards development process covers the entire electricity system 
including generation, transmission, distribution and end-user equipment 
and devices. These standards are essential to ensure that all the 
different software and hardware components of a smart grid, supplied 
from various vendors, will work together seamlessly and secure the grid 
against disruptions. In other words, such standards will support the 
ability of different devices to exchange data, communicate, and 
participate in business activities regardless of the operating systems 
or programming languages underlying those devices. NIST has established 
domain working groups and is identifying and evaluating existing 
standards and measurement methods to support the transformation of our 
electric delivery system.
    In mid-May, Secretaries Locke and Chu announced the initial batch 
of sixteen NIST-recognized inter-operability standards. NIST is 
directed to issue a report to Congress when it determines that the work 
is completed or that a federal role is no longer necessary for 
standards development. EISA further calls on FERC to institute a rule-
making proceeding to adopt such standards and protocols as may be 
necessary to insure smart-grid functionality and inter-operability in 
interstate transmission of electric power and regional and wholesale 
electricity markets. FERC has authority to determine when NIST's 
process has led to sufficient consensus of the stakeholders.

A Smart Grid

    There is a lot of talk about deploying smart meters, a process that 
is underway. It is important to note that metering is just one of 
numerous possible applications that make up a smart grid. The smart 
grid is far more than meters as it will function like an energy 
internet and innovative technologies will be empowered by the two-way 
digital communication and plug-and-play capabilities that exemplify a 
smart grid.
    For consumers, the smart grid means they will have access to real-
time pricing and these price signals will help to educate consumers 
about energy consumption and actively engage them in energy decisions. 
Ultimately, consumer participation will result in reduced peak demand--
when electricity demand is its greatest. Today our electric bills 
provide little information about energy consumption patterns and costs, 
and the bills come monthly, days after actual consumption takes place. 
New smart grid technologies will allow consumers to see the price they 
are paying for their energy in real-time, helping them to lower their 
electric bills as they use less electricity during peak demand times 
when prices are high. This behavior in turn benefits the utilities 
because shedding load at peak demand times will help to relieve stress 
on the grid and avoid costly infrastructure and maintenance costs. 
Reducing peak demand also allows utilities to reduce reliance on its 
least efficient generating plants that are necessary to meet peak 
demand.
    It is estimated that smart grid enhancements will ease congestion 
on the grid and increase capacity significantly, sending 50 to 300 
percent more electricity through existing energy corridors.\5\ 
Maximizing the efficiency of the electricity infrastructure reduces the 
need for owners and operators to pay for additional generation capacity 
to meet our nation's growing demand for electricity. Transforming our 
power system to a smart grid will save money, save energy, and lower 
emissions from the utility sector making this transition a smart 
alternative to building more power plants, substations, transformers 
and transmission lines.
---------------------------------------------------------------------------
    \5\ Ibid, page 17.
---------------------------------------------------------------------------
    In addition, a smart grid will increase reliability of the grid and 
enhance the grid's security. Today's grid is dominated by central 
generation with many obstacles for distributed energy resources 
interconnection. This centralized system can be vulnerable to 
disruptions from natural or human events. A modern grid would more 
readily integrate distributed energy resources, such as electric 
vehicles and other storage technologies, making our power supply less 
centralized and less vulnerable. Smart grid technology will include an 
immense communications network and will vastly improve the utilities' 
ability to manage the grid under emergency conditions. A smooth 
transition of our electricity delivery system to a smart grid is 
critical to realize the benefits associated with a more efficient, 
reliable and secure electricity infrastructure.
    Chairman Baird. If our guests will take their seats, the 
hearing will come to order.
    Good morning to everyone, and welcome to today's hearing on 
``Effectively Transforming Our Electric Delivery System to a 
Smart Grid.'' I would like to welcome our expert panelists who 
will discuss both the role of the Federal Government and 
industry stakeholders in transforming our power grid.
    Even today with tremendous advancements in technology, 
electrification is considered the greatest engineering 
achievement of the 20th century. However, parts of this 
infrastructure are nearly a century old and our increased 
reliance on electrical power is straining our system's 
capacity.
    In the past nine years, we have experienced three big 
blackouts. It is estimated that the blackout of 2003 resulted 
in a $6 billion economic loss to the region. In order to 
improve efficiency of power delivery and incorporate renewable 
energy technologies, we need to modernize our grid 
infrastructure.
    A smart grid is a sophisticated, two-way communication 
system for managing our electric infrastructure. It will 
operate more efficiently and reliably and empower consumers to 
more actively engage in energy use decisions. The technology to 
encourage their participation in these decisions will be at 
their fingertips. Accurate and timely price signals will help 
consumers reduce energy consumption during peak demand when 
prices are highest. This shaving off of the peak load, in turn, 
offers power plant operators the opportunity to avoid 
investment costs for new generation capacity. In addition, 
utilities will be better equipped to manage their systems and 
integrate energy from renewable sources, plug-in-electric 
vehicles and other storage technologies.
    Also, there is growing recognition that a smart electric 
grid is extremely important for responding to environmental 
problems such as ocean acidification and lethal overheating of 
our planet. More efficient energy production and increased use 
of renewable energy resources will help to set us on a course 
to address these environmental challenges.
    I would like to thank the witnesses for their participation 
today, and I am looking forward to your testimony. I am 
sincerely excited and interested in this as I think so many of 
us are as it is going to be central to solving our nation's 
energy problems, and we have an outstanding panel of experts.
    With that, I yield to our distinguished colleague and my 
friend, Mr. Inglis, for an opening statement.
    [The prepared statement of Chairman Baird follows:]
               Prepared Statement of Chairman Brian Baird
    Good morning and welcome to today's hearing on ``Effectively 
Transforming Our Electric Delivery System to a Smart Grid.''
    I would like to welcome our expert panelists who will discuss both 
the role of the Federal Government and industry stakeholders in 
transforming our power grid.
    Even today with tremendous advancements in technology, 
electrification is considered the greatest engineering achievement of 
the 20th century. However, parts of this infrastructure are nearly a 
century old, and our increased reliance on electrical power is 
straining this systems' capacity.
    In the past nine years, we have experienced three big blackouts. It 
is estimated that the blackout of 2003 resulted in a $6 billion 
economic loss to the region. In order to improve efficiency of power 
delivery and incorporate renewable energy technologies we need to 
modernize our grid infrastructure.
    A smart grid is a sophisticated, two-way communication system for 
managing our electric infrastructure. It will operate more efficiently 
and reliably and empower consumers to more actively engage in energy 
usage decisions. The technology to encourage their participation in 
these decisions will be at their fingertips.
    Accurate and timely price signals will help consumers reduce energy 
consumption during peak demand when prices are highest. This shaving of 
the peak load, in turn, offers power plant operators the opportunity to 
avoid investment costs for new generation capacity. In addition, 
utilities will be better-equipped to manage their systems and integrate 
energy from renewable sources, plug-in-electric vehicles, and other 
energy storage technologies.
    Also, there is growing recognition that a smart electric grid is 
extremely important for responding to environmental problems such as 
ocean acidification and lethal over-heating of the planet. More 
efficient electricity production and increased use of renewable energy 
resources will help to set us on a course to address these 
environmental challenges.
    Again, I would like to thank the witnesses for their participation 
today, and I look forward to your testimony.

    Mr. Inglis. Thank you, Mr. Chairman, and thank you for this 
very important hearing.
    In our last hearing, we discussed obstacles in getting 
renewable energy, wind and solar in particular, into the 
electricity market in a meaningful way. One of the biggest gaps 
we heard about was getting renewable energy onto a grid 
designed for centralized generation from conventional power 
plants. In order to move away from fossil fuels, we need to 
upgrade the grid. A smart grid presents many exciting 
opportunities. First, we will be able to use distributed 
generation to supply our population centers, enabling a shift 
toward renewable power. Second, we will improve efficiency and 
increase capacity on the electricity grid. Finally, we will 
create a new model of consumer participation. With the two-way 
communication made possible by smart grid technologies, 
consumers will have access to new information about their 
energy use and prices and get more involved in how they use 
electricity.
    So now we have to figure out how to get to a modern 
electricity grid. I am looking forward to hearing from our 
witnesses about where we are now and where we have to go. 
Governments and professional associations will certainly play 
an important role in the research and development of smart grid 
technologies and in setting the standards that will govern the 
new electricity delivery system. Private enterprise will step 
in with cutting-edge technology designed to integrate the grid, 
better manage peak loads, and give consumers the tools they 
need to make informed decisions.
    I have several questions about smart grid. We are working 
on developing a new grid and a new pattern of energy generation 
at this time. I hope to learn all these efforts are working in 
tandem and if we are going forward at the right pace. I also 
wonder what the proper relationship between private and public 
investment is in a project like this that serves both interests 
together.
    Finally, the smart grid will support electricity from 
sources far away from population centers. While this will 
support development of renewable electricity, it may also 
support continued reliance on old and polluting facilities that 
operate in some remote areas. I hope we can address these 
concerns today, and I thank the Chairman for holding this 
hearing.
    [The prepared statement of Mr. Inglis follows:]
            Prepared Statement of Representative Bob Inglis
    Good morning and thank you for holding this hearing, Mr. Chairman.
    At our last hearing, we discussed obstacles in getting renewable 
energy, wind and solar in particular, into the electricity market in a 
meaningful way. One of the biggest gaps we heard about was getting 
renewable energy onto a grid designed for centralized generation from 
conventional power plants. In order to move away from fossil fuels, we 
need to update the grid.
    A smart grid presents many exciting opportunities. First, we'll be 
able to use distributed generation to supply our population centers, 
enabling a shift toward renewable power. Second, we'll improve 
efficiency and increase capacity on the electricity grid. Finally, 
we'll create a new model of consumer participation. With the two-way 
communication made possible by smart grid technologies, consumers will 
have access to new information about their energy use and prices and 
get more involved in how they use electricity.
    So now we have to figure out how to get to a modern electricity 
grid. I'm looking forward to hearing from our witnesses about where we 
are now and where we have to go. Governments and professional 
associations will certainly play an important role in the research and 
development of smart grid technologies and in setting the standards 
that will govern the new electricity delivery system. Private 
enterprise will step in with cutting edge technology designed to 
integrate the grid, better manage peak loads, and give consumers the 
tools they need to make informed decisions.
    I have several questions about the smart grid. We're working on 
developing a new grid and a new pattern of energy generation at the 
same time; I hope to learn how these efforts are working in tandem and 
if we're going forward at the right pace. I also wonder what the proper 
relationship between private and public investment is in a project like 
this that serves both interests together. Finally, the smart grid will 
support electricity from sources far away from population centers. 
While this will support development of renewable electricity, it may 
also support continued reliance on old and polluting coal facilities 
that operate in the same remote areas. I hope we can address these 
concerns today.
    Thank you again for holding this hearing, Mr. Chairman.

    Chairman Baird. Thank you, Mr. Inglis.
    If there are other Members who wish to submit additional 
opening statements, your statements will be added to the record 
at this point.
    [The prepared statement of Chairman Gordon follows:]
               Prepared Statement of Chairman Bart Gordon
    Thank you Chairman Baird. I am very pleased that the Energy and 
Environment Subcommittee is holding this hearing today to discuss our 
efforts to transform our electricity infrastructure into a smart grid.
    Digitizing our electrical power grid is a massive endeavor that 
offers exciting possibilities and a wide range of benefits. 
Modernization will increase the reliability of our grid, provide 
significant energy efficiency gains, and will enable us to broaden the 
use of renewable energy sources and energy storage technologies. A 
smart grid will allow active consumer involvement in decisions to use 
energy, and businesses will reduce their energy costs by managing their 
demands for power.
    Because transformation of our electricity delivery system is such 
an enormous undertaking, it comes with many challenges as well. We are 
investing billions of federal dollars toward the smart grid transition, 
and we need to make certain those dollars are invested well.
    I look forward to hearing from our panel of expert witnesses about 
our progress to deploy innovative smart grid technologies and the 
hurdles we must yet overcome to modernize our power infrastructure.
    I thank the witnesses for testifying today and I look forward to an 
interesting dialogue.

    [The prepared statement of Mr. Costello follows:]
         Prepared Statement of Representative Jerry F. Costello
    Good morning. Thank you, Mr. Chairman, for holding today's hearing 
to transition our aging electric delivery system to a smart grid 
infrastructure.
    Our current electric grid is inefficient and outdated. These 
problems have been highlighted by the three massive blackouts the 
Nation has experienced in the last nine years. Smart grid technology 
will reduce inefficiency, provide consumers more control over their 
electricity costs, and give utility operators more flexibility in 
generating and transmitting power. In addition, smart grid technology 
will improve the security of our electricity infrastructure, making it 
less susceptible to threats. With the House of Representative's passage 
of the American Clean Energy and Security Act, the need for a 
modernized, clean electricity grid has become increasingly important.
    Developing and demonstrating these technologies will require 
coordination between the Federal Government and the private sector. The 
American Recovery and Reinvestment Act's $4.5 billion investment in 
smart grid technology was an important step in moving forward with 
early smart grid research efforts. DOE has distributed these funds to 
universities, including the Illinois Institute of Technology, and 
private companies to move these projects towards large-scale 
demonstrations. I would be interested to hear from our witnesses how 
Congress can continue to support these collaborative efforts. In 
particular, how can Congress support efforts to move these important 
projects towards commercial application?
    I welcome our panel of witnesses, and I look forward to their 
testimony. Thank you again, Mr. Chairman.

    Chairman Baird. It is now my pleasure to introduce our 
witnesses at this time. Ms. Patricia Hoffman is the Acting 
Assistant Secretary of the Office of Electric Delivery and 
Energy Reliability at the Department of Energy. Ms. Suedeen--am 
I pronouncing that right? Is it Sueldeen or Suedeen?
    Ms. Kelly. Suedeen.
    Chairman Baird. Suedeen G. Kelly is the Commissioner of the 
Federal Energy Regulatory Commission. Dr. George Arnold is the 
National Coordinator for Smart Grid Interoperability at the 
National Institute of Standards and Technology. Mr. Paul De 
Martini is the Vice President of Advanced Technology for 
Southern California Edison, Mr. Jeff Ross, Executive Vice 
President for GridPoint Incorporated, and finally, Mr. Michael 
Stoessl is the Group President of Cooper Power Systems. We 
thank you all. As I think you have been briefed by staff, we 
try to keep the testimony as near to five minutes as we can. As 
my distinguished friend, Dr. Ehlers, used to say when he 
chaired the Committee, as you go past five minutes there is a 
risk the chair drops out from under you and you don't get to 
testify for the rest of the hearing. Please keep your comments 
brief, but we sure appreciate your testimony. Following your 
comments, then we will have a series of questions from the 
panel Members.
    So with that, I will start from Ms. Hoffman from the 
Department of Energy. Thank you. Please begin.

STATEMENT OF MS. PATRICIA HOFFMAN, ACTING ASSISTANT SECRETARY, 
  OFFICE OF ELECTRICITY DELIVERY AND ENERGY RELIABILITY, U.S. 
                      DEPARTMENT OF ENERGY

    Ms. Hoffman. Thank you, Mr. Chairman and Members of the 
Subcommittee for the opportunity to provide an update on the 
current status of smart grid activities at the Department of 
Energy as well as future directions and priorities.
    The Energy Independence and Security Act of 2007 and the 
American Recovery and Reinvestment Act expanded the role of the 
Federal Government substantially in research, development, 
demonstration and deployment of smart grid technologies, tools 
and techniques. To fulfill this role, the Department of Energy 
and the Office of Electricity Delivery and Energy Reliability 
are carrying out smart grid activities in three primary areas: 
smart grid investment grants, smart grid demonstrations and 
smart grid research and development.
    One of our top priorities is to responsibly disburse funds 
made available under the Recovery Act to develop and deploy 
smart grid technologies designed to modernize our nation's 
electric system. On June 25, 2009, we released two funding 
opportunity announcements, one for smart grid investment grants 
and the second for smart grid demonstrations. We are expecting 
to evaluate hundreds of applications over the coming months and 
to make awards for projects that will show the benefits of a 
more modern grid that uses smart grid technologies, tools and 
techniques for the betterment of electricity consumers across 
America. We expect this funding to spark innovation, create 
businesses and provide jobs for American workers. We believe 
these programs represent a once-in-a-generation chance for 
game-changing investments, and we are dedicated to making sure 
that the American taxpayers get maximum value from these 
investments in terms of a more reliable, secure, efficient, 
affordable and clean electric system.
    While these programs are about transforming the delivery 
and management of electric power through the application of 
today's smart grid technologies, tools and techniques such as 
phasor measurement units and advanced metering infrastructure, 
we are simultaneously working on the next generation systems 
for expanding the capacity and increasing the flexibility and 
functioning of the electric transmission and distribution 
system. Our fiscal year 2010 budget request for smart grid and 
related R&D is aimed at harnessing the Nation's scientific and 
engineering talents in electric systems and focusing it on 
discovery and innovation for new materials, algorithms, 
concepts and prototypes for power lines, substations, 
transformers, storage systems and power electronics.
    Section 1302 of the Energy Independence and Security Act 
directed the Secretary of Energy to report to Congress 
concerning the status of smart grid deployments nationwide and 
any regulatory or government barriers to continued deployment. 
This week the Department of Energy released its Smart Grid 
Systems Report. The report finds that while many smart grid 
capabilities, are still emerging, penetration levels for 
substation automation, smart metering and distributed 
generation technologies are growing significantly.
    A part of the vision for a smart grid is its ability to 
enable informed participation by consumers, making them an 
integral part of the electric power system with bi-directional 
flows of energy and coordination through communication 
mechanisms. A smart grid should help balance supply and demand 
and enhance reliability by modifying the manner in which 
consumers use and purchase electricity. These modifications can 
be the result of consumer choices that motivate shifting 
patterns of behavior and consumption. These choices involve new 
technologies, new information regarding electricity use, and 
new pricing and incentive programs.
    A key aspect for implementation of smart grid technologies 
is the need to address inter-operability and cyber security. 
Development of industry-based standards governing how the many 
different devices involved in a smart grid can communicate and 
inter-operate with each other in a seamless, efficient and 
secure manner is one of the top priorities for DOE and other 
federal and State agencies. Since the smart grid vision 
involves the two-way flow of information and electric power, 
for higher degrees of automation and control than what exist 
today in the electric transmission and distribution system, it 
is necessary for there to be standards that guide manufacturers 
and smart grid developers, foster innovation and provide a 
platform that enables a wide range of offerings to come to 
market and have the opportunity to compete. As occurred with 
the telecommunications and the evolution of the Internet, 
effective standards form the basis upon which entrepreneurs can 
bring innovations to the marketplace, build new businesses and 
create job opportunities.
    The public-private partnerships on phasor measurement units 
have been instrumental in the development and deployment of 
this technology and the formation of the North American 
SyncroPhasor Initiative. The SyncroPhasor Initiative is an 
important technology to provide greater insight into system 
operating conditions and holds the promise to enable better 
indication of grid stress as well as other performance 
characteristics. An important goal is to use the phasor 
measurement unit (PMU)-derived information to trigger 
corrective actions and maintain reliable system operation.
    This concludes my statement, Mr. Chairman. Thank you for 
the opportunity to testify. I look forward to answering any 
questions you or your colleagues may have.
    [The prepared statement of Ms. Hoffman follows:]
                 Prepared Statement of Patricia Hoffman
    Thank you Mr. Chairman and Members of the Subcommittee for the 
opportunity to provide an update on the current status of smart grid 
activities at the Department of Energy as well as our future directions 
and priorities.
    The Energy Independence and Security Act of 2007 (EISA) and the 
American Recovery and Reinvestment Act of 2009 (Recovery Act) expand 
the role of the Federal Government substantially in research, 
development, demonstration, and deployment of smart grid technologies, 
tools, and techniques. To fulfill this role, the U.S. Department of 
Energy (DOE) and the Office of Electricity Delivery and Energy 
Reliability (OE) are carrying out smart grid activities in three 
primary areas: (1) Smart Grid Investment Grants, (2) Smart Grid 
Demonstrations, and (3) Smart Grid Research and Development (R&D).
    One of our top priorities is to responsibly disburse funds made 
available under the Recovery Act to develop and deploy smart grid 
technologies designed to modernize the Nation's electric system. On 
June 25, 2009 we released two Funding Opportunity Announcements 
(FOAs)--one for Smart Grid Investment Grants and the second for Smart 
Grid Demonstrations. We are expecting to evaluate hundreds of 
applications over the coming months and to make awards for projects 
that will show the benefits of a more modern grid that uses smart grid 
technologies, tools, and techniques for the betterment of electricity 
consumers across America. We expect this funding to spark innovation, 
create businesses, and provide new jobs for American workers. We 
believe these programs represent a ``once-in-a-generation'' chance for 
game-changing investments and we are dedicated to making sure that 
American taxpayers get maximum value from these investments in terms of 
a more reliable, secure, efficient, affordable, and clean electric 
system.
    While these programs are about transforming the delivery and 
management of electric power through application of today's smart grid 
technologies, tools, and techniques (such as phasor measurement units 
and advanced metering infrastructure), we are simultaneously working on 
``next generation'' systems for expanding the capacity and increasing 
the flexibility and functionality of electric transmission and 
distribution systems. Our fiscal year 2010 budget request for smart 
grid and related R&D is aimed at harnessing the Nation's scientific and 
engineering talent in electric systems and focusing it on discovery and 
innovation for new materials, algorithms, concepts, and prototypes for 
power lines, substations, transformer banks, feeder lines, storage 
systems, and switchgear to increase efficiency, reliability, security, 
resiliency, functionality, throughput, and energy density while 
reducing costs, footprint, and environmental impacts.

Smart Grid Performance Metrics and Trends

    Section 1302 of Title XIII of the Energy Independence and Security 
Act of 2007 directed the Secretary of Energy to ``. . . report to 
Congress concerning the status of smart grid deployments nationwide and 
any regulatory or government barriers to continued deployment.'' This 
week the Department of Energy released the Smart Grid Systems report. 
The report finds that while many smart grid capabilities are emerging, 
penetration levels for substation automation, smart metering, and 
distributed generation technologies are growing significantly.
    A part of the vision of a smart grid is its ability to enable 
informed participation by customers, making them an integral part of 
the electric power system. With bi-directional flows of energy and 
coordination through communication mechanisms, a smart grid should help 
balance supply and demand and enhance reliability by modifying the 
manner in which customers use and purchase electricity. These 
modifications can be the result of consumer choices that motivate 
shifting patterns of behavior and consumption. These choices involve 
new technologies, new information regarding electricity use, and new 
pricing and incentive programs.
    Supporting the bi-directional flow of information and energy is a 
foundation for enabling participation by consumer resources. Advanced 
metering infrastructure (AMI) is receiving the most attention in terms 
of planning and investment. Currently AMI comprises about 4.7 percent 
of all electric meters and their use for demand response is growing. 
Approximately 52 million meters are projected to be installed by 2012. 
As many service areas do not yet have demand response signals 
available, a significant number of the meters installed are estimated 
not being used for demand response activities. Pricing signals can 
provide valuable information for consumers (and the automation systems 
that reflect their preferences) to decide on how to react to grid 
conditions. A Federal Energy Regulatory Commission (FERC) study found 
that in 2008 slightly over one percent of all customers received a 
dynamic pricing tariff, with nearly the entire amount represented by 
time-of-use tariffs (energy price changes at fixed times of the day). 
Lastly, the amount of load participating based on grid conditions is 
beginning to show a shift from traditional interruptible demand at 
industrial plants toward demand-response programs that either allow an 
energy-service provider to perform direct load control or provide 
financial incentives for customer-responsive demand at homes and 
businesses.
    Distributed energy resources and interconnection standards to 
accommodate generation capacity appear to be moving in positive 
directions. Accommodating a large number of disparate generation and 
storage resources requires anticipation of intermittency and 
unavailability, while balancing costs, reliability, and environmental 
emissions. Distributed generation (carbon-based and renewable) and 
storage deployments, although a small fraction (1.6 percent) of total 
summer peak, appear to be increasing rapidly. In addition, 31 states 
have interconnection standards in place, with 11 states progressing 
toward a standard, one state with some elements in place, and only 
eight states with none.
    Gross annual measures of operating efficiency have been improving 
slightly as energy lost in generation dropped 0.6 percent to 67.7 
percent in 2007 and transmission and distribution losses also improved 
slightly. The summer peak capacity factor declined slightly to 80.8 
percent while overall annual average capacity factor is projected to 
increase slightly to 46.5 percent. Contributions to these measures 
include smart grid related technology, such as substation automation 
deployments. While transmission substations have considerable 
instrumentation and coordination, the value proposition for 
distribution-substation automation is now receiving more attention. 
Presently about 31 percent of substations have some form of automation, 
with the number expected to rise to 40 percent by 2010. The deployment 
of dynamic line rating technology is also expected to increase asset 
utilization and operating efficiency; however, implementations thus far 
have had very limited penetration levels.

The Smart Grid Investment Grant Program

    The overall purpose of the Smart Grid Investment Grant Program 
(SGIG) is to accelerate the modernization of the Nation's electric 
transmission and distribution systems and promote investments in smart 
grid technologies, tools, and techniques to increase flexibility, 
functionality, inter-operability, cyber security, situational 
awareness, resiliency, and operational efficiency.
    The goals of the program involve accelerating progress toward a 
modern grid that provides the following specific characteristics that 
DOE believes define what a smart grid would accomplish:

          Enabling informed participation by consumers in 
        retail and wholesale electricity markets.

          Accommodating all types of central and distributed 
        electric generation and storage options.

          Enabling new products, services, and markets.

          Providing for power quality for a range of needs by 
        all types of consumers.

          Optimizing asset utilization and operating efficiency 
        of the electric power system.

          Anticipating and responding to system disturbances.

          Operating resiliently to attacks and natural 
        disasters.

    The SGIG FOA issued on June 25th calls for the submission of 
project applications in three phases. Phase I applications are due 
August 6, 2009; Phase II applications are due November 4, 2009; and 
Phase III applications are due March 3, 2010. We expect to make Phase I 
selections in September 2009.
    There is approximately $3.4 billion available for this solicitation 
for projects in two categories:

          Smaller projects in which the federal share would be 
        in the range of $300,000 to $20,000,000.

          Larger projects in which the federal cost share would 
        be in the range of $20,000,000 to $200,000,000.

    We expect about 60 percent of the funds will be allocated to larger 
projects and about 40 percent for smaller projects. The period of 
performance for awarded projects is three years, or less.
    Project applications will be considered in six topic areas:

          Equipment manufacturing,

          Customer systems,

          Advanced metering infrastructure,

          Electric distribution systems,

          Electric transmission systems, and

          Integrated and/or crosscutting systems.

    A technical merit review of the applications will be conducted by 
our own staff plus experts from colleges, universities, national 
laboratories, and the private sector. Reviewers will be subject to non-
disclosure and conflict of interest agreements and will apply the 
following technical merit review criteria:

          The adequacy of the technical approach for enabling 
        smart grid functions;

          The adequacy of the plan for project tasks, schedule, 
        management, qualifications, and risks;

          The adequacy of the technical approach for addressing 
        inter-operability and cyber security, and

          The adequacy of the plan for data collection and 
        analysis of project costs and benefits.

The Smart Grid Demonstration Program

    The overall purpose of the Smart Grid Demonstrations Program (SGDP) 
is to demonstrate how a suite of existing and emerging smart grid 
technologies can be innovatively applied and integrated to investigate 
technical, operational, and business-model feasibility. The aim is to 
demonstrate new and more cost-effective smart grid technologies, tools, 
techniques, and system configurations that significantly improve upon 
the ones that are either in common practice today or are likely to be 
proposed in the Smart Grid Investment Grant Program.
    The SGDP FOA was also released on June 25th and calls for 
applications to be submitted by August 26, 2009 in two areas of 
interest:

          Regional demonstrations, and

          Grid-scale energy storage demonstrations.

    The regional demonstration area covers projects involving electric 
system coordination areas, distributed energy resources, transmission 
and distribution infrastructure, and information networks and finance. 
The grid-scale energy storage demonstration area covers battery storage 
for load shifting or wind farm diurnal operations, frequency regulation 
ancillary services, distributed energy storage for grid support, 
compressed air energy storage, and demonstration of promising energy 
storage technologies and advanced concepts.
    Approximately $615 million is available for awards with 8-12 
regional demonstration projects and 12-19 energy storage projects 
expected. The period of performance for awards is three to five years.

Inter-operability and Cyber Security

    A key aspect for the implementation of smart grid technologies, 
tools, and techniques nationwide is the need to address inter-
operability and cyber security. Development of industry-based standards 
for governing how the many different devices involved in smart grid can 
communicate and inter-operate with each other in a seamless, efficient, 
and secure manner is one of the top priorities for OE and other federal 
and State agencies. Since the smart grid vision involves the two-way 
flow of both information and electric power, and for higher degrees of 
automation and control than exist in today's electric transmission and 
distribution system, it is necessary for there to be standards that 
guide manufacturers and smart grid developers, foster innovation, and 
provide for a platform that enables a wide range of offerings to come 
to market and have the opportunity to compete. As occurred with 
telecommunications and the evolution of the Internet, effective 
standards form the basis upon which entrepreneurs can bring innovations 
to the marketplace, build new businesses, and create job opportunities.
    At the same time, it is paramount that smart grid devices and 
inter-operability standards include protections against cyber 
intrusions and have systems that are designed from the start (not 
patches added on) that prevent hackers from disrupting grid operations 
from gaining entry through the millions of new portals created by the 
deployment of smart grid technologies, tools, and techniques.
    Through the Federal Smart Grid Task Force, we are collaborating 
with the National Institute of Standards and Technology (NIST) and 
other agencies and organizations in the development of a framework and 
roadmap for inter-operability standards, as called for in EISA Section 
1305. Cyber security is a critical element of these efforts. Our 
collaboration with NIST includes financial assistance involving $10 
million of Recovery Act funding that was designated to support the 
development and implementation of inter-operability standards.
    As a demonstration that the DOE is working to eliminate cyber 
security risks, the following language is part of the smart grid FOAs:
    Cyber security should be addressed in every phase of the 
engineering life cycle of the project, including design and 
procurement, installation and commissioning, and the ability to provide 
ongoing maintenance and support. Cyber security solutions should be 
comprehensive and capable of being extended or upgraded in response to 
changes to the threat or technological environment. The technical 
approach to cyber security should include:

          A summary of the cyber security risks and how they 
        will be mitigated at each stage of the life cycle (focusing on 
        vulnerabilities and impact).

          A summary of the cyber security criteria utilized for 
        vendor and device selection.

          A summary of the relevant cyber security standards 
        and/or best practices that will be followed.

          A summary of how the project will support emerging 
        smart grid cyber security standards.

    DOE intends to work with those selected for award but may decide 
not to make an award to an otherwise meritorious application if that 
applicant cannot provide reasonable assurance that their cyber security 
will provide protection against broad-based systemic failures in the 
electric grid in the event of a cyber security breach.
    The following technical merit review criteria will be used in the 
evaluation of applications and in the determination of the SGIG project 
awards. The relative importance of the four criteria is provided in 
percentages in parentheses.

        1.  Adequacy of the Technical Approach for Enabling Smart Grid 
        Functions (40 percent)

        2.  Adequacy of the Plan for Project Tasks, Schedule, 
        Management, Qualifications, and Risks (25 percent)

        3.  Adequacy of the Technical Approach for Addressing Inter-
        operability and Cyber Security (20 percent)

        4.  Adequacy of the Plan for Data Collection and Analysis of 
        Project Costs and Benefits (15 percent)

Smart Grid Research and Development

    OE's fiscal year 2010 budget request contains a new line item to 
support a suite of activities to develop the next generation of smart 
grid technologies, tools, and techniques. While the FOAs are intended 
to accelerate existing systems, the R&D activities are aimed at new 
inventions, discoveries, and technology advances. We view grid 
modernization as a multi-decade process based on private sector 
investments and business innovations across a variety of markets and 
applications. This will be a highly dynamic process and will require 
agility and flexibility in the way OE manages its activities. There is 
direct linkage between the FOAs and the R&D, as lessons learned during 
implementation will generate use cases, best practices, and experience 
that will guide R&D directions and priorities.
    Smart grid R&D priorities for fiscal year 2010 include:

          Integrated communications,

          Advanced components,

          Advanced control methods,

          Sensing and measurement,

          Improved interfaces and decision support, and

          Grid materials research.

    Integrated communications involves projects to create an open 
architecture and support inter-operability for a ``plug & play'' smart 
grid environment. Advanced components include projects to develop power 
electronics devices for high-voltage energy conversion and flow 
control. Advanced control methods includes projects to provide 
operating and control solutions for integrating renewable and 
distributed energy systems into the electric transmission and 
distribution system, including plug-in electric vehicles. Sensing and 
measurement includes projects for advanced devices to evaluate system 
conditions and feed back such information to both grid operators and 
consumers for optimized operations and controls. Improved interfaces 
and decision support includes projects to develop tools for grid 
operators and consumers to use information streams from smart grid 
devices for real-time decision-making and diagnostics. Grid materials 
research includes projects to explore advanced materials for 
conductors, insulators, power electronics devices, and other equipment 
that involve materials that change shape or functionality in response 
to external conditions where new qualities and performance features 
will be needed when those devices operate in a smart grid environment.
    Another R&D priority for 2010, and one that is closely related to 
and coordinated with our work in smart grid R&D, involves Clean Energy 
Transmission and Reliability and projects involving the deployment of 
Phasor Measurement Units (PMUs). OE leadership has been instrumental in 
the development and deployment of this technology and in the formation 
of the North American SyncroPhasor Initiative (NASPI), which involves 
OE collaboration with the Nation's leading electric utilities, power 
transmission companies, independent system operators, universities, 
national laboratories, and the North American Electric Reliability 
Corporation. The NASPI mission is to improve power system reliability 
and visibility through wide area measurement and control. 
Synchrophasors are precise grid measurements now available from 
monitors called phasor measurement units (PMUs). PMU measurements are 
taken at high speed (typically 30 observations per second--compared to 
one every four seconds using conventional technology). Each measurement 
is time-stamped according to a common time reference. Time stamping 
allows synchrophasors from different utilities to be time-aligned (or 
``synchronized'') and combined together providing a precise and 
comprehensive view of the entire interconnection. Synchrophasors are 
providing greater insight into system operating conditions and hold the 
promise to enable a better indication of grid stress. An important goal 
is the use of PMU-derived information to trigger corrective actions 
that maintains reliable system operation.
    A map of PMU installations shows growing numbers across North 
America including the Eastern Interconnection, Western Interconnection, 
and the ERCOT Interconnection (which comprises most of Texas). Devices 
called phasor data concentrators aggregate PMU data for use by system 
operators for wide area visibility and measurements. There are 
significant computational challenges in organizing and analyzing phasor 
data and in developing models and analysis tools for grid operators and 
visualization and decision-making support. Such models and tools are 
essential for making key system-level improvements, including:

          Wide-area, real-time interconnection monitoring, 
        visualization, and situational awareness of precursors of grid 
        stress, e.g., phase angles, damping,

          Monitoring of key metrics and compliance with 
        reliability standards,

          Translation of data and metrics into information 
        dashboards for operator action,

          Model validation (e.g., dynamic models, load models),

          Event analysis of root causes and forensics,

          Small signal stability monitoring and oscillation 
        detection,

          Automated control actions--smart switchable networks,

          Definition of ``edge'' and reliability margins for 
        real-time dynamic system management, and

          Computation of sensitivities and analysis of 
        contingencies.

    OE priorities in this area for fiscal year 2010 include development 
of prototype small signal monitoring tools for damping of 
characteristic grid oscillations, development of dynamics analysis 
capabilities for PMU-based networks, development of advanced 
visualization and decision-making tools, assess possible PMU 
installations to monitor dynamics from wind and other variable sources 
of renewable generation, research in new algorithms and computational 
methods for solving complex power system problems, and assessments of 
human factors requirements for grid operators using operational 
simulations and scenario-based assessments.

Conclusion

    OE's smart grid activities are among our top priorities and 
crosscut virtually everything we do in electricity delivery and energy 
reliability. Our immediate attention is on the successful 
implementation of the two Recovery Act programs in smart grid 
investment grants and demonstrations. At the same time we are moving 
forward on smart grid R&D to accelerate development of the next 
generation of smart grid technologies, tools, and techniques. All of 
these efforts are aimed at modernizing the North American electric 
grid. We believe that grid modernization is paramount for achieving 
national energy, environmental, and economic goals for reductions in 
oil consumption and carbon emissions, as well as creation of new 
businesses and jobs for American workers.
    This concludes my statement, Mr. Chairman. Thank you for the 
opportunity to testify. I look forward to answering any questions you 
and your colleagues may have.

                     Biography for Patricia Hoffman
    Patricia Hoffman is the Principal Deputy Assistant Secretary for 
the Office of Electricity Delivery and Energy Reliability at the U.S. 
Department of Energy. The Office of Electricity Delivery and Energy 
Reliability leads the Department of Energy's (DOE) efforts to modernize 
the electric grid through the development and implementation of 
national policy pertaining to electric grid reliability and the 
management of research, development, and demonstration activities for 
``next generation'' electric grid infrastructure technologies.
    Hoffman is responsible for developing and implementing a long-term 
research strategy for modernizing and improving the resiliency of the 
electric grid. Hoffman directs research on visualization and controls, 
energy storage and power electronics, high temperature 
superconductivity and renewable/distributed systems integration. She 
also oversees the business management of the office including human 
resources, budget development, financial execution, and performance 
management. Before joining the Office of Electricity Delivery and 
Energy Reliability, Hoffman was the Program Director for the Federal 
Energy Management Program which implements efficiency measures in the 
federal sector and the Program Manager for the Distributed Energy 
Program that developed advanced natural gas power generation and 
combined heat and power systems. She also managed the Advanced Turbine 
System program resulting in a high-efficiency industrial gas turbine 
product. Hoffman holds a Bachelor of Science and a Master of Science in 
Ceramic Science and Engineering from Penn State University.

    Chairman Baird. Thank you, Ms. Hoffman.
    Ms. Kelly.

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

    Ms. Kelly. Thank you, Mr. Chairman and Members of the 
Subcommittee for the opportunity to testify today. My name is 
Suedeen Kelly. I am a Commissioner on the Federal Energy 
Regulatory Commission, and what I am going to do now is 
describe FERC's efforts to develop and implement a range of 
technologies which has come to be known collectively as the 
smart grid. I am going to discuss three topics: our authority 
to act, the coordinated efforts we have undertaken to date with 
other federal regulators and State regulators, and the activity 
that we have undertaken on our own.
    Regarding our authority to act, it derives from two 
statutes: the Energy Independence and Security Act passed in 
2007 and the Federal Power Act, which has been with us for over 
70 years now. The Energy Independence and Security Act gives 
FERC authority in the area of inter-operability standards for 
the smart grid. The Federal Power Act gives FERC jurisdiction 
over part of the electricity industry and part of the 
electricity market. Specifically, there are three areas under 
the Federal Power Act where we have jurisdiction that are 
relevant to smart grid development.
    First, we have jurisdiction over the transmission of 
electricity by public utilities but we don't have jurisdiction 
over the distribution of electricity, which is subject to State 
regulation. We have jurisdiction over the wholesale sales of 
electricity in interstate commerce by public utilities, but we 
don't have jurisdiction over retail sales, which is under the 
jurisdiction of State regulators. And we have jurisdiction over 
the approval and enforcement of reliability standards for the 
bulk power system.
    We have been coordinating over the last two years with 
federal and State agencies. In the federal arena, smart grid 
efforts involve a broad range of government agencies and the 
federal agencies include primarily those who are with you 
today: the Department of Energy, the National Institute of 
Standards and Technology, and FERC, as Ms. Hoffman has 
described DOE's role on smart grid and Dr. Arnold will soon 
describe the role of NIST. NIST will be involved in setting up 
the framework for inter-operability standard development and 
overseeing that development. Once FERC determines that NIST's 
work has led to sufficient consensus regarding a standard, then 
FERC's role under the Energy Independence and Security Act is 
to adopt the inter-operability standards ``needed to ensure the 
functionality and inter-operability of smart grid.'' So it may 
be that some of the standards developed through the NIST 
process will not ultimately fall into the category of ``needed 
to ensure the functionality and inter-operability'' but to the 
extent those standards do fall into that category, it is FERC's 
responsibility to adopt them as regulations, or at least we 
have the authority to do that.
    Development of the inter-operability framework, as Dr. 
Arnold will discuss, is a very challenging task. Recent funding 
for NIST's efforts will help but coordination among government 
agencies as well as among industry participants is just as 
important. DOE, NIST and FERC have been working with each other 
to ensure progress, and those efforts will continue.
    In the State arena, as I mentioned, utilities are regulated 
by FERC at the transmission level and the wholesale level, and 
most of them are also regulated by one or more State regulatory 
commissions at the distribution level and the retail sales 
level. Now, because smart grid technologies span the grid from 
the transmission through the distribution level, the concurrent 
jurisdiction of federal and State regulators, we believe, will 
best be served if both federal and State regulators adopt 
complementary policies to avoid sending regulatory signals. To 
address this as well as other issues related to deployment of 
smart grid technology, I and Mr. Fred Butler, who is Chairman 
of the New Jersey Public Utility Commission as well as 
President of the Association of State Utility Commissioners, 
formed a collaborative and we co-chair that collaborative 
between FERC and the State commissions. At present, there are 
21 states that have become a member of that collaborative. 
Since its creation 15 months ago, the collaborative has 
explored a host of technological and regulatory issues 
involving the smart grid including the development of a 
clearinghouse of information at the Department of Energy as 
well as the drafting of criteria that we suggested to the 
Department of Energy for the funding of smart grid technologies 
under the stimulus bill and we are now participating with the 
help of Lawrence Berkeley Lab and the Pacific Northwest 
National Lab in the NIST process as a collaborative and in the 
development of DOE's clearinghouse for information from smart 
grid demonstration projects.
    A critical issue as smart grid is deployed is the need to 
ensure grid reliability and cyber security. FERC can use its 
existing authority to facilitate implementation of smart grid 
under the Federal Power Act. Last week FERC adopted a smart 
grid policy statement that basically has two parts. The first 
part identified priorities that we see from our position of 
regulator of the electric industry for the development of 
inter-operability standards. Cyber security is one of those 
priorities as is standardized communication across intersystem 
interfaces. We also listed four functional priorities: wide 
area situational analysis, demand response, electric storage 
and electric transportation. The policy statement also 
specified certain cost recovery mechanisms available for 
recovery of costs of transmission-owning utilities that want to 
invest in the smart grid facilities.
    I appreciate the opportunity to testify today and I would 
be happy to answer any questions that you might have.
    [The prepared statement of Ms. Kelly follows:]
                 Prepared Statement of Suedeen G. Kelly

Introduction and Summary

    Mr. Chairman and Members of the Subcommittee, thank you for the 
opportunity to speak here today. My name is Suedeen Kelly, and I am a 
Commissioner on the Federal Energy Regulatory Commission (FERC or 
Commission). My testimony addresses the efforts to develop and 
implement a range of technologies collectively known as the ``smart 
grid.''
    Our nation's electric grid generally uses decades-old technology 
and has not incorporated new digital technologies extensively. Digital 
technologies have transformed other industries such as 
telecommunications. A similar change has not yet happened for the 
electric grid. As detailed below, a smart grid can provide a range of 
benefits to the electric industry and its customers, enhancing its 
efficiency and enabling its technological advancement while ensuring 
its reliability and security. While we are moving forward expeditiously 
on smart grid, its implementation will take time.
    Smart grid efforts involve a broad range of government agencies, at 
both the federal and State levels. The federal agencies include 
primarily the Department of Energy (DOE), the National Institute of 
Standards and Technology (NIST) and the FERC. DOE's tasks include 
funding research and development; awarding grants for smart grid 
projects; managing the Smart Grid Task Force, discussed below; and 
developing a smart grid information clearinghouse. NIST has primary 
responsibility for coordinating development of an ``inter-operability 
framework'' allowing smart grid technologies to communicate and work 
together. The FERC is then responsible for adopting inter-operability 
standards, once FERC is satisfied that NIST's work has led to 
sufficient consensus.
    Development of the inter-operability framework is a challenging 
task. Recent funding for NIST's efforts will help, but cooperation and 
coordination among government agencies and industry participants is 
just as important. DOE, NIST and FERC have been working with each other 
and with other federal agencies to ensure progress, and those efforts 
will continue. FERC also has been coordinating with State regulators, 
to address common issues and concerns.
    The FERC can use its existing authority to facilitate 
implementation of smart grid. For example, through its recent final 
smart grid Policy Statement (Policy Statement), the Commission has 
specified criteria for recovery of costs of investing in jurisdictional 
smart grid facilities.
    A critical issue as smart grid is deployed is the need to ensure 
grid reliability and cybersecurity. The significant benefits of smart 
grid technologies must be achieved without taking reliability and 
security risks that could be exploited to cause great harm to our 
nation's citizens and economy.
    Finally, if the intent of Congress is that everyone must comply 
with the smart grid standards adopted by the Commission under the 
Energy Independence and Security Act of 2007 (EISA), additional 
legislation would need to be considered.

What is the Smart Grid?

    ``Smart grid'' refers to the effort to modernize the electric grid 
to improve the way we deliver and use power. The smart grid takes the 
existing electricity delivery system and makes it smarter by linking 
seamless communications systems to the electrical transmission and 
distribution system between any point of generation and any point of 
consumption. It can monitor, protect and automatically optimize the 
operation of the interconnected elements. The smart grid will provide a 
two-way flow of electricity and information to create a more automated 
and efficient energy delivery network.
    The smart grid concept encompasses all levels of the electric 
system, and, therefore, a comprehensive list of applications and 
technologies could be quite long. Two key examples, however, include: 
(1) smart thermostats capable of receiving and responding to 
electricity price or dispatch signals to lower or raise demand as 
necessary to balance available supply at the device level; and (2) 
advanced sensor networks on the distribution and transmission grids to 
improve awareness of actual system conditions and, thus, permit more 
advanced control and use of those grids.

How do Technology and Regulation Interact?

    Existing retail and wholesale regulatory frameworks generally 
assume that load (i.e., customer consumption; also called demand) is an 
uncontrollable variable that can only be addressed with controllable 
generation. Accordingly, load pays to consume the energy it needs, and 
generation is paid to meet that need no matter how variable and 
unpredictable it may be. This mutes any incentive for load to shift its 
usage in grid-favorable ways and increases the challenge and cost of 
accommodating such load with generation. The smart grid concept seeks 
to move away from this framework by making all aspects of the electric 
system, including the load side, more transparent, interactive, and 
responsive.
    This interplay between technology and regulation is visible in the 
Commission's examination of its rate policies in light of the new 
Congressional directive in the EISA to initiate rule-makings on smart 
grid inter-operability standards. As explained in more detail below, 
the Commission recently issued a smart grid Policy Statement that 
adopts an interim rate policy to help encourage investment in smart 
grid systems.
    At the consumer level, a smart grid could include smart devices, 
such as smart thermostats capable of receiving and responding to 
electricity price or dispatch signals to lower or raise demand as 
necessary to balance available supply at the device level. State 
regulators have the authority and ability to provide pricing and 
dispatch signals at retail. If signals reflect real-time costs, 
consumers are likely to buy and install smart devices. For example, 
consumers might install smart thermostats if regulators provide real-
time price signals.

What Federal Regulation Applies?

    Federal regulation relevant to smart grid is found in the following 
statutes: EISA; the Energy Policy Act of 2005; and the American 
Recovery and Reinvestment Act of 2009. The provisions of the FPA can 
also be used to advance smart grid technologies. These are discussed 
below.
    Section 1301 of the EISA states that ``it is the policy of the 
United States to support the modernization of the Nation's electricity 
transmission and distribution system to maintain a reliable and secure 
electricity infrastructure that can meet future demand growth and to 
achieve'' a number of benefits. Section 1301 specifies benefits such 
as: increased use of digital technology to improve the grid's 
reliability, security, and efficiency; ``dynamic optimization of grid 
operations and resources, with full cyber-security;'' facilitation of 
distributed generation, demand response, and energy efficiency 
resources; and integration of ``smart'' appliances and consumer 
devices, as well as advanced electricity storage and peak-shaving 
technologies (including plug-in hybrid electric vehicles).
    Section 1305(a) of the EISA gives NIST ``primary responsibility to 
coordinate the development of a framework that includes protocols and 
model standards for information management to achieve inter-operability 
of smart grid devices and systems.'' NIST is required to solicit input 
from a range of others, including the GridWise Architecture Council and 
the National Electrical Manufacturers Association, as well as two 
international bodies, the Institute of Electrical and Electronics 
Engineers and the North American Electric Reliability Corporation 
(NERC). Many of the organizations working with NIST on this issue 
develop industry standards through extensive processes aimed at 
achieving consensus.
    Although the EISA does not define inter-operability, definitions 
put forth by others often include many of the same elements. These 
include: (1) exchange of meaningful, actionable information between two 
or more systems across organizational boundaries; (2) a shared meaning 
of the exchanged information; (3) an agreed expectation for the 
response to the information exchange; and (4) requisite quality of 
service in information exchange: reliability, accuracy and security. 
(See GridWise Architecture Council, ``Inter-operability Path Forward 
Whitepaper,'' www.gridwiseac.org)
    Pursuant to EISA section 1305(d), once the Commission is satisfied 
that NIST's work has led to ``sufficient consensus'' on inter-
operability standards, it must then ``institute a rule-making 
proceeding to adopt such standards and protocols as may be necessary to 
insure smart-grid functionality and inter-operability in interstate 
transmission of electric power, and regional and wholesale electricity 
markets.'' Section 1305 does not specify any other prerequisites to 
Commission action, such as a filing by NIST with the Commission or 
unanimous support for individual standards or a comprehensive set of 
standards.
    The Commission's role under EISA section 1305 is consistent with 
its responsibility under section 1223 of the Energy Policy Act of 2005. 
Section 1223 directs FERC to encourage the deployment of advanced 
transmission technologies, and expressly includes technologies such as 
energy storage devices, controllable load, distributed generation, 
enhanced power device monitoring and direct system State sensors.
    Recently, the American Recovery and Reinvestment Act of 2009 (the 
``Stimulus Bill'') appropriated $4.5 billion to DOE for ``Electricity 
Delivery and Energy Reliability.'' The authorized purposes for these 
funds include, inter alia, implementation of programs authorized under 
Title XIII of EISA, which addresses smart grid. Smart grid grants would 
provide funding for up to 50 percent of a project's documented costs. 
In many cases, State and/or federal regulators could be asked to 
approve funding for the balance of project costs. The Secretary of 
Energy is required to develop procedures or criteria under which 
applicants can receive such grants. The Stimulus Bill also states that 
$10 million of the $4.5 billion is ``to implement [EISA] section 
1305,'' the provision giving NIST primary responsibility to coordinate 
the development of the inter-operability framework.
    The Stimulus Bill also directed the Secretary of Energy to 
establish a smart grid information clearinghouse. As a condition of 
receiving smart grid grants, recipients must provide such information 
to the clearinghouse as the Secretary requires.
    As an additional condition, recipients must show that their 
projects use ``open protocols and standards (including Internet-based 
protocols and standards) if available and appropriate.'' These open 
protocols and standards, sometimes also referred to as ``open 
architecture,'' will facilitate inter-operability by allowing multiple 
vendors to design and build many types of equipment and systems for the 
smart grid environment. As the GridWise Architecture Council stated, 
``An open architecture encourages multi-vendor competition because 
every vendor has the opportunity to build interchangeable hardware or 
software that works with other elements within the system.'' (See 
``Introduction to Inter-operability and Decision-Maker's Checklist,'' 
page 4, www.gridwiseac.org)
    The Commission's interest and authority in the area of smart grid 
derives not only from the EISA but also from its authority under the 
Federal Power Act (FPA) over the rates, terms and conditions of 
transmission and wholesale sales in interstate commerce and its 
responsibility for reliability standards for the bulk-power system. 
Specifically, the Commission has jurisdiction over transmission and 
sales for resale of electric energy in interstate commerce by public 
utilities pursuant to FPA section 201 and over the approval and 
enforcement of reliability standards for the bulk-power system under 
FPA section 215.
    An additional issue involves enforcement of smart grid standards 
promulgated by the Commission under EISA section 1305. This section, 
which is a stand-alone provision instead of an amendment to the FPA, 
requires the Commission to promulgate standards, but does not provide 
that the standards are mandatory or provide any authority or procedures 
for enforcing such standards. If the Commission were to seek to use the 
full scope of its existing FPA authority to require compliance with 
smart grid standards, most of its authorities apply only to certain 
entities (i.e., public utilities under its rate-making authority in 
sections 205 and 206, or users, owners and operators of the bulk power 
system under its reliability authority in section 215). The Commission 
also has asserted jurisdiction in certain circumstances over demand 
response programs involving both wholesale and eligible retail 
customers. However, The Commission's authority under the FPA excludes 
local distribution facilities unless specifically provided; its rate 
authority under sections 205 and 206 applies only to public utilities; 
and its section 215 reliability authority does not authorize it to 
mandate standards but rather only to refer a matter to NERC's standard-
setting process. Further, its section 215 reliability authority 
excludes Alaska and Hawaii. If the intent of Congress is that everyone 
must comply with the smart grid standards adopted by the Commission 
under the EISA, additional legislation should be considered.
    While FERC, by itself, may be able to take steps to foster smart 
grid technologies, achieving the full benefits of a smart grid will 
require coordination among a broad group of entities, particularly DOE, 
NIST, FERC and State regulators. For example, Congress itself 
recognized, in EISA section 1305(a)(1), the need for NIST to seek input 
from FERC, the Smart Grid Task Force established by DOE and ``other 
relevant federal and State agencies.'' On another front, DOE's 
authority to support up to 50 percent of the cost of a smart grid 
project must be matched with regulatory approvals allowing utilities to 
recover the rest of their costs in rates. Similarly, the concurrent 
jurisdiction of the FERC and State commissions over many utilities will 
require regulators to adopt complementary policies to avoid sending 
conflicting regulatory signals. More fundamentally, a smart grid will 
require substantial coordination between wholesale and retail markets 
and between the federal and State rules governing those markets. 
Similarly, smart grid standards may require changes to business 
practice standards already used in the industry, such as those 
developed through the North American Energy Standards Board, and the 
industry and government agencies should support the work needed to 
evaluate and develop those changes.

How are the FERC, NIST and DOE Collaborating?

    As required by EISA section 1303, DOE has established the smart 
grid Task Force. The Task Force includes representatives from DOE, 
FERC, NIST, the Environmental Protection Agency and the Departments of 
Homeland Security, Agriculture and Defense. The Task Force seeks to 
ensure awareness, coordination and integration of Federal Government 
activities related to smart grid technologies, practices, and services. 
The Task Force meets on a regular basis, and has helped inform the 
participating agencies of the smart grid efforts of other participants 
as well as the efforts outside the Federal Government. FERC has 
designated two employees (one from the Office of Energy Policy and 
Innovation and one from the Office of Electric Reliability) to the Task 
Force. These employees bring a policy, rates, reliability and 
cybersecurity perspective to the Task Force. The FERC routinely updates 
the Task Force on the FERC/NARUC smart grid Collaborative, discussed 
below, and other FERC orders regarding smart grid policy.
    Independent of the Smart Grid Task Force, the Commission has 
coordinated closely with NIST and DOE on the development of inter-
operability standards for the smart grid. Several FERC commissioners 
and staff have participated in relevant meetings and conferences as 
speakers and/or session chairs. FERC staff also confers regularly with 
NIST and DOE staff on inter-operability standards, discussing matters 
such as accelerating the timeline, strategies to achieve consensus, and 
setting priorities.

How is FERC Collaborating with the States?

    In February 2008, FERC and NARUC began the Smart Grid 
Collaborative. I and Commissioner Frederick F. Butler of the New Jersey 
Board of Public Utilities co-chair the collaborative. Initiation of a 
collaborative effort was timely because State regulators were 
increasingly being asked to approve pilot or demonstration projects or 
in some cases widespread deployment in their states of advanced 
metering systems, one key component of a comprehensive smart grid 
system.
    The Collaborative began by convening joint meetings to hear from a 
range of experts about the new technologies. A host of issues were 
explored. Key among them were the issues of inter-operability, the 
types of technologies and communications protocols used in smart grid 
applications, the sequence and timing of smart grid deployments, and 
the type of rate structures that accompany smart grid projects.
    Through these meetings, Collaborative members learned of a range of 
smart grid projects already in place around the country. The smart grid 
programs in existence were varied in that they used a mix of differing 
technologies, communications protocols and rate designs. Collaborative 
members began discussing whether a smart grid information clearinghouse 
could be developed that would then allow an analysis of best practices. 
This information could help regulators make better decisions on 
proposed smart grid projects in their jurisdictions. In keeping with 
the Stimulus Bill, DOE is working to establish such a clearinghouse.
    The Collaborative members have begun to look beyond the information 
clearinghouse to who could best analyze this information to identify 
best practices from smart grid applications. Funding is being sought 
for a project under the auspices of the Collaborative that could act as 
an analytical tool to evaluate smart grid pilot programs, using the 
information developed by the clearinghouse, once the clearinghouse 
information becomes available. DOE recently selected a contractor to 
set up the clearinghouse.
    The Collaborative also developed criteria to apply to projects 
seeking smart grid grants. The Collaborative members focused on 
criteria that could help them fulfill their legal responsibilities as 
to smart grid projects they would be asked to approve. DOE has adopted 
many of the Collaborative's suggested funding criteria regarding data 
disclosures, cybersecurity, inter-operability and requirements related 
to the identification of project benefits.
    In addition, the Collaborative has met with DOE staff to discuss 
possible funding for technical assistance to the Collaborative and 
State regulators as they engage with NIST and other stakeholders in the 
development of smart grid inter-operability standards and protocols.
    The Commission and NARUC also have a Demand Response Collaborative 
headed up by FERC Chairman Jon Wellinghoff, Commissioner Phyllis Reha 
of the Minnesota Public Utilities Commission, and Commissioner Katrina 
McMurrian of the Florida Service Commission. The Demand Response 
Collaborative often focuses on smart grid issues because demand 
response will play an integral role in the smart grid. Smart grid 
technologies have considerable potential to facilitate demand response, 
and demand response can help address bulk-power system challenges, 
including reliably integrating unprecedented amounts of renewable 
resources into the grid.

How is the FERC Reaching Out to Industry?

    The Commission performs continuing outreach within the electric 
power industry to ensure that regulated entities are aware of NIST's 
process for the development of the framework for inter-operability 
standards and to encourage participation in this process. Numerous 
discussions have occurred with regional transmission organizations, the 
ISO-RTO Council (a coordinating entity comprised of ten independent 
system operators and regional transmission organizations in North 
America), and public utilities that have been actively involved in 
smart grid projects, including Xcel, AEP, SoCal Edison, PG&E, Oncor, 
Consumers Energy, and Duke. The Commission has also followed the 
efforts of the GridWise Architecture Council in order to get a better 
understanding of smart grid inter-operability standards from an 
information technology point of view. The GridWise Architecture Council 
was formed by DOE to promote and enable inter-operability among the 
many entities that interact with the Nation's electric power system.

The FERC's Policy Statement

    Last week, the Commission approved its smart grid Policy Statement. 
This action was preceded by the issuance of a proposed policy statement 
on March 19, 2009. Over 70 comments were received in response to the 
proposed policy statement.
    The Policy Statement prioritizes the development of key inter-
operability standards. This prioritization will facilitate progress on 
the smart grid technologies that will provide the largest benefits to a 
broad group of market participants.
    The Policy Statement establishes two cross-cutting and four 
functional priorities for inter-operability standards. The cross-
cutting priorities are cybersecurity and standardized communication 
across inter-system interfaces. To insure the integrity and reliability 
of the underlying bulk-power system, the Commission has required a 
demonstration of sufficient cybersecurity protections in all proposed 
smart grid standards to be considered in the FERC rule-making process 
directed by the EISA, including, where appropriate, a proposed smart 
grid standard applicable to local distribution-related components of 
smart grid. The Commission has also recognized that development of a 
common semantic framework and software models to enable effective 
communication and coordination across the inter-system interfaces is 
critical to supporting all of the smart grid goals, such as system 
self-healing, integration of diversified resources and improved system 
efficiency and reliability.
    The four functional priorities are wide-area situational analysis, 
demand response, electric storage, and electric transportation. First, 
wide-area situational analysis awareness is imperative for enhancing 
reliability of the bulk-power system because it allows for greater 
knowledge of the current state of available resources, load 
requirements and transmission capabilities. Second, smart grid 
technologies have considerable potential to promote demand response, 
which can reduce wholesale prices and wholesale price volatility and 
reduce potential generator market power. Third, as the technology 
advances, electricity storage will become a valuable resource providing 
a variety of services to the bulk-power system, including helping to 
address large-scale changes in generation mix. Finally, to the extent 
that new electric transportation options become more widely adopted in 
the near future, maintaining the reliable operation of the bulk-power 
system will require some level of control over when and how electric 
vehicles draw electricity off the electric system. Therefore, the 
Commission has urged the early development of standards that can permit 
distribution utilities to facilitate electric vehicle charging during 
off-peak load periods.
    In the Policy Statement, the Commission also adopted an interim 
rate treatment to encourage the near-term deployment of smart grid 
systems capable of helping to address challenges to the operation of 
the bulk-power system, if certain conditions are met. Those conditions 
include showing that (1) the smart grid facilities will advance the 
smart grid concept, (2) reliability and cybersecurity of the bulk-power 
system will not be adversely affected, (3) the applicant has minimized 
the possibility of stranded investment in smart grid equipment, and (4) 
the applicant must share feedback useful to the inter-operability 
standards development process with the Department of Energy Smart Grid 
Clearinghouse. The conditions that FERC has put in place for FERC-
jurisdictional costs may serve as a model for retail regulators.

Conclusion

    A coordinated and timely deployment of smart grid can provide many 
positive benefits to the Nation's electric industry and its customers, 
if we are careful to maintain and enhance grid security and reliability 
at the same time. Indeed, I would expect smart grid to evolve in many 
unanticipated but beneficial ways. Well-designed standards and 
protocols are needed to make smart grid a reality. They will eliminate 
concerns about technology obsolescence, allow system upgrades through 
software applications, and ultimately permit plug-and-play devices, 
regardless of vendor. The dynamic nature of smart grid technologies and 
practices are, in some cases, creating challenges in government 
oversight of the power industry. There is a great need for continued 
collaboration between State and federal regulators and between industry 
and government in general. The FERC is committed to working closely 
with DOE, NIST and others to facilitate rapid deployment of innovative, 
secure smart grid technologies.
    Thank you again for the opportunity to testify today. I would be 
happy to attempt to answer any questions you may have.

                     Biography for Suedeen G. Kelly
    Suedeen G. Kelly is a Commissioner at the Federal Energy Regulatory 
Commission, who has served since November 2003. In December 2004, she 
was confirmed to a second term that expires June 30, 2009. Previously 
she was a Professor of Law at the University of New Mexico School of 
Law, where she taught energy law, public utility regulation, 
administrative law and legislative process. She also worked with the 
law firm of Modrall, Sperling, Roehl, Harris & Sisk in Albuquerque from 
2000 through 2003 and the law firm of Sheehan, Sheehan, and Stelzner 
from 1992 through 1999. In 2000, Ms. Kelly served as counsel to the 
California Independent System Operator. In 1999, she worked as a 
Legislative Aide to U.S. Senator Jeff Bingaman.
    Prior to joining the faculty of the Law School, Ms. Kelly served as 
Chair of the New Mexico Public Service Commission, which regulated New 
Mexico's electric, gas and water utilities. She had been a lawyer in 
the Office of the New Mexico Attorney General and with the New Mexico 
firm of Leubben, Hughes & Kelly. She also worked in Washington, DC, for 
the Natural Resources Defense Council and Ruckelshaus, Beveridge, 
Fairbanks & Diamond.

Education: University of Rochester, B.A. with Distinction in Chemistry 
and a J.D. cum laude from Cornell Law School. She is admitted to the 
bars of New Mexico and the District of Columbia.

    Chairman Baird. Thank you, Ms. Kelly.
    Dr. Arnold.

  STATEMENT OF DR. GEORGE W. ARNOLD, NATIONAL COORDINATOR FOR 
 SMART GRID INTER-OPERABILITY, NATIONAL INSTITUTE OF STANDARDS 
          AND TECHNOLOGY, U.S. DEPARTMENT OF COMMERCE

    Dr. Arnold. Chairman Baird, Ranking Member Inglis and 
Members of the Subcommittee, thank you for this opportunity to 
discuss NIST's progress in accelerating the development of 
standards needed to realize a secure and inter-operable 
nationwide smart grid.
    Working with industry, government and consumer 
stakeholders, NIST is providing strong national and technical 
leadership to help make a reliable, robust smart grid a 
reality. The Recovery Act provided NIST with $10 million from 
the Department of Energy and we are using this funding to speed 
up the process to build a standards foundation for the smart 
grid. First, I would like to summarize our three-phase effort 
to expedite development of this foundation.
    Phase I is well underway and nearing completion. On the 
basis of stakeholder input, we have identified an initial slate 
of 16 standards and 64 more are undergoing public review. In 
September, we intend to issue for public comment Release 1.0 of 
the NIST framework and roadmap for smart grid inter-operability 
standards. The document that we deliver to FERC will describe a 
reference architecture, an initial set of standards to support 
secure and inter-operable implementation and prioritized action 
plans to fill gaps. In Phase II, which we launched last month 
with a request for proposal, NIST is establishing a formal 
standards panel, a private-public partnership to drive long-
term progress in the development and implementation of the 
hundreds of standards that eventually will be needed. Later 
this year in Phase III, NIST will announce plans for a 
framework for testing and certifying how standards are 
implemented in the smart grid devices, systems and processes.
    As we work with the many stakeholder groups, we are 
uncovering and addressing many issues that are impediments to a 
fully operational smart grid. For example, there is a 
foundational smart meter-related standard that is so feature-
rich that different meter vendors have implemented it in 
different ways. This ambiguity undermines inter-operability. We 
have commissioned a fast track effort to revise the standard 
and to ensure upgradability to extend the useful life of smart 
meter deployments.
    We are also focusing on the plethora of wired and wireless 
communications technologies being employed by the smart meter 
manufacturers. The goal is to provide guidance on the selection 
of communication standards--one size does not fit all in this 
case--and not to mandate the use of a particular technology or 
spectrum.
    Then there is the matter of supporting plug-in electric 
vehicles, or PEVs. The interface between the PEVs and the grid 
needs to support two-way flow of electricity and information 
and to meet relevant standard codes. At least seven sets of 
standards under the auspices of five different standards 
development organizations needs to be completed or revised to 
provide this functionality. These are but a few of the many 
technical issues that we are addressing with the engagement of 
the many hundreds of stakeholders in our process.
    Mr. Chairman, I would like to conclude with some final 
thoughts. First and foremost, we will continue to stress the 
critical dimension of security in our work. We need to design 
in the necessary safeguards at the very beginning. Second, I 
believe the approach we are taking to develop standards for the 
smart grid, a strong public-private partnership forged with 
active White House and Cabinet-level leadership is the right 
one. Third, we must aim to develop and use international 
standards wherever possible to enable U.S. manufacturers to 
capture global market opportunities. Fourth, NIST is engaging, 
as Commissioner Kelly has cited, the states as integral 
partners in the standards effort. And finally, it is essential 
that we base the smart grid on open standards in order to 
foster innovation.
    In conclusion, NIST is proud to have been given such an 
important role in the smart grid effort. We are committed to 
achieving the Administration's vision of a cleaner, greener, 
more efficient and effective electric power grid that creates 
jobs and reduces our dependence on others to meet our energy 
needs.
    Thank you for this opportunity, and I would be happy to 
answer any questions.
    [The prepared statement of Dr. Arnold follows:]
                 Prepared Statement of George W. Arnold

Introduction

    Chairman Baird, Ranking Member Inglis, and Members of the 
Subcommittee, I am George Arnold, the National Coordinator for Smart 
Grid Inter-operability at the Department of Commerce's National 
Institute of Standards and Technology (NIST).
    Thank you for the opportunity to appear before you today to discuss 
NIST's progress in accelerating the development of standards needed to 
realize a secure and inter-operable nationwide Smart Grid.
    A Smart Grid would replace the current, outdated system and employ 
real-time, two-way communication technologies to allow users to connect 
directly with power suppliers. The development of the grid will create 
jobs and spur the development of innovative products that can be 
exported. Once implemented, the Smart Grid is expected to save 
consumers money and reduce America's dependence on oil by improving 
efficiency and spurring the use of renewable energy sources.
    President Obama's comprehensive energy plan sets ambitious short- 
and long-term goals. And, the American Recovery and Reinvestment Act 
includes $11 billion in investments to ``jump start the transformation 
to a bigger, better, smarter grid.'' \1\ The President's Council of 
Economic Advisors estimates that the number of environment-based jobs 
will increase by more than 50 percent between 2000 and 2016, and jobs 
created by the Smart Grid are part of this.
---------------------------------------------------------------------------
    \1\ ``The American Reinvestment and Recovery Plan--By the 
numbers,'' http://www.whitehouse.gov/assets/documents/
recovery-plan-metrics-report-
508.pdf
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    The Smart Grid is a critical piece of the Administration's overall 
goal of fostering and creating millions of jobs in a green economy 
through the creation of whole new industries and green entrepreneurs, 
who are able to grow and thrive as a result of the investments made in 
a Smart Grid. NIST's mission to advance innovation and U.S. industrial 
competitiveness fits perfectly with this goal and we're committed to 
helping make that vision a reality.
    Modernizing and digitizing the Nation's electrical power grid--the 
largest interconnected machine on Earth--is an enormous challenge and a 
tremendous opportunity. Success requires a combination of quick action 
and sustained progress in implementing and integrating the components, 
systems, and networks that will make up the Smart Grid.
    NIST is providing strong national leadership to drive the creation 
of inter-operability standards needed to make the Smart Grid a reality. 
We are carrying out our standards-related responsibility with a strong 
sense of urgency. We are engaging industry, government, and consumer 
stakeholders in an open, public process to expedite identification and 
development of standards critical to achieving a reliable and robust 
Smart Grid. An initial slate of 16 standards has already been 
identified, 64 more are undergoing public comment, and a roadmap for 
development of additionally-needed standards will be published in 
September.
    Congress assigned NIST responsibility to coordinate development of 
these standards in the Energy Independence and Security Act of 2007.
    The Recovery Act provided NIST with $10 million in funding from the 
Department of Energy (DOE) to ensure that we had the resources to get 
the job done. Development of standards typically occurs at a glacial 
pace. ARRA funds are the providing the major boost needed to 
dramatically speed up this process.
    NIST is well suited for the role of leading the charge for rapid 
standards development. The agency has earned a reputation as an 
``honest broker''--an impartial, technically knowledgeable third party 
with a long history of working collaboratively with industry and other 
government agencies. These partners include the DOE, which leads the 
overall federal Smart Grid effort. They also include the Federal Energy 
Regulatory Commission (FERC), State regulatory commissions, and many 
others.
    In its role as the Nation's metrology institute, NIST has provided 
measurement technology and technical assistance to utilities, equipment 
manufacturers, and other power-system stakeholders. For example, NIST 
has developed measurements and a special calibration service for power 
monitoring instruments so that utilities can know the operational state 
of the power grid in real time to minimize disruptions and outages. 
With such an integrated monitoring system major blackouts that have 
ravaged regions of the Nation in the past can be mitigated. NIST 
participates in key international standards organizations, and NIST's 
measurement and testing expertise is recognized worldwide.
    NIST also is a recognized expert in advanced networking technology 
and in the cyber security countermeasures needed to prevent or detect 
and mitigate intrusions and network disruptions. NIST also has 
collaborated with businesses and standards organizations on guidelines 
and standards to protect industrial supervisory control and data 
acquisition (SCADA) systems and to secure their interfaces to the power 
grid. NIST know-how extends to standards and measurements for building 
control systems and their links to the grid.
    These strengths are allowing NIST to make a unique contribution to 
public and private sector efforts to build the Smart Grid.

NIST Plan to Expedite Standards for the Smart Grid

    The need to get this critical standards development work done now 
is clear. A recent Congressional Research Service report,\2\ for 
example, cited the ongoing deployment of smart meters as an area in 
need of widely accepted standards. Ultimately, the U.S. investment in 
smart meters is predicted to total $40-$50 billion.
---------------------------------------------------------------------------
    \2\ S.M. Kaplan, Electric Power Transmission: Background and Policy 
Issues. Congressional Research Service, April 14, 2009.
---------------------------------------------------------------------------
    Globally, 100 million new smart meters are predicted to be 
installed over the next five years.\3\
---------------------------------------------------------------------------
    \3\ ON World, ``100 Million New Smart Meters within the Next Five 
Years.'' June 17, 2009; http://www.onworld.com/html/newssmartmeter.htm
---------------------------------------------------------------------------
    DOE's Smart Grid Investment Grant Program will provide $3.4 billion 
for cost-shared grants to support manufacturing, purchasing and 
installation of existing smart grid technologies that can be deployed 
on a commercial scale.
    Sound inter-operability standards are needed to insure that these 
technology investments are not stranded. Such standards enable diverse 
systems and their components to work together and to securely exchange 
meaningful, actionable information.
    NIST took aggressive action in March of this year to accelerate the 
identification of needed standards. The agency established a Smart Grid 
National Coordinator position--my role--to provide visible leadership 
at the national level and focus accountability for managing NIST smart 
grid resources to ensure success.
    In April, NIST launched a three-phase plan to expedite development 
and promote widespread adoption of Smart Grid inter-operability 
standards. This plan was developed after consulting with dozens of 
stakeholders in industry, the standards community, and Federal and 
State government. It satisfies the need to rapidly establish an initial 
set of standards, while providing a robust, well governed process for 
the evolution of smart grid standards.
    Here's a rundown of the three phases, parts of which run in 
parallel:

Phase I--Engage stakeholders in a participatory public process to 
identify applicable standards, gaps in currently available standards 
and priorities for new standardization activities.

    The work required in this phase is a very large task being done 
over a short period of time. Work on Phase I began in April and will 
conclude in September with the publication of Release 1.0 of the NIST 
Inter-operability Framework. To expedite progress, NIST augmented its 
own technical resources through a contract with the Electric Power 
Research Institute (EPRI). EPRI assisted NIST in engaging Smart Grid 
stakeholders in assessing existing standards and identifying new 
standards needs.
    EPRI technical experts compiled and distilled stakeholder inputs, 
including technical contributions made at two EPRI-facilitated, two-
day, public workshops--one in April and the other in May. The two 
workshops drew more than a thousand participants. The results are 
documented in EPRI's ``Report to NIST on the Smart Grid Inter-
operability Standards Roadmap,'' which NIST released for public comment 
on June 18. NIST is using this report, along with comments received, as 
an input in developing the NIST framework for Smart Grid inter-
operability standards, as called for in EISA. Other inputs include the 
accomplishments of five Domain Expert Working Groups established by 
NIST in 2008, and the Cyber Security Coordination Task Group 
established in 2009. Cyber security is a top priority. The Cyber 
Security Coordination Task Group was established to help ensure that 
NIST is addressing the cyber security requirements of the Smart Grid as 
part of the NIST Smart Grid Inter-operability Framework. The group 
includes over 150 experts from industry, academia and government 
agencies.
    Early next month, NIST will convene another public workshop to get 
down to the nuts and bolts of developing plans and setting timelines 
for development of the new or revised standards identified through this 
process. Representatives of standards developing organizations--SDOs 
and user groups--will lead sessions at this workshop.
    Developing standards for an advanced metering infrastructure is an 
example of one priority area. Research suggests that the combination of 
smart meters and demand response could reduce peak power demand by more 
than 20 percent. Such benefits will also require standards for grid-
connected consumer products and building systems.
    The September Release 1.0 document will describe an initial Smart 
Grid architecture; priorities for inter-operability standards, 
including cyber security; an initial set of standards to support 
implementation; and plans to meet remaining standards needs.

Phase II--Establish a formal private-public partnership to drive 
longer-term progress.

    While initial standards for the Smart Grid will be identified in 
2009, further standards development will be needed to address gaps, 
harmonize standards, and incorporate evolving technology. Industry has 
made it clear that a representative, reliable, and responsive 
organizational structure is needed to support and sustain this 
evolutionary development. By the end of 2009, NIST plans to use ARRA 
funds to establish, through a contract, a more permanent public-private 
partnership entity--a Smart Grid Inter-operability Standards Panel to 
serve this function.

Phase III--Develop and implement a framework for testing and 
certification.

    Testing and certification of how standards are implemented in Smart 
Grid devices, systems, and processes are essential to ensure inter-
operability and security under realistic operating conditions. Industry 
has indicated that this is a high priority. NIST, in consultation with 
industry, government, and other stakeholders, intends to develop an 
overall plan for a testing and certification framework by the end of 
2009 and initiate steps toward implementation in 2010.
    Now, I'd like to shift to some observations on the process and to 
identify several issues that could impact standards-related efforts 
and, ultimately, progress toward realizing the Smart Grid vision.

Pace, Perseverance, and Perspective

    The task of developing standards for a national infrastructure like 
the Smart Grid is a large and complex undertaking. However it is 
eminently doable. There have been several previous national 
infrastructure standards projects of similar magnitude that were 
accomplished successfully and with which I have personal experience.
    Thirty years ago, Bell Laboratories successfully put in place 
architecture for the complete automation of maintenance and operations 
in the nationwide telecommunications network, with an underlying 
foundation of protocols and standards that utilized distributed 
computing and data networking technology of that era. That job was 
comparable in scale to the current challenge of the Smart Grid; however 
the coordination challenge was a bit easier because the national 
network at that time was owned and operated by a single entity with a 
captive manufacturer rather than 3100 utilities and many more 
suppliers.
    A more recent effort that required industry-wide cooperation was 
the development of standards for so-called ``next generation networks'' 
that are transforming legacy voice networks into packet networks 
integrating voice, video and data. These networks are being 
successfully deployed, embodying hundreds of standards developed over a 
five-year period.
    However, the situation we face with the Smart Grid is that the 
deployment of some elements is out pacing the availability of firm 
standards. Clearly, the need for identification and development of 
Smart Grid inter-operability standards is urgent. This means that the 
diverse community of Smart Grid stakeholders must commit to picking up 
the pace of standards development and to engaging in productive 
collaboration.
    Fortunately, executives in government and industry agree with the 
Administration that the challenge, while daunting, must be addressed as 
quickly and as thoroughly as possible to ensure success. Energy 
Secretary Steven Chu and Commerce Secretary Gary Locke hosted a meeting 
at the White House of 70 industry leaders from the IT, utility, 
manufacturing, and other sectors. The secretaries encouraged the 
executives to devote the organizational energy, will, and resources 
necessary to expedite the development and adoption of standards. The 
response was overwhelmingly positive.
    Yet, by its very nature, the process of developing voluntary 
standards from scratch can be painstakingly slow. Years--not weeks or 
months--are the customary measurement units. In fact, when NIST 
announced its three-phase plan to expedite the process, a newsletter 
called it an ``unnaturally paced standards effort.''
    So, if the standards process were a track competition, it would be 
part sprint, part mid-distance race, and part marathon.
    In the sprint portion, we are identifying already-existing 
standards that can be applied to Smart Grid needs. In May, after 
analyzing input received at our first workshop, NIST identified 16 
standards for inclusion in the initial Smart Grid inter-operability 
standards framework. This list of standards--all of which require 
further development--was submitted for public review and comment.
    There are additional examples of this ``low hanging fruit.'' In 
fact, the EPRI report identified more than 80 existing standards that 
could be applied or adapted to Smart Grid inter-operability or cyber 
security needs.
    EPRI's report to NIST also flags 70 gaps and issues, and NIST 
continues to identify others. We are in the process of distilling, 
categorizing, and prioritizing these gaps and issues. For those at the 
top of the list, we are developing ``priority action plans,'' in 
consultation with standards organizations and other stakeholders.
    Our goal is to achieve agreement on individual and collaborative 
responsibilities of the standards development organizations--the SDOs--
to address and resolve standards issues and gaps. And, we are asking 
the SDOs to achieve ``personal bests'' in terms of the time required to 
go from start to finish.
    This is the mid-distance portion of the effort, and we will be 
setting ambitious timetables for developing sound standards, along with 
associated conformance requirements. Clearly, there is a need for 
speed, but the standards process must be systematic, not ad hoc.
    That, in effect, will complete the first leg of the marathon. 
Ultimately, a robust, secure Smart Grid that fosters sustainability and 
promotes innovation will be built on an infrastructure consisting of 
hundreds of inter-operability standards. Persistence and perseverance 
in the domestic and international standards arenas will be required 
over a span of, perhaps, a decade or more. The standards panel, which 
will be established in the second phase of the plan, will help to 
maintain the consistency of effort that will be critical to success.
    Standards are necessary but not sufficient--a testing and 
certification regime is essential. Developing a framework for testing 
and certification constitutes the third phase of the NIST plan.

Examples of Issues

    I would like to give you a few examples of the issues we are 
uncovering and how we are going about addressing them in collaboration 
with industry and the SDOs.
    Smart Meters are one of the earliest elements of the Smart Grid to 
be deployed and they play an important role by allowing near real-time 
collection of data on power usage that enables new forms of demand 
response programs and pricing. One of the ``low hanging fruit'' 
standards identified by NIST is the ANSI C12.19 standard, which 
specifies the data tables captured by these meters. The National 
Electrical Manufacturers Association (NEMA) was the lead for this 
standards effort. This is one of the most fundamental standards needed 
for the Smart Grid. Through our workshop process, it was determined 
that this standard is so ``feature rich'' and allows so much room for 
interpretation that different meter vendors have implemented it in 
different ways. This is a serious impediment to inter-operability. We 
now know the standard will have to be revised, and it will take some 
time to gain industry consensus on the revision.
    As soon as we learned this, we called upon NEMA to convene a 
standards effort with the leading meter manufacturers to develop a plan 
to upgrade the related standards and develop an upgradeability standard 
for smart meters to ensure that firmware in meters to be deployed in 
near future can be upgraded to accommodate needed changes to the ANSI 
C12 standard. This effort will ensure that deployment of smart meters 
conforming to this specification can proceed without risk of becoming 
stranded investments that are prematurely obsolete.
    I would like to commend NEMA and the involved industry participants 
for recognizing the issue and for rising to this challenge.
    We are also urgently focusing efforts on the plethora of 
communications technologies being employed by the smart meter 
manufacturers, both wired and wireless. There are proposals for new 
approaches, such as the Utility Telecom Council's proposal for the 
allocation of dedicated spectrum for utility communications. With the 
high demand for spectrum from many different kinds of radio systems, 
the concept of dedicating spectrum for one particular application must 
be considered carefully so as not to use the critical resource 
inefficiently. A standards issue is the need that multiple standards be 
supported to meet different real-world requirements and is in keeping 
with Congress's requirement that the NIST Inter-operability Framework 
be technology neutral to encourage innovation. However, the Federal 
Communications Commission has received reports that some wireless 
meters operating on unlicensed frequencies have experienced 
interference from other unlicensed devices that share the same 
frequencies. The potential for interference to wireless meters will 
require study in order to develop recommendations and guidance on 
appropriate standards and technologies for wireless smart meter 
communications.
    Moreover, regardless of the outcome of these technical studies, 
there is no intention to mandate for smart meter systems the use of 
specific spectrum (licensed or unlicensed) or the use of specific 
wireless technologies. Thus, all current systems, as well as all 
systems under development, which fully comply with FCC requirements, 
will be allowed.
    I would like to discuss one final example to illustrate the 
complexity of the coordination task to develop standards for new smart 
grid applications. Consider the standards that are needed to support 
the wide-scale deployment of plug-in electric vehicles (PEVs).
    Supporting PEVs on the grid is not just a matter of plugging them 
into an ordinary electric socket. Ideally PEVs should be charged when 
demand on the grid, and hence the price of electricity, is low. The 
charging system into which a PEV is connected needs to be integrated 
into the Smart Grid demand response capability. The batteries in PEVs 
can also be a source of energy for the grid, providing regulation 
service or even energy support during periods of peak demand. Thus, the 
interface between the PEVs and the grid needs to support two-way flow 
of electricity. In order to be deployed, these interfaces and charging 
systems need to meet relevant electric codes to ensure safety.
    There are at least seven sets of standards developed or being 
developed by five different organizations that need to be completed or 
revised to provide this functionality. SAE International\4\ is 
developing the standards for the connector on the vehicle and the 
associated charging system; IEEE\5\ develops the standards that are 
needed for these charging systems to feed power back into the grid; 
NEMA develops the standards for smart meters that need to be able to 
support the two-way flow of electricity and information; and 
Underwriters Laboratories Inc. (UL), National Fire Protection 
Association (NFPA), and IEEE develop standards needed to ensure 
electric safety of the overall system.
---------------------------------------------------------------------------
    \4\ SAE--formerly known as the Society of Automotive Engineers is 
now referred to by the acronym SAE only.
    \5\ IEEE--formerly known as the Institute of Electrical and 
Electronics Engineers, Inc., is now referred to by the acronym IEEE.
---------------------------------------------------------------------------
    An additional standard that will be needed is an information 
management standard to allow electricity usage for roaming vehicles to 
be billed appropriately.

Observations

    To conclude, a few overarching observations:

    First, the scale and complexity of this standards effort may be 
unprecedented. Consider, for example, that the 5.4 million miles of 
distribution and transmission cables that make up today's grid could 
circle the Earth at the equator more than 200 times. The grid includes 
some 22,000 substations and 130 million watt-hour meters. But as I 
observed earlier, we have faced similar challenges before, 
successfully, and have valuable experience to draw upon to ensure the 
success of this effort.
    Second, I believe the approach we are taking to develop standards 
for the Smart Grid--a strong public-private partnership forged with 
active White House and Cabinet-level leadership--illustrates the 
effectiveness of the U.S. approach. The American way abhors ``one size 
fits all'' solutions and prizes innovation and flexibility. In the 
Smart Grid we are capitalizing on our strength--a dynamic and flexible 
decentralized system--as well as our innovation in solving problems. 
Our spirit of public/private partnership motivates cooperation to find 
the right balance of ``top down'' and ``bottom up'' to achieve the 
coordination needed for the smart grid. The rest of the world is 
following our effort closely.
    Third, it is important that we base our standards, wherever 
possible, on international standards or work to get our approaches 
adopted as international standards. This will maximize the 
opportunities for U.S. suppliers to address a large, global market 
opportunity. Fortunately, we are well-connected to International 
Electrotechnical Commission (IEC), IEEE and other international 
organizations and are pursuing those connections vigorously in our 
effort.
    Fourth, one of our challenges is our regulatory complexity. 
Jurisdiction over the grid is divided among 50 states, the District of 
Columbia, and the Federal Government. Regulatory uncertainty can impede 
investment and create an inertia that slows innovation and the adoption 
of new technology. NIST is working closely with National Association of 
Regulatory Utility Commission (NARUC) and the FERC/NARUC Smart Grid 
Collaborative to engage the states as integral partners in the 
standards effort.
    However, the regulatory model for the Smart Grid will need to keep 
pace with the reality that the information and communications 
technologies that enable the Smart Grid have a much faster life cycle 
than traditional power system technologies.
    Fifth, it is essential that we base the Smart Grid on open 
standards. This is essential to unleash the power of innovation and 
competition to create new applications and businesses that grow the 
benefits that the Smart Grid can offer to the economy and the 
environment.
    Finally, and most important, we need to continue to stress the 
critical dimension of security in our work. This is an area in which we 
need to take the time to do it right because security must be built 
into the foundation of the Smart Grid. It cannot be added on later. We 
are treating this aspect with the utmost priority and I would refer to 
my NIST colleague, Cita Furlani's July 21, 2009 testimony before the 
House Committee on Homeland Security's Subcommittee on Emerging 
Threats, Cyber Security, and Science and Technology, which describes 
NIST's approach to ensuring the security and reliability of the 
information and communication aspects of the Smart Grid.

Conclusion

    The Smart Grid, with the unique investment opportunity afforded by 
the American Recovery and Reinvestment Act, represents a once in a 
lifetime opportunity to renew and modernize one of the Nation's most 
important infrastructures. NIST is proud to have been given such an 
important role and is committed to achieving the Administration's 
vision of a cleaner, greener, more efficient and effective electricity 
grid that creates jobs and reduces our dependence on others for our 
energy needs..
    Thank you for the opportunity to testify today on NIST's work on 
Smart Grid inter-operability. I would be happy to answer any questions 
you may have.

                     Biography for George W. Arnold
    George Arnold was appointed National Coordinator for Smart Grid 
Inter-operability at the National Institute of Standards and Technology 
(NIST) in April 2009. He is responsible for leading the development of 
standards underpinning the Nation's Smart Grid. Dr. Arnold joined NIST 
in September 2006 as Deputy Director, Technology Services, after a 33-
year career in the telecommunications and information technology 
industry.
    Dr. Arnold served as Chairman of the Board of the American National 
Standards Institute (ANSI), a private, non-profit organization that 
coordinates the U.S. voluntary standardization and conformity 
assessment system, from 2003 to 2005. He served as President of the 
IEEE Standards Association in 2007-2008 and is currently Vice 
President--Policy for the International Organization for 
Standardization (ISO) where he is responsible for guiding ISO's 
strategic plan.
    Dr. Arnold previously served as a Vice President at Lucent 
Technologies Bell Laboratories where he directed the company's global 
standards efforts. His organization played a leading role in the 
development of international standards for Intelligent Networks and IP-
based Next Generation Networks. In previous assignments at AT&T Bell 
Laboratories he had responsibilities in network planning, systems 
engineering, and application of information technology to automate 
operations and maintenance of the nationwide telecommunications 
network.
    Dr. Arnold received a Doctor of Engineering Science degree in 
Electrical Engineering and Computer Science from Columbia University in 
1978. He is a Senior Member of the IEEE.

    Chairman Baird. Leave it to NIST to hit it within one 
second of the time. I am sure you are proud of that, and we are 
appreciative. Well done, Dr. Arnold.
    Mr. De Martini.

 STATEMENT OF MR. PAUL DE MARTINI, VICE PRESIDENT OF ADVANCED 
             TECHNOLOGY, SOUTHERN CALIFORNIA EDISON

    Mr. De Martini. Thank you, Mr. Chairman and distinguished 
Members of the Subcommittee, for the opportunity to be here 
today.
    Southern California Edison is one of the Nation's largest 
utilities, serving a population of nearly 14 million people in 
a 50,000-square-mile service territory. As a subsidiary of 
Edison International, Southern California Edison is uniquely 
qualified to share our experience, progress and vision in the 
development of a smarter electricity grid.
    Edison purchases more renewable energy than any utility in 
the country including 65 percent of the Nation's solar power. 
We pioneered demand response programs and helped our customers 
conserve more energy than any other utility. We are a leader in 
the implementation of advanced transmission and distribution 
technologies, including one of the largest smart meter programs 
in the country, and 20 years ago we launched an electric 
transportation program that includes our electric vehicle 
technology center opened in 1993, allowing us to be a critical 
player in the development not only of the electric vehicle but 
also of improved battery storage technologies.
    As Members of this committee are well aware, the current 
stakes for addressing climate change, energy independence and 
infrastructure security could not be higher and our nation's 
climate and energy goals simply cannot be met by our aging 
grid. We need a smarter, more robust electricity infrastructure 
if we as a country are to rely on greater amounts of 
intermittent renewable energy, use electricity as a fuel for 
vehicles, empower our customers to manage their monthly energy 
bills, and ensure the continued reliability and vitality of our 
nation's energy economy.
    In California, we are on a critical path as we also have a 
number of ambitious climate and energy policy goals that will 
require many aspects of our smart grid vision to be operational 
by the year 2020. Southern California Edison saw the 
limitations associated with aging grid and began implementing 
components of a smarter grid over the past decade to improve 
our ability to anticipate and prevent outages and empower our 
customers to make smarter consumption decisions in the best 
interests of our environment and their bottom line. Three 
examples illustrate the breadth of these investments.
    Edison pioneered synchrophasor technology that allows 
operators and engineers the ability to monitor the grid at 
critical points every one-thirtieth of a second, which 
significantly reduces the likelihood of widespread outages or a 
system collapse, such as the 2003 Northeast blackout. Edison 
also has one of the largest deployments of substation and 
distribution automation technologies in the industry including 
an advanced distribution circuit called Avanti co-funded by the 
Department of Energy. After the California energy crisis, 
Edison deployed smart meters to all of its largest commercial 
and industrial customers that consume in total about 60 percent 
of the energy delivered on our grid. Over the next four years, 
Edison is making an additional capital investment of $1.5 
billion in smart grid infrastructure that has already been 
approved by the California Public Utilities Commission. This 
year, Edison's new meter program will begin rolling out to our 
five million small commercial and residential customers. We are 
also expanding our synchrophasor technology to all of Edison's 
bulk transmission system, which will be the largest deployment 
in the United States.
    As we look forward, Edison believes the deployment and 
development of a smart grid is a journey that will evolve over 
the next decade or more and will require significantly more R&D 
and capital investment to achieve our goals. It will require 
new technology, open standards and more robust security. We are 
actively collaborating with research institutes, universities, 
product manufacturers, aerospace and defense and information 
technology firms to identify opportunities to develop game-
changing energy technologies such as energy storage, high-
temperature superconducting equipment as well as adapting 
telecommunications, cyber security and data management 
technologies. Edison believes that advancing the smart grid 
inter-operability and security through standards adoption 
fosters innovation and accelerates robust, secure and reliable 
technology developments. We have been active for the past five 
years in several DOE-sponsored efforts including the GridWise 
Architecture Council and have been increasingly active with Dr. 
Arnold in the National Institute of Standards and Technology 
efforts to identify and recommend standards for the smart grid.
    As the smart grid technology is deployed, we believe 
consumer adoption of new pricing, energy conservation and 
demand response programs will be one of the largest behavioral 
change management initiatives undertaken in public policy. 
However, the time appears right for introducing change. 
Edison's research indicates consumers more clearly recognize 
that the smart use of energy will save them money and help make 
a positive difference for the environment.
    In conclusion, Edison is making significant investments in 
both capital infrastructure and R&D to accelerate our country's 
transition to a cleaner, smarter energy future. We look forward 
to continuing to work with Members of this committee, Congress 
and the Administration to make our vision a reality in the best 
interests of our customers, our environment and our economy. 
Thank you.
    [The prepared statement of Mr. De Martini follows:]
                 Prepared Statement of Paul De Martini
    Thank you Mr. Chairman and distinguished Members of the 
Subcommittee for the opportunity to share Southern California Edison's 
smart grid strategy and activities to enable federal and California 
climate and energy policies over the next decade.
    My name is Paul De Martini, I am the Vice President for Advanced 
Technology for Southern California Edison. My responsibilities include 
Smart Grid and Electric Transportation strategy, policy and technology 
research, development and demonstration. Southern California Edison 
(Edison) is a subsidiary of Edison International and one of the 
Nation's largest electric utilities, serving a population of nearly 14 
million via 4.9 million customer accounts in a 50,000-square-mile 
service area within Central, Coastal and Southern California. Edison is 
a recognized global leader in the development and implementation of a 
smarter electric grid. This leadership is based on solid research and 
development capabilities and existing and current capital deployments 
in advanced technology to create a smarter grid.

Edison Smart Grid Strategy

    The United States has arrived at a critical juncture in its energy 
future. The current stakes for addressing climate change, energy 
independence and infrastructure security could not be higher. Federal 
and State policy-makers alike have recognized the need for a smarter, 
more robust electricity infrastructure if we as a country are to rely 
on greater amounts of renewable generation, use electricity as a fuel 
for vehicles, enable consumers to become active participants in the 
energy supply chain, and ensure the continued reliability and vitality 
of our nation's energy economy.
    Edison is in the process of modernizing and expanding its electric 
power delivery systems. In doing so, it is critical that Edison deploy 
technologies that enable it to provide service in a manner consistent 
with present and future customer needs, while accommodating changes in 
market participation. Edison's vision of a smart grid is to develop and 
deploy a more reliable, secure, economic, efficient, safe and 
environmentally-friendly electric system. This smart grid will 
incorporate high-tech digital devices throughout the transmission, 
substation and distribution systems and integrate advanced intelligence 
to provide the information necessary to both optimize electric services 
and empower customers to make informed energy decisions.
    Consistent with the 2007 EISA and the U.S. Department of Energy's 
and National Energy Technology Laboratory's Vision for the Modern Grid, 
Edison's smart grid will enable the increase of intermittent and 
renewable resources (such as wind and solar power) and spark greater 
use of Plug-in Electric Vehicles (PEVs) by increasing system 
flexibility; reduce greenhouse gas emissions; avoid the economic losses 
associated with catastrophic failures and wide-area blackouts; foster 
energy conservation, energy efficiency and demand response capabilities 
by providing customers with better energy use information and choices; 
reduce operating costs and improve reliability and safety by providing 
real-time information for system monitoring and system automation; 
improve maintenance and operations practices on the electrical grid; 
and facilitate the development of a ``Clean Tech'' economy, which is 
expected to include the creation of new jobs. We believe a true smart 
grid can help America achieve a more secure energy future and 
meaningful greenhouse gas reductions.
    Additionally, Edison believes that many aspects of our smart grid 
vision will need to be operational by the year 2020 to enable 
California's ambitious policy goals, such as the AB 32 greenhouse gas 
reductions, zero net energy homes, California Solar Initiative, smart 
metering infrastructure, California's renewable portfolio standard, low 
carbon fuel standard, and wide-spread consumer adoption of plug-in 
electric vehicles.
    To accomplish this objective, Edison's overall smart grid strategy 
encompasses six areas that address a broad set of requirements:

          Renewable and Distributed Energy Resources 
        Integration

          Grid Control & Asset Optimization

          Workforce Effectiveness

          Smart Metering

          Energy-Smart Customer Solutions

          Secure Telecommunications & Computing Systems

Smart Grid Research, Development & Deployment

    Edison seeks to discover, evaluate, and adopt energy and 
information technologies to implement our smart grid strategy. It is 
important to keep in context that California is the Nation's leader in 
many of these areas and as such, several components of a smart grid are 
already in development within Edison's service territory. For example, 
Edison has already achieved significant results in energy efficiency, 
demand response, and renewable energy, and is a recognized national and 
international leader in these three areas. Other aspects of a future 
smart grid are under development, but their future implementation will 
enable Edison to meet increased renewable energy goals, further reduce 
greenhouse gas emissions, and improve system reliability and safety.

Existing Smart Grid System
    Edison has made significant investments over the past decade in the 
deployment of transmission system measurement and control technology, 
distribution and substation automation, and smart meters for our large 
commercial and industrial customers. Edison has been a leading 
developer of wide area measurement and control technologies for over 15 
years. Edison's pioneering efforts in the area of synchronized phasor 
measurement systems allows operators and engineers the ability to 
monitor the grid at critical points every one-thirtieth of a second. 
This is a significant improvement in our ability to assess and respond 
to the dynamic operating characteristics of the grid that can help 
avoid widespread electric system collapse. Synchrophasors as compared 
to SCADA systems is analogous to MRI as compared to X-ray. Edison's 
synchrophasor efforts were awarded the 2007 T&D Automation Project of 
the Year award from Utility Automation & Engineering T&D magazine.
    Edison has one of the largest deployments of substation and 
distribution automation in the industry with over half of its 900 
substations equipped with automation technology, including state-of-
the-art microprocessor-based systems. Edison has also equipped over a 
third of its 4,300 distribution circuits and most of its nearly 10,000 
capacitor banks with automation equipment that operates using wireless 
networks. Edison's automation strategy allows for both remote control/
monitoring and autonomous control of critical grid components, which 
helps protect the system during abnormal conditions and maintain 
reliability.
    After the energy crisis in California, it was recognized that 
providing energy use and pricing information to customers would allow 
them to make informed decisions about energy consumption that could 
mitigate wholesale market constraints. As part of a State initiative, 
Edison deployed smart meters to all of its largest commercial and 
industrial customers to provide timely energy information and online 
energy analysis tools to help them manage their energy costs. These 
customers with peak demand of 200kW or greater consume about 60 percent 
of the energy delivered on our grid. Edison's new smart meter program 
is designed to extend this capability to our small commercial and 
residential customers.

Current Smart Grid Projects
    Edison is currently poised to take our grid to the next level over 
the next four years with another round of investments. In 2008, the 
California Public Utilities Commission (CPUC) approved our deployment 
of our Edison SmartConnectTM meters to five million residential and 
small commercial customers beginning this year and proceeding through 
2012. Earlier this year, the CPUC approved Edison's 2009 general rate 
case that included about $270 million in smart grid investments related 
to advanced electric grid measurement and control systems that enable, 
in part, the integration of large-scale and distributed renewable 
generation and improve the overall operation of the electric grid. 
Also, Edison will expand synchrophasor technology to all of Edison's 
bulk transmission system--the largest deployment in the United States. 
Combined, these projects bring Edison's planned level of smart grid 
capital investment to about $1.5 billion over the next four years. This 
investment will provide important foundational elements, but more 
technology investment over the coming decade will be required to meet 
federal and California climate, renewable and energy policy objectives 
and to realize additional operational efficiencies.

RD&D Overview
    In the electric utility industry, Edison has a unique and 
comparatively large research, development and demonstration (RD&D) 
effort to support the achievement of our 2020 objectives. The current 
RD&D strategy is focused on three key themes:

        1.  Integration and managing complex systems

                  Renewable integration modeling and analysis

                  Telecommunications

                  Computing systems and data management

                  Inter-operability standards development

                  Cyber-security

        2.  Game-changing energy technology

                  Energy storage

                  Superconductivity applications

                  Electric transportation

                  Self-healing distribution automation

                  Consumer end-use technology

        3.  People and processes

                  Customer adoption of energy smart technology

                  21st Century electric utility workforce

                  Robotics, unmanned aerial vehicles, mobile 
                workforce automation

                  Safety equipment

    A significant level of complexity will be introduced to the 
electric grid over the next decade. Edison is working with leading 
research universities such as Caltech, MIT, Stanford, University of 
Southern California and Carnegie Mellon to better understand ``system 
of systems'' complexity, designing computing systems models and event 
scenarios to understand the nature of the future electric grid. Edison 
is also working with aerospace-defense and information technology firms 
to identify opportunities to adapt telecommunications, cyber-security 
and data management technologies.
    Several game-changing energy technologies are expected to become 
commercially and economically viable over the next decade, including 
various forms of energy storage, high-temperature superconducting 
equipment, various forms of electric transportation, advanced self-
healing distribution automation equipment and energy smart consumer 
devices/appliances. Edison is working with several national research 
labs, EPRI and manufacturers on the development of products from 
prototype testing to field demonstrations through commercial 
introduction on Edison's system. One example is the live demonstration 
of second generation distribution circuit automation on a Department of 
Energy (DOE) co-funded project called Avanti that also includes the 
world's first high temperature superconducting fault current limiter. 
Another is the work Edison is conducting at our Electric Vehicle 
Technology Center (EVTC), where we work closely with auto manufacturers 
on electric-drive systems and battery manufacturers on emerging mobile 
and stationary storage applications. Edison was honored to have 
President Obama visit our EVTC facility earlier this year.
    In the area of people and processes, Edison is looking ahead to 
evaluate the consumer, organizational and workforce impacts of 
introducing a vast range of new technologies, customer programs and 
related operational process changes. Edison has engaged a consortium of 
universities to conduct research on the ``Energy Workforce of the 21st 
Century'' and has conducted consumer research to better understand 
technology adoption behavior with leading design firms like IDEO.
    Edison is actively pursuing stimulus funds for two smart grid 
demonstrations and development of electric transportation. For smart 
grid, Edison will seek matching funds for both utility-scale energy 
storage utilizing automotive grade batteries and a regional smart grid 
demonstration that includes the development of a secure energy network 
for the smart grid. Edison participated in three electric 
transportation proposals currently under evaluation with the DOE. One 
was related to the development of plug-in electric vehicles with GM, 
The second proposal was for plug-in hybrid utility bucket trucks with 
Ford and Eaton and the third expands public charging infrastructure 
with Ford, the California Air Resources Board and other stakeholders in 
Southern California.

Inter-operability Standards and Cyber-security

    Edison recognizes that advancing smart grid inter-operability and 
security through standards adoption fosters innovation and accelerates 
robust, secure and reliable technology deployments. This is achieved by 
lowering the barriers to entry for vendors; accelerating secure and 
inter-operable product time to market; and ultimately lowering costs 
for consumers. Unfortunately, realizing the benefits of standardization 
requires more than just selection of a standard. Full realization of 
the benefits will require a shared government, utility and product 
supplier focus on a common set of smart grid functions, and a standards 
life cycle framework supporting those functions. The goal of this 
standards life cycle framework is to align policy, standards 
development, product development and procurement actions to create a 
self-sustaining smart grid market. A successfully operating, self-
sustaining smart grid product market is defined by public policy 
supported by standards that are rapidly adopted by product suppliers 
seeking certification, and driven by utility procurement agents only 
buying products certified to those standards.
    To realize this goal, Edison has been active over the past five 
years in several DOE sponsored efforts, including the GridWise 
Architecture Council to define use cases, user requirements, and 
reference designs. Over the past year, we have been increasingly active 
with the National Institute of Science and Technology's efforts to 
identify and recommend standards for the smart grid. Edison's long 
standing participation with several industry and standards 
organizations provided an opportunity to work more closely with both 
DOE and NIST on the development of standards in several areas, 
including customer access to energy information and a set of smart grid 
cyber-security specifications and profiles. For example, Edison is one 
of a dozen utilities that contributed funding to the smart meter 
security effort with DOE last year and is currently co-funding a 
broader smart grid effort in collaboration with DOE and NIST. Also, 
Edison along with several other utilities has been championing the 
development of an open standard and secure interface for customer 
access through a web services provider to customer related energy 
information on utility computing systems. NIST is leading an effort to 
coordinate the development of such a standard and Edison is actively 
supporting the effort.

Integration of new technologies with existing technology

    Edison defines ``inter-operability'' as a characteristic that 
permits seamless communication and exchange of information between 
diverse, disparate systems. The national and utility grids will need 
inter-operability of key future smart grid technology components to 
support a robust, flexible, and secure energy infrastructure. Edison's 
vision for a smart grid has long been premised on the idea of ``inter-
operability from the generator to the customer, and everywhere in 
between.'' This is important for stimulating vendor competition, 
fostering innovation, and realizing lower costs. Edison also supports 
criteria that, where appropriate, call for future smart grid 
deployments and enhancements to be inter-operable with existing capital 
investments. The challenge is developing a systems architecture and 
roadmap that provides a graceful transition from the existing systems 
to the future state. For example, Edison has invested heavily in 
substation and distribution automation, and believes it is prudent to 
leverage this existing infrastructure for future smart grid 
enhancements as much as possible. Computing systems and 
telecommunications have evolved over the past twenty-five years to the 
mostly plug and play state that we know today--Edison expects the smart 
grid to similarly evolve over the next two decades given the typically 
long asset lives and the need to balance large capital costs with 
consumer rate impacts.

Smart grid benefits & Consumer adoption

    Smart grid benefits can be generalized into three categories; 
utility operational benefits, customer energy savings benefits and 
societal benefits. In terms of utility operational benefits, many of 
the smart grid technologies involve automation of existing business 
practices that create substantial reductions in labor. For example, 
Edison's residential smart metering program created benefits that 
exceeded costs by about 110 percent on a net present value basis, with 
nearly 60 percent of the benefits derived from reduction in labor and 
related costs due to the elimination of the meter reading function. 
Other operational savings result from operational efficiencies in 
financial transaction management and field operations. The other 50 
percent of the smart metering benefits come from energy procurement 
cost savings as a result of enabled demand response programs and 
reduction in residential energy consumption due to energy information.
    Consumers will have a new range of energy management services and 
programs available from utilities and third parties that are enabled by 
smart metering, energy storage, energy smart appliances and plug-in 
electric vehicles. In a survey of research studies by Oxford 
University, and subsequently validated in limited field trials in the 
industry, consumers are expected to save on average between 5-15 
percent on their monthly electric bills if they actively participate in 
dynamic pricing and energy conservation related programs. Consumer 
benefits also include improved customer experience from automated 
services like turning the electric service on when moving in to a house 
or apartment. Over 20 percent of Edison's 4.9 million customers move 
each year so this is a significant improvement. Customers will also 
experience improved service reliability and faster outage response as 
the smart grid is deployed.
    A substantial portion of smart grid benefits are societal in nature 
and include national and State priorities, such as achieving energy 
independence, reducing greenhouse gas emissions, and increasing grid 
security, safety, and reliability. These benefits are often difficult 
to quantify, they may vary widely in their justification of various 
smart grid technologies, and they are multi-tiered in terms of who 
benefits from them. Benefits may relate to Edison customers, California 
residents in general, or society at large. These benefits should be 
considered by policy-makers within the context of a complete portfolio 
of smart grid technologies, as the benefits may not accrue to any one 
project, but the integrated system which would necessarily be deployed 
over an extended time horizon.
    Consumer adoption of new pricing, energy conservation and demand 
response programs will be one of the largest behavioral change 
management initiatives undertaken in public policy. However, based on 
Edison's research, we believe our customers are ready to change how 
much and when they use electricity. Edison has conducted persona based 
customer research over the past five years and the majority of our 
customers now are actively looking for a way to either reduce their 
energy costs to manage their monthly budget or reduce their energy use 
to reduce their carbon footprint. Consumers do not want to be wasteful 
and recognize that the smart use of energy will save them money and 
help make a positive difference for the environment.
    One key is to provide customers information that is actionable. 
This is one of the values of a smart meter system especially combined 
with dynamic pricing. Another key is make the process simple and use 
technology to automate the customer's desired outcome. For example, to 
enable a customer who wants to manage to a monthly budget amount for 
electricity, Edison is creating a daily electric budget manager that 
notifies the customer if their usage will likely exceed the target 
budget in advance through online, text messages or cell phone 
application. Edison is also working with many product and service 
providers to create this type of automation. Edison recognizes that we 
have a once in a lifetime opportunity to engage and educate our small 
commercial and residential customers when we replace all our 
approximately five million meters over the next three plus years.

Conclusion

    The electricity infrastructure delivering power from a variety of 
generating sources to our homes, businesses and communities is not 
suitable for today's needs. The challenges that face our nation's 
energy future simply cannot be met by our aging electric grid. Growing 
renewable energy capacity requirements, global climate change 
provisions, and the pressing need for more energy self-determination on 
behalf of customers all require a smarter, more intelligent grid. 
Edison is making significant investments in both capital infrastructure 
and smart grid R&D to accelerate our ability to support the future.

                    Biolography for Paul De Martini
    Paul De Martini is Vice President of Advanced Technology in the 
Transmission & Distribution Business Unit of Southern California Edison 
(SCE). Advanced Technology is SCE's R&D organization responsible for 
SmartGrid development, which includes advanced grid technologies, 
electric transportation, smart metering and integration of energy smart 
consumer products.
    Prior to joining SCE in 2002, De Martini held senior management 
positions with ICF Consulting, Sempra Energy, Coastal Corporation and 
PG&E Corporation.
    De Martini is a member of the California Energy Commission's Public 
Interest Energy Research (PIER) Advisory Board, Electric Power Research 
Institute's Power Delivery and Utilization Sector Council and Smart 
Grid Advisory Committee, Co-Chair of both the Utility Smart Grid 
Executives working group and the Western Electric Industry R&D 
Collaborative.
    De Martini earned a MBA from the University of Southern California 
and a BS from the University of San Francisco. He also completed the 
technology management program at the California Institute of 
Technology. De Martini is currently a Fellow of the Wharton School, 
University of Pennsylvania.

    Chairman Baird. Thank you, Mr. De Martini.
    Mr. Ross.

  STATEMENT OF MR. JEFFREY L. ROSS, EXECUTIVE VICE PRESIDENT, 
                        GRIDPOINT, INC.

    Mr. Ross. Good morning, Mr. Chairman, Ranking Member Inglis 
and distinguished Members of the Subcommittee. Thank you for 
the opportunity to testify today. I am Executive Vice President 
at GridPoint, a leading smart grid software company. We have 
developed an online energy management solution that enables 
customers to obtain near-real-time information on their energy 
use and empowers them to make informed decisions about their 
energy consumption.



Our solutions also help utilities better balance supply and 
demand across a wide range of areas including electric vehicle 
charging, storage, integration of renewable energy and demand 
response in an economical, efficient and environmentally 
beneficial manner.
    I have three points I would like to leave with you today. 
First, while the infrastructure of smart meters and advanced 
communications is important in modernizing the Nation's grid, 
to realize the benefits of increased efficiency, reliability, 
security, we also need software that allows utilities to better 
control and optimize load. Second, we need to realign the 
regulatory and economic policies and incentives guiding 
investor-owned utilities such that those utilities are 
motivated to invest in smart grid technologies. Third, we must 
provide consumers with greater information on their energy use 
if we expect them to be able to reduce their consumption and 
their energy costs.



    The term ``smart grid'' refers to energy delivery and 
distribution using two-way communications and digital 
technology to enhance the grid with sensing, communications, 
analysis, feedback and control technologies in order to improve 
efficiency, increase reliability, ensure security and reduce 
environmental impacts. The Energy Independence and Security Act 
of 2007 and the American Recovery and Reinvestment Act provide 
for regional demonstration projects to develop advanced 
techniques for measuring peak load reductions and energy 
efficiency savings from smart metering, demand response, 
distributed generation and storage systems and to validate new 
business models and best practices for implementing advanced 
smart grid technologies that can be replicated throughout the 
country. These goals encourage the testing of new technologies. 
While the smart grid will benefit from investments in smart 
meters and advanced communications, these investments alone 
will not realize the true promise of the smart grid. Smart 
meters and advanced communications cannot by themselves manage 
peak demand, integrate renewable energy, manage electric 
vehicle charging and storage, or provide customers with 
information they can use to manage their energy consumption, 
all of which can help the electric grid operate more 
efficiently and reliably. The electric grid needs software and 
applications to work in conjunction with meters and 
communications to realize these benefits.
    Xcel Energy's Smart Grid City is the U.S.'s first full-
scale pilot project designed to test smart grid technologies 
and the new business models they enable. Since 2008, Xcel 
Energy and its partners have developed a website portal for 
customers to better manage their energy use, launched the 
Nation's first test of plug-in hybrid electric cars with 
vehicle-to-grid capability, turned the Chancellor's residence 
at University of Colorado into the Nation's first fully 
integrated ``smart house'' with solar, backup power, electric 
vehicle charging and consumer controls, installed nearly 15,000 
smart meters and implemented a wind-to-battery program to 
create a more predictable, reliable source of energy. The city 
of Austin, Texas, also announced late last year a new smart 
grid deployment called the ``Pecan Street Project'' that would 
create a virtual 300-megawatt clean power plant through a 
combination of efficiency and clean power. These types of 
efforts would likely increase as funding under the Recovery Act 
is awarded.
    There is real value in these types of demonstration 
projects because they provide a test bed for new and innovative 
smart grid technologies. Only through testing new technologies 
can we determine what works in order to spur innovation. 
Studies have shown that when consumers have more information 
about their energy use, they typically reduce their consumption 
by 10 to 20 percent. Near-real-time information on energy use 
through a portal or an in-home display will empower consumers 
to control their energy consumption. The portal, or in-home 
display, provides customers with energy savings tips and a 
comparison of their use against earlier periods, among other 
benefits, which will help them lower their energy consumption.
    In conclusion, we have an historic opportunity to transform 
and modernize our nation's electric grid. To do so, we need to 
look beyond smart meters and communications and invest in the 
applications that reside on top of this infrastructure to make 
the smart grid more efficient, reliable and secure. We must 
create the regulatory and economic structures that incentivize 
utilities to make smart grid investments and we need to provide 
consumers with information about their own energy use to 
empower them to control their energy consumption.
    Thank you for this opportunity to testify here today. I am 
happy to answer any questions you may have.
    [The prepared statement of Mr. Ross follows:]
                 Prepared Statement of Jeffrey L. Ross
    Good morning Chairman Baird, Ranking Member Inglis, Full Committee 
Chairman Gordon, Ranking Member Hall, and distinguished Members of this 
subcommittee. Thank you for the opportunity to testify at today's 
hearing. My name is Jeffrey L. Ross, and I am an Executive Vice 
President at GridPoint, a leading smart grid company that has developed 
an online energy management solution for consumers, as well as products 
and services that help utilities manage energy in the areas of electric 
vehicle charging, storage, integration of renewable energy, and demand 
response. We are a private company headquartered in Arlington, VA with 
approximately 130 employees. I would like to request that my full 
statement be entered into the record.
    I appreciate the leadership you, the Full Committee, and this 
Congress have demonstrated in supporting the Energy and Independence 
Security Act of 2007 (EISA) and the American Reinvestment and Recovery 
Act of 2009 (ARRA), the provisions of which have the potential to 
reshape positively the energy ecosystem in our country.
    I am here to provide GridPoint's perspectives on the role of the 
Federal Government and industry in transforming the Nation's electric 
grid from an over-burdened, outdated system into an interconnected, 
intelligent ``smart grid.''
    I have three points I would like to leave you with today:

        1.  First, while the infrastructure of smart meters and 
        advanced communications is important in transforming the 
        Nation's grid, we also need other new innovative technologies 
        to realize the benefits of increased efficiency, reliability, 
        and security.

        2.  Second, we need to realign the regulatory and economic 
        policies and incentives pertaining to investor-owned utilities 
        (IOUs), such that utilities are motivated to invest in smart 
        grid technologies.

        3.  We must provide consumers with greater information on their 
        energy use if we expect them to better manage their energy 
        consumption.

An Historic Opportunity

    The term ``smart grid'' refers to the means by which energy is 
delivered from generators to consumers using two-way communications and 
digital technology to improve efficiency, increase reliability, and add 
transparency. This generally involves enhancing the grid with sensing, 
communications, analysis, feedback, and control technologies to realize 
operational efficiencies and improve environmental impacts. Much of the 
attention around ``smart grid'' has focused on the distribution side of 
the electricity system, which is where GridPoint offers its solutions. 
While this area benefits from improvements in ``smart'' meters (often 
referred to as Advanced Metering Infrastructure (AMI) ) and advanced 
communications systems, there needs to be a wider range of technologies 
adopted to realize the full benefits of the smart grid. These 
technologies will provide utilities and consumers with the ability to 
understand and better manage energy consumption. They also will help 
improve energy efficiency and/or reduce demand, and thereby help reduce 
greenhouse gas emissions.
    EISA and the ARRA set forth the following goals and benefits for 
smart grid: create a modern electric grid, enhance security and 
reliability of energy infrastructure, and facilitate recovery from 
disruptions to the energy supply. The ARRA and EISA envision that there 
will be a variety of regional demonstration projects to develop 
advanced techniques for measuring peak load reductions and energy-
efficiency savings from smart metering, demand response, distributed 
generation, and electricity storage systems; quantify costs and 
benefits; verify technology viability; and validate new business models 
and best practices for implementing advanced smart grid technologies 
that can be replicated throughout the country. These goals encourage 
the testing of new technologies, in addition to improvements in smart 
metering and advanced communications infrastructure.
    The ARRA provides $4.5 billion in funding for the smart grid 
investment program. More than $2 billion of this funding will likely be 
spent on smart meters and advanced communications systems. While this 
new metering and communications infrastructure is important, it is 
critical to include applications that run on this infrastructure as new 
smart grid projects roll out. Without the applications to improve 
efficiency, reliability, security, and provide consumers and utilities 
with additional information, the true promise of the smart grid will 
not be realized.

The Promise of the Smart Grid

    Our system for generating, transmitting, and producing electricity 
was developed more than a century ago when all we required of 
electricity was that it be cheap, ubiquitous, and reliable. Over the 
last century, we have constructed a complex network of power plants 
that are connected regionally via transmission lines to population 
centers, with electricity distributed to homes and businesses over 
power lines. Today, this system is experiencing issues with 
reliability, efficiency, and security. We are increasingly asking more 
from the electric grid--not just greater demand, but also that delivery 
of our energy be efficient and green. Without significant technological 
upgrades, our electric grid cannot meet these 21st century challenges.
    If we take advantage of the historic opportunity presented to us 
today, with the policies set in place in EISA, to upgrade our grid and 
make it ``smarter,'' the benefits are limitless. Imagine if you could 
access real-time information about how much energy you were consuming, 
and which appliances and devices in your home consumed the most energy. 
What if, armed with that information, you could make small changes in 
your behavior that would save significant amounts of energy and lower 
your monthly utility bill?
    What if solar panels on peoples' roofs and electric vehicles in 
garages were networked together such that their capacity could be used 
to relieve areas of stress and high demand in the grid? What if your 
utility and your electric vehicle were smart enough to delay your 
charging until nighttime, when electric rates are less expensive, 
demand on the grid lower, and more renewable energy is available?
    What if a utility could sense an overheating transformer, and 
divert its load by shifting it to other resources in the system? 
Imagine if a utility could make wind reliable and predictable by 
storing electricity in the form of a battery to back up the 
intermittent renewable power so, together, these became a continuous, 
reliable source of energy? That is, the wind could be used to charge a 
large battery. When the wind blew at night the battery would charge, 
and when the wind died down, the battery would discharge to keep a 
constant amount of power available.
    Smart grid technologies exist today to enable all of these 
benefits. Just imagine if utilities and consumers were to implement 
them. How many power plants could we avoid building? How much money 
would we save? How much carbon dioxide would we prevent from entering 
the atmosphere?
    The technologies that can make the ``smart grid'' a reality offer 
consumers greater insight and control over their energy usage and 
improved environmental benefits, while utilities gain greater 
efficiency in their operations, improved reliability, and increased 
security.

GridPoint's Technology and the Benefits of a Modern Grid

    GridPoint has developed a software platform (i.e., management 
system) that enables utilities to have visibility into, and manage, 
their distributed energy assets. The platform seamlessly integrates 
five solutions: online energy management, load management, electric 
vehicle management, storage, and integration of renewable energy. With 
GridPoint's platform, utilities efficiently balance supply and demand 
in an economical, scalable and environmentally beneficial manner.



    In online energy management, the GridPoint solution offers 
utilities a portal to provide their customers far greater awareness of 
their energy consumption. It also provides consumers with insight into 
their energy usage with features such as carbon calculators, 
comparisons to their bill from a previous month or year, and energy 
savings tips based on their consumption patterns. Consumers benefit by 
having control over, and being able to reduce, their energy usage. 
Studies have shown that simply providing consumers information about 
their energy use can lead to reductions in consumption of between 10 to 
20 percent. Providing consumers with information about their energy use 
is an important first step in empowering them to control their energy 
consumption.



    The GridPoint load management solution assists utilities in 
managing capacity-strained areas by providing visibility and control of 
devices in the home or business to address peak loads. This increases 
reliability in the electric grid. The solution provides utilities 
detailed measurement and verification of achieved reductions against a 
projected baseline, which enables carbon measurement. It allows the 
utility to shift load and reduce peak demand through demand response 
programs with circuit-level visibility and control of large load 
classes by type (e.g., Air conditioners) either in aggregate or by 
substation, feeder or individual customer.
    By market share, 70 percent of automobile manufacturers have 
announced plans to launch electric vehicle models, the first of which 
will hit the road, and the electric grid, in 2010. The GridPoint smart 
charging solution controls the flow of electricity to plug-in electric 
vehicles, allowing utilities to balance real-time grid conditions with 
the needs of individual drivers. During peak periods, the flow of 
energy can be delayed or slowed to shift the charging load into an off-
peak period--minimizing grid stress and ensuring service reliability. 
When wind or solar power is available, the charging rate can be 
increased to expand the use of renewable energy in the grid. The 
solution enables smart charging at every charging level and from any 
point on the grid, whether the driver is at home, work, or a public 
charging station.



    The GridPoint storage management solution provides aggregated, 
real-time control over the charging and discharging of distributed 
storage assets located in the utility's transmission and distribution 
systems. Its software algorithms allow energy storage devices to be 
managed in isolation or aggregated at various levels of the system and 
dynamically dispatched in a coordinated fashion. Charging and 
discharging scenarios include: load leveling, load shaping, integrating 
renewable energy, economic dispatch based on price signals, system 
regulation, and spinning reserves to respond to an unexpected power 
disruption. These capabilities allow utilities to manage the grid more 
cost effectively; increase predictability, availability and 
optimization of renewable energy sources; and improve the efficiency of 
transmission and distribution resources.
    Finally, the GridPoint renewable integration solution predicts and 
precisely monitors the production of distributed renewable power 
systems, like a solar panel array, to allocate the associated energy, 
renewable credit, and carbon credit value streams. It also maximizes 
the value of grid-connected renewable power sources, both residential 
and utility-scale, by balancing output variability via automated 
dispatch of other distributed energy assets, including demand response, 
storage, and plug-in hybrid vehicles. Utilities benefit from the 
monitoring and prediction of residential and commercial grid-connected 
renewable systems. Consumers benefit by having insight into their 
personal solar production and consumption, reductions in their carbon 
footprint due to environmental data based on renewable production and 
consumption, and weather information to help predict their future solar 
energy production.

Challenges to Realizing a Truly ``Smart'' Smart Grid

    With all of the tremendous benefits inherent in a ``smart grid,'' 
one might ask why the technologies are not being adopted more widely by 
utilities. There are several reasons, but perhaps the most important is 
that the regulatory model for investor-owned utilities (IOUs) does not 
incent those utilities to make investments in smart grid technologies.
    IOUs make money for their investors by receiving a guaranteed rate 
of return on capital to deploy generation, transmission and 
distribution assets and to ensure system reliability. The more energy 
IOUs need to produce, the more capital they can deploy to purchase 
these assets. This, in turn, allows them to include those assets into 
the rate base and receive a return on their investment. Therefore, the 
more power an IOUs produces, transmits, or distributes, the more money 
that IOU will earn.
    One of the benefits of smart grid technologies is that they create 
efficiencies in the electric grid, thereby reducing the amount of 
energy needed to serve the same population. If an IOU deploys smart 
grid technologies, it could serve its customer base while producing 
less energy. This would benefit ratepayers, who would not face an 
increase in rates, and the environment, by reducing the need for 
additional power generation assets. However, this scenario--under the 
current regulatory structure--would leave the IOU without the need to 
deploy new generation, transmission or distribution assets and would 
reduce the IOU's ability to receive a return on investment. IOUs may 
actually risk losing money if they deploy smart grid technologies that 
serve their customers more efficiently and improve environmental 
impacts. Not all IOUs face this economic deterrent all of the time; 
however, the challenge of this economic and regulatory model is 
prevalent enough to dampen IOUs investment in smart grid technologies.

Xcel Energy's SmartGridCity (Boulder, CO)

    SmartGridCity is the U.S.'s first and largest full-scale pilot 
project designed to test smart grid technologies and the new business 
models they enable. It is sponsored by Xcel Energy Corporation, a 
fully-integrated power utility, headquartered in Minnesota, with a 
service territory extending into eight states, including Colorado, and 
a total of 3.3 million electric and 1.8 million gas customers. Xcel is 
a leading utility in the use of wind power, with nearly 3,000 MW of 
capacity installed. SmartGridCity is a demonstration project designed 
to understand how the utility and its customers collectively manage 
power generation, delivery, and energy consumption.
    SmartGridCity is a multi-phase project that began in the spring of 
2008. The first phase, over 18 months, was designed to test 
capabilities and gauge customer reaction. It involves upgrades to two 
substations and five feeders, as well as 15,000 residential and 
commercial premises. The second phase will be a full deployment with a 
larger reach to a broader customer base, and includes an additional two 
substations, 20 feeders, and 35,000 premises. Grid Point is providing 
demand and supply side management, solar integration, plug-in hybrid 
electric vehicle support, online energy management and integration 
services to the SmartGridCity project.
    Xcel Energy conceived of this project as a way to test a number of 
business, customer and social issues. The principal benefits centered 
on the following:

        1.  Peak Energy Consumption: Can real-time pricing and 
        environmental signals, in conjunction with advanced in-home 
        energy management systems reduce residential peak energy 
        consumption?

        2.  Grid Reliability: Will there be a reduction in the number 
        and duration of customer outages as a result of the technology 
        installed in the distribution network?

        3.  Capital Expenses: Will the reduction in peak load demand 
        result in a deferral of capital spent on distribution and 
        transmission infrastructure?

        4.  Operating Expenses: Will there be cost savings to Xcel from 
        the implementation of smart meters, distribution automation and 
        home energy automation?

        5.  Carbon Footprint: Will there be a meaningful and measurable 
        reduction in carbon emissions as a result of the lowered 
        residential peak demand and other efficiency programs?

    Xcel's vision is to make SmartGridCity a fully-connected and 
horizontally-integrated system that would require real-time and 
automated decision-making across all parts of the network. The project 
includes:

        1.  High-speed communications network (broadband over power 
        line and wireless) and sensing equipment.

        2.  Smart meters with the ability to provide near real-time 
        data on consumption.

        3.  Improved intelligence at the substations.

        4.  A feeder distribution system with communications-enabled 
        reclosers and switches, and other assets to provide power 
        system information.

        5.  Power analyzers at each transformer to provide real-time 
        data on power consumption, outages, restorations and fault 
        locations.

        6.  Integration of renewable energy generation and distributed 
        storage, including a large scale wind-to-battery project.

        7.  Integration and optimization, or smart charging, of plug-in 
        hybrid electric vehicles within the grid.

        8.  Customer programs and incentives that help them save 
        energy, track energy usage, and manage demand in response to 
        real-time price signals, all through a custom web portal 
        interface that provides: (a) control to set energy preferences; 
        (b) analysis of information, billing history and a means for 
        helping customers discover how to best manage energy; and (c) 
        information to effectively educate customers about how their 
        energy is produced and how to lower their carbon footprint.

    The SmartGridCity project is about half way through its duration. 
Since construction began in 2008, Xcel Energy and its partners have:

          Installed nearly 15,000 smart meters with another 
        10,000 more ``opt-in'' customers;

          Launched the SmartGridCity Control Room and 
        Operations Center;

          Implemented over 327 network elements for grid 
        communication and monitoring;

          Developed a web site portal for customers to better 
        manage their energy use;

          Launched the Nation's first test of plug-in hybrid 
        electric cars with vehicle-to-grid capability;

          Turned the Chancellor's residence at the University 
        of Colorado into the Nation's first fully-integrated ``smart 
        house,'' with solar, back-up power, PHEV smart charging and 
        consumer control; and

          Implemented Xcel Energy's wind-to-battery program to 
        test the control and firming quality of an integrated wind and 
        storage system.

    Although we are still at an early stage in the project, Grid Point, 
as a participant, has learned some valuable lessons about demonstrating 
and deploying ``smart grid'' technologies as we move forward with the 
SmartGridCity team to create a more resilient and responsive grid. 
There is real value in demonstration projects such as SmartGridCity 
that can provide a test bed for new and innovative smart grid 
technologies. Consumers must be able to understand their energy 
consumption and usage with greater frequency and granularity than the 
information in their bill at the end of the month. Near real-time 
information on energy usage can influence positively consumers' 
behavior and provide them with the means to control their energy 
consumption.

Importance of Smart Grid Demonstration Projects and Innovation

    Other cities have begun to follow Xcel's SmartGridCity project with 
their own demonstration projects. The city of Austin, Texas announced 
late last year a new smart grid deployment called the Pecan Street 
Project that would create a virtual 300MW clean power plant through a 
combination of efficiency and clean power. The City of Miami, Florida 
likewise has announced a high-profile project. These efforts will 
likely increase as funding under the ARRA is awarded. It is important 
that smart grid demonstration projects test a broad range of new 
technologies and measure and verify the costs and benefits of the 
technologies. Only by doing this, can the best technologies gain 
recognition and acceptance to improve the grid.

Conclusion

    In conclusion, we face an historic opportunity today to transform 
our nation's electric grid. To do so, we need to leverage the funding 
Congress has made available. While we need the advanced infrastructure 
of meters and communications, we also need the applications that reside 
on top of the infrastructure to make the grid more efficient, reliable, 
and secure. We need to continue to work toward regulatory and economic 
structures that incent utilities to make smart grid investments. 
Finally, we need to provide consumers with information about their own 
energy use to empower them to control their energy consumption.
    Thank you for this opportunity to testify here today.

                     Biography for Jeffrey L. Ross
    Jeffrey L. Ross is Executive Vice President at GridPoint, Inc., a 
leading smart grid software company. Mr. Ross works on business 
development, marketing, and corporate development matters for the 
company. Prior to GridPoint, he served as a partner at Dakota Ventures, 
a technology investment fund.
    Earlier in his career, Mr. Ross served as General Manager & Vice 
President of the Identity & Enterprise Security business for Gemalto 
North America. In this role, he was responsible for sales, marketing, 
solutions development and management, strategy, partnerships and 
alliances, and customer delivery and technical support. He previously 
served as Vice President for Marketing & Solutions for Gemplus' North 
American Enterprise Security & Identity and Banking & Retail 
businesses.
    Prior to joining Gemplus in 2004, Mr. Ross founded Alereon, Inc., a 
leading wireless semiconductor company focused on ultra wideband 
technology for wireless USB and next generation Bluetooth. He held the 
position of Executive Vice President at Alereon responsible for 
finance, marketing, strategy, and administration. Mr. Ross also worked 
as Senior Vice President for Corporate and Business Development at Time 
Domain Corporation from 1999 to 2003. Prior to Time Domain, Mr. Ross 
practiced corporate law at Patton Boggs in Washington, D.C.
    Mr. Ross has considerable experience working with growth clean 
technology, wireless, software, and semiconductor companies. Mr. Ross 
is a frequent speaker on technology issues and has appeared on 
television and radio and in print in such venues as CNBC and the Wall 
Street Journal. Mr. Ross holds a B.A. Degree, magna cum laude, from 
Washington University in St. Louis and a law degree from the University 
of Virginia.

    Chairman Baird. Thank you, Mr. Ross.
    Before moving on, are you any connection to the Ross of the 
Ross Power Station fame in the Pacific Northwest?
    Mr. Ross. No, not that I am aware of.
    Chairman Baird. Ross is a great name in Northwest energy, 
so there may be some connection there.
    Mr. Stoessl.

 STATEMENT OF MR. MICHAEL A. STOESSL, GROUP PRESIDENT, COOPER 
                         POWER SYSTEMS

    Mr. Stoessl. Good morning, Mr. Chairman and Members of the 
Committee. On behalf of the National Electrical Manufacturers 
Association, I am Mike Stoessl, Group President of Cooper Power 
Systems. I have been asked to appear here today to help 
describe some of the challenges our industry faces in actually 
making the grid smart.
    Now, Cooper Power Systems has been providing equipment and 
solutions to the electric utility industry literally since the 
days of Thomas Edison. We provide transformers and components 
needed to connect and restore energy, switchgear and automation 
technology needed to make the electrical grid reliable and 
efficient as well as AMI and demand response capabilities that 
help manage the grid's overall load. Our solutions cover the 
range of smart grid intelligence.
    Now, all smart solutions have in common the ability to 
sense activity on a grid, communicate that information back to 
some sort of decision support application, send a decision back 
to the grid and actually make some change.



So as an example, we brought a picture here of a sensor that 
can help determine when the grid is becoming more or less 
efficient. If air conditioning comes on in the middle of the 
day, the grid can actually start wasting energy as it responds 
to that increase in load. So the sensor you see in the upper 
right working with the capacitor bank controller that you see 
in the middle on the left can determine that inefficiencies are 
occurring. Equipped with radio technology or some other form of 
communication, it will send a signal back to the utility 
alerting them to the situation. They in turn can then choose to 
take that capacitor bank, which is in the lower middle of the 
screen, and turn it on or off using the cap bank switch. This 
is just one example of a smart application and the sort of 
things that have to be installed in the field to make it work.
    Now, one of the big challenges we face with building out 
the smart grid is the integration of legacy equipment that 
already exists. Many pieces of apparatus installed on the grid 
do not provide or support any external interface or have custom 
communication protocols. So, for example, this recloser that is 
pictured here provides over-current protection to our overhead 
lines.



If there is a fault, for instance, a branch falls and shorts 
out a power line, the recloser will open, isolate the circuit 
and basically try to restore power. Many of these devices do 
not support two-way communications, so while they are an 
effective isolated solution, they cannot be truly part of a 
smart grid without being replaced or being retrofitted. The key 
to doing these kind of upgrades will be an economic cost 
benefit to the utility, or it is going to be government 
incentives based on the value, more intangible value of a truly 
more reliable grid. With more than 500,000 of just these type 
of reclosers out in service today, retrofits of product like 
this will be an important part of making the grid smart.
    Another challenge we face in building out the smart grid is 
the range of communication options that are already available. 
In the past three years we have seen an increase in 
availability of cost-effective two-way communication 
technology. Cellular, Wi-Fi, WIMAX, Mesh RF, line-of-sight RF 
are a few of these technologies. Now, these cost-effective two-
way communications have become an enabler of adding 
intelligence to the grid but they also present a host of 
challenges. So as an example, the fault circuit indicator shown 
here in the upper left is a great example of a successful 
product making the transition from being a dumb, isolated 
solution to a smart, integrated solution.



    The original form of a fault circuit indicator had no 
communication capabilities. It simply displays a local orange 
visual indication when a fault has occurred on the line. And 
prior to communications capabilities, the utility would 
literally dispatch their line crew, who would drive the lines, 
looking up, trying to find the orange indicator. When they 
found it, they knew where the fault was and they could begin 
repair. When you actually can communicate with the utility, the 
utility can now know that a fault has occurred, dispatch 
linemen directly to the source of the fault, which reduces fuel 
consumption, reduces CO2 emissions and also 
potentially can reduce the time of an outage from hours into 
minutes. That is just one example of what the smart grid can 
do. However, what is pictured directly below the fault circuit 
indicator are the range of hardware options that we have to add 
into the device in order to communicate. Even though there are 
standards, if we want to communicate over the AT&T cell 
network, there is a different card required versus 
communicating through a Mesh RF network versus a line-of-sight 
network versus the Verizon cell network. Each different choice 
necessitates a new card. Each card then requires that we 
integrate it into our package so it has to fit into the device 
itself, validate it with a variety of standards, certify it 
with a communications provider and then write software, which 
we grabbed some screenshots and put at the bottom to actually 
interface it with our software as well as the software that the 
utilities themselves use and have deployed over past decades.
    So in conclusion, Cooper Power Systems believes Congress, 
NIST and the DOE should continue to drive smart grid standards. 
We also commend the DOE in their preparation for evaluating 
grant applications for the $4.5 billion stimulus for smart grid 
investments. We believe the swift and judicious release of 
these funds will help stimulate the economy and support the 
process of converting the legacy grid into a smart grid. We 
would also encourage Congress to consider favorable incentives 
for utilities and vendors for replacement or upgrades to 
existing legacy equipment.
    Thank you for the opportunity to appear before you this 
morning and I am prepared to answer any questions you may have.
    [The prepared statement of Mr. Stoessl follows:]
                Prepared Statement of Michael A. Stoessl
    Good morning, Mr. Chairman and Members of the Committee,
    On behalf of the National Electrical Manufacturers Association 
(NEMA), I am Michael Stoessl, Group President of Cooper Power Systems. 
Cooper is represented on the NEMA Board of Governors and on its Smart 
Grid Advisory Panel. NEMA is the leading trade association in the U.S. 
advancing the interests of 430 electrical manufacturers of a wide array 
of electrical industry products used in utility, industrial, 
commercial, institutional, medical imaging, and residential 
applications.
    NEMA companies are actively engaged in the research, development, 
manufacturing and promotion of a wide range of smart grid technologies 
and products, including advanced transmission devices, end user 
controls, and utility distribution equipment. NEMA is an ANSI-
accredited standards development organization and publishes several 
hundred standards, including dozens used today in electrical grid 
equipment. In the 2007 Energy Independence and Security Act, Congress 
directed NEMA to advise the National Institute of Standards and 
Technology on a smart grid inter-operability framework. NEMA along with 
its member companies are actively supporting NIST in identifying 
standards and protocols that will accelerate deployment of smart grid 
technologies, including the one(s) in my presentation today.
    Cooper Power Systems has been providing equipment and solutions to 
the electric utility industry since the days of Thomas Edison. Our 
product range covers the transformers and components needed to connect 
and restore power, the switchgear and automation technology needed to 
make the electric grid reliable and efficient, as well as AMI and 
Demand Response capabilities that help manage the grid's overall load. 
Our solutions cover the range of ``Smart Grid'' intelligence. Our 
``Smart'' offerings include Smart Metering (AMI/AMR), Demand Response, 
VAR Management, Voltage Regulation, Over-current Protection, Outage 
Detection and Substation Automation. These solutions are known as 
``Smart'' because they are communications equipped and provide decision 
support both locally on the grid and in back office software solutions. 
What they all have in common is the ability to sense activity on the 
grid, communicate that information back to a decision support 
application, send a decision back to the grid, and then make an actual 
change to the grid itself. As an example, consider that electricity 
flow can become inefficient as central air conditioning load increases 
on a hot day. ``VAR'' sensors on the grid [picture] can detect this 
inefficiency, alert decision support software, which can use two-way 
communication to turn on capacitor bank and improve the load flow 
efficiency. Cooper has been developing and providing these types of 
solutions to the industry since the late 1980's.
    One of the big challenges we face with building out the smart grid 
is the integration of legacy equipment in operation on our grid. Many 
pieces of apparatus installed on the grid do not provide or support any 
external interfaces, or use custom communication protocols. For 
example, these reclosers provide over-current protection to overhead 
lines on the distribution grid. In the event of a fault (say a tree 
branch momentarily short circuits a line) it will open the circuit to 
try to isolate the problem. Many of these devices do not support two-
way communications, so while they are effective as an isolated 
solution, they can not be part of a truly ``Smart'' grid without being 
replaced, or being retrofitted to integrate with the grid. The key to 
these upgrades will be an economic cost benefit to the utility through 
operational savings, a variety of government incentive programs, or a 
combination of both. With more than 500,000 of these types of devices 
in service today, this is an important undertaking.
    Another challenge we face in building out the smart grid is the 
range of communication options available. In the past three years we 
have seen an increased availability of cost effective two-way 
communications technology. Cellular, Wi-Fi, WiMAX, Mesh RF, and Line of 
sight RF are a few of those technologies. These cost effective two-way 
communications have become an enabler of adding intelligence to the 
grid but also present a host of challenges. As an example, Cooper's 
Faulted Circuit Indicator (FCI) [see photo] has been one of the 
successful products making the transition from ``dumb'' to ``smart.'' 
Our legacy FCI has no communications capabilities. It simply displays a 
local visual indication that a fault has occurred; it is visible to 
utility line crews from the ground. When a power outage is reported, 
utility line crews drive along the overhead distribution grid beginning 
at the substation looking for an FCI indicating a fault. We have 
transformed this product using today's low cost communications into a 
communicating FCI. These devices report the outage event to the utility 
control center allowing them to dispatch the crew directly to the 
correct FCI location. This can translate into less miles traveled thus 
saving fuel and reducing CO2 emissions. It also can 
potentially reduce outage time from hours to minutes. One of our 
challenges with this technology is that we must support a host of 
communication technologies within this device. Each communication 
technology must be integrated into our package, validated with a 
variety of standards, often certified by the communications provider, 
and interfaced into utility backend IT infrastructure. This adds to the 
amount of time it takes to bring each communication technology to the 
market and the amount of research and development investment made by 
companies like ours.
    Cooper Power Systems believes Congress, NIST, and the DOE should 
continue to drive smart grid standards, as they have begun to do. These 
industry standards should be directed through standards organizations 
like NEMA, they should be based on existing or de facto standards, and 
they should be able to evolve with the emerging smart grid technology. 
We commend the DOE in their preparation for evaluating FOA grant 
applications for the $4.5 billion stimulus for smart-grid investments. 
We believe the swift and judicious release of these funds will help 
stimulate the economy and support the process of converting the legacy 
grid into a smart grid. We would also encourage Congress to consider 
favorable incentives to utilities and vendors for smart grid 
replacement or upgrades to existing ``dumb'' equipment, and for U.S.-
based research and development investments in smart grid technology.
    Thank you very much for the opportunity to testify.

                    Biography for Michael A. Stoessl
    Michael A. Stoessl was named Group President, Cooper Power Systems 
in 2004, reporting directly to Kirk S. Hachigian, President and CEO, 
Cooper Industries. He had been President, Cooper Bussmann since 2002. 
Mr. Stoessl joined Cooper Bussmann from Emerson Electric Company where 
he had been employed from 1993 to 2002, most recently as General 
Manager and Vice President of a unit of Emerson's Liebert Power 
business. In his nine years at Emerson, Mr. Stoessl held a number of 
positions, starting as a Marketing Manager in Emerson's Specialty 
Motors business, to President of Hurst Manufacturing, to President of 
Rosemont Analytical Uniloc and then to General Manager and Vice 
President of Astec DC-DC Power Supplies before joining Liebert.
    Prior to Emerson, Mr. Stoessl was with the Circuit Protection 
Division of Raychem Corporation for four years, serving in marketing, 
strategic planning and operations management positions.
    Mr. Stoessl began his career as a Business Analyst with McKinsey & 
Company, Inc. after graduating with Highest Honors from Princeton 
University with a B.S. in Computer Science and Electrical Engineering. 
Mr. Stoessl also holds an M.B.A. from Harvard University where he 
graduated as a Baker Scholar.
    Cooper Power Systems manufactures equipment, components and systems 
for the distribution and management of electrical power for electrical 
utilities, industries, businesses and institutions worldwide. 
Headquartered in Waukesha, WI, Cooper Power Systems has manufacturing 
facilities in ten domestic locations and three foreign locations, and 
approximately 3,400 employees worldwide.
    Cooper Industries, Ltd. (NYSE: CBE) is a global manufacturer with 
2008 revenues of $6.5 billion, approximately 88 percent of which are 
from electrical products. Founded in 1833, Cooper's sustained level of 
success is attributable to a constant focus on innovation, evolving 
business practices while maintaining the highest ethical standards, and 
meeting customer needs. The Company has eight operating divisions with 
leading market share positions and world-class products and brands 
including: Bussmann electrical and electronic fuses; Crouse-Hinds and 
CEAG explosion-proof electrical equipment; Halo and Metalux lighting 
fixtures; and Kyle and McGraw-Edison power systems products. With this 
broad range of products, Cooper is uniquely positioned for several 
long-term growth trends including the global infrastructure build-out, 
the need to improve the reliability and productivity of the electric 
grid, the demand for higher energy-efficient products and the need for 
improved electrical safety. In 2008, 61 percent of total sales were to 
customers in the Industrial and Utility end-markets and 37 percent of 
total sales were to customers outside the United States. Cooper, which 
has more than 29,000 employees and manufacturing facilities in 23 
countries as of 2008, is incorporated in Bermuda with administrative 
headquarters in Houston, TX.

                               Discussion

    Chairman Baird. I thank our witnesses for a very 
interesting and informative testimony. I recognize myself for 
five minutes for questions.

                    Anticipated Development Timeline

    Give us a sense of the glide path of when we begin to see 
these technologies becoming more adopted. You know, the 
temptation is to say when will this be ready. I know it is 
going to be a gradual transition but give us kind of a sense, 
metrics that give us a sense of what will be established by 
what time, and I know that is dependent also on incentives and 
markets, et cetera, but give us some thoughts about that. Mr. 
De Martini, you might be in one of the best places.
    Mr. De Martini. Sure. Well, I think certainly across the 
country we are seeing, and California in particular, the 
adoption of smart meter technology as a foundational element as 
was discussed. Certainly as we see over the next, in our case 
in California, over the next three and a half years all three 
investor-owned utilities will have smart meters deployed for 
all their customers, building on what we have done already for 
our largest industrial customers. At the same time, there is a 
lot of push, and we are certainly at the forefront, but others 
looking at opportunities as part of the ARRA funds for 
synchrophasor technologies. It is very cost-effective. So we 
see that over the next couple years, that being deployed on the 
transmission systems, and that has two benefits, not only the 
one that I mentioned in terms of helping to reduce, or improve, 
I should say, the reliability and reduce the exposure to these 
large blackouts. It also has the benefit of allowing us to be 
able to understand how large amounts of wind energy can be 
integrated into the grid because of the very dynamic nature of 
wind energy. So that is one of the things that we look at in 
California with the strong reliance on renewable energy in our 
system. We are anticipating over the next five years as much as 
4,500 megawatts of new wind energy coming on and so we are 
looking at that. As we look at these other distribution 
automation technologies, while we have deployed and many others 
in the country have deployed quite a bit of distributed 
automation, what we have had in the last 10 years needs to be 
taken further. I think it was mentioned in the other 
testimonies and I think at the outset in the opening comments 
that when we start to look at two-way power flow in the 
distribution system, many of the protection schemes, how we 
think about and design these distribution systems, need to be 
taken to another level. So part of what we are looking at with 
this Avanti circuit but also other demonstration projects is, 
how do we accommodate two-way power flow on the distribution 
system that for the last 100-plus years has been designed as a 
one-way power flow from central plant down to the customer?

                        Features of Smart Meters

    Chairman Baird. Excellent summary. If I am an average 
citizen and you say the word ``smart meter,'' you are 
installing a smart meter, what is the difference between the 
dumb meter I have outside and the smart meter?
    Mr. De Martini. Well, the dumb meter hasn't really changed 
in 50 years and really in basic form type in 100-plus years. So 
it is an electromechnical device. It has magnets and it spins 
on a disc. I think most folks have taken a look at one of 
those. It is extremely difficult to read because of the way the 
clocks in terms of the numbers are there so it is very 
difficult for folks to understand, the average consumer. What 
the digital meter will do, first and foremost, it is digital. 
It is two-way communicating, has two forms of communication 
included in the meter, one two-way communication methodology 
back to the utility to be able to do remote metering----
    Chairman Baird. Real time?
    Mr. De Martini. Real time--well, near real time. So we can 
get the information and we can collect it on an hourly or up to 
15-minute increments and then we usually download it once a day 
or a couple times a day, but we can get real-time reads off the 
meter as needed. The other communication goes into the home so 
many of us are looking at wireless technology. Zigbee in 
particular is one that we are looking at that allows us to 
bridge to many of the devices that Mr. Ross talked about in 
terms of being able to allow energy management systems in the 
home to get the read right off the meter every 10 seconds, 
really real-time information, and take advantage of that. So 
these sorts of things and more processing and memory capability 
in the meter are really what distinguish it, and features like 
remote service switches that allows us to remotely turn on the 
power when somebody moves in. In our case, we have over 20 
percent of our customers move every year. That is over a 
million and a half customers moving.
    Chairman Baird. Thank you. I am not going to have time to 
ask a couple other questions but I will just put those out if 
someone could be kind enough to share down the road with us. If 
we get to a second round of questions, we will get to it. I am 
interested in the extent to which the energy bill that we 
recently passed out of the House--a number of folks mentioned 
incentives as key to adopting or not adopting some of these 
technologies--how the system of allowances and credits, et 
cetera, particularly in the cap-and-trade system would relate 
to incentives, or disincentives possibly for adoption of this. 
The other thing is, Dr. Arnold, you know, when we travel the 
world we are used to now carrying these little plug adaptors, 
and I am interested in, you mentioned global standards. I am 
interested separately in how we are coordinating with the rest 
of the world smart grid technology so that, you know, we don't 
create yet another layer of incompatibility for international 
travel and international trade and consumption of international 
goods. With that, I recognize Mr. Inglis for five minutes.

             Flexibility and Pace of Standards Development

    Mr. Inglis. Thank you, Mr. Chairman. Mr. Ross was talking 
earlier about the feedback loop of customers figuring out how 
much power they are using. The first house that my wife and I 
bought was heated with electric baseboard resistance heaters 
and so the first time it turned cold, I went outside and 
watched the meter and I called out to her to turn them on. I 
thought the thing was going to come busting through the glass 
and become a dangerous projectile going through the 
neighborhood, it was going so fast. That was the beginning of 
the feedback loop but 30 days later when we got the bill was 
when the real feedback came about, gee, do we have to change 
this technology, and so we changed pretty rapidly because even 
in warmer South Carolina it is not that cold, you know, but 
wow, was it expensive. So I can see the value of a quick 
feedback loop to change behavior because you realize oh, my 
gosh, this is costing a fortune to heat this house.
    Mr. Ross, Dr. Arnold is working on standards. You are in a 
rapidly evolving area. Software moves rapidly. Is it time for 
standards? Are you ready for standards or are you hoping for 
more development before he gets his standards in place or do 
his standards help you implement your technology?
    Mr. Ross. We have been very supportive of the NIST 
standards efforts and really would like to commend Dr. Arnold 
and all the work that they have done there. You know, they are 
dealing with a huge area and have set forth a plan in multiple 
phases that really is moving with good, deliberate speed while 
taking into account all the complexities of the issues they are 
needing to deal with. From our standpoint, I think most people 
in industry are supporting open standards. It would be helpful 
to have the standards in place obviously as quickly as possible 
but you really need to balance that with getting it right and 
making sure there is enough time to investigate and work 
through all the issues.
    Mr. Inglis. Is there a way to keep this flexible? Because 
it seems to me in an area of rapidly evolving technology, which 
I hope is what we are dealing with, particularly in the 
software, to keep those standards flexible. It may be a 
question for Mr. Ross and Dr. Arnold.
    Mr. Ross. I can just comment, and then Dr. Arnold would 
have a lot more to say. I think there is. I mean, I think the 
intent is not to pick winners or losers or very specific 
technologies, but to be able to pick the types of technologies 
broadly that will at least allow for inter-operability and 
connectivity, which is a hallmark of the smart grid, but I will 
let Dr. Arnold talk about that.
    Dr. Arnold. Thank you. Well, we have to be careful not to 
overspecify things because we do need to facilitate innovation, 
which will benefit the consumer. There are certain aspects in 
the standards that everyone agrees have to be common like you 
have to have some common understanding of what data are you 
going to have, how is it going to be represented, and these are 
things that people can agree on. We can allow a lot of 
flexibility in terms of things people can innovate and get 
benefits to consumers and they are built on this foundation, 
sort of the key fundamental standards, data models and so 
forth. So we are proceeding to address this in I think a 
thoughtful fashion.

                              Net Metering

    Mr. Inglis. What is the holdup with net metering? I hear, 
you know, a lot of people have trouble with--theoretically I 
think EPACT 2005 really requires power companies to allow us to 
do that, right? But then there are all kinds of questions about 
the ability, the actual ability to sell your power back to the 
grid. What is the holdup? Is it technological or is it a 
business issue and we really don't want to move quickly if you 
are in the power business?
    Mr. De Martini. In terms of net metering, there are 
actually two dimensions. One is net metering where you are 
netting out how much energy is being used by the home, and then 
there is the metering that involves a separate meter to be able 
to then get paid for, for the energy being produced at the 
home. The current meters that we are deploying, the electronic 
meters have capability to do net metering. They also have the 
ability if we put a discrete measurement device on, say, a 
solar panel to be able to measure that and we are looking at 
this also for the vehicle--I think Dr. Arnold talked about 
this--as well as when we look at energy storage potentially in 
the home or at the business, how we would be able to measure 
that as well in terms of its contribution to the grid, not only 
for energy but also what other services it might provide in 
terms of grid stability. So we are looking at that. It is 
really--it is not a technology issue. I think we are looking at 
what the new form factors need to be to be able to do that and 
then there are standards both in terms of interconnection 
standards that might be required as well as some technology 
standards to deal with these different form factors because in 
most cases these meters would have protection on them, unlike 
the meter on the side of the house that doesn't and so there 
are different safety considerations.
    Mr. Inglis. Thank you.
    Chairman Baird. Mr. Lujan.

                      Inter-operability Standards

    Mr. Lujan. Thank you very much, Mr. Chairman. I would like 
to start off where our Chairman and Ranking Member's questions 
have gone as well with talking about some of the open standards 
and not picking winners or losers, but the importance of inter-
operability, and as we look to see some of the technologies 
that we depend on every day, our cell phones as an example, 
which are developed in open platforms but in the United States 
have not kept up with some of the technological advances that 
have occurred in other nations, and when you talk about an open 
platform but some of the restrictions that are placed on 
consumers as a result of carving out niches within this 
industry. Can you talk about the importance of inter-
operability and some of the minimum performance standards that 
should be included so that way we are able to maximize 
efficiency, cost-effectiveness when we are looking at 
consumers' implementation and the integration with utilities as 
well?
    Dr. Arnold. Well, I think we have to be careful not to fall 
into the trap of thinking that one size fits all because the 
smart grid has to accommodate a nationwide infrastructure. 
Environments in rural context are very different than urban 
areas so there will have to be a range of technologies that 
utilities can employ, and we don't want to impede innovation. 
So the challenge in this effort is to identify the critical 
interfaces in which there needs to be a standard and the nature 
of the standard has to be right as well. One example that I 
will give you is that a standard for communicating dynamic 
pricing information across the grid is going to be a very 
fundamental standard for the smart grid, but we have 53 
jurisdictions in the United States that set tariffs and rates 
and they are not all the same. So we can't have one pricing 
model. So the type of standard that we need, there is language 
to describe pricing models, and this is quite doable. So it is 
a combination of recognizing which are the key interfaces and 
applying the right type of technology to create the right type 
of standard.
    Mr. Lujan. Very good. Does anyone else want to comment on 
that?
    Ms. Kelly. From the regulatory perspective, both the 
federal and State regulators have recognized the importance of 
inter-operability at some level. And in the absence of inter-
operability of open architecture, and the State commissions 
adopted a resolution at their meeting, their national meeting 
yesterday, that pledges the State commissions to ensure that 
any smart grid technology that is sought to be deployed on 
their systems that they will require that the architecture be 
open. (And in FERC's policy statement for cost recovery, we 
have made the same statement.)
    Mr. Lujan. Thank you. And I would also like to second the 
thoughts of Mr. Inglis as well as it pertains to net metering. 
As we are looking to smart meters and the importance of making 
that inclusion as we are making this critical investment now to 
prepare homes and the investments to be made with smart meters 
for those individuals that would like to get involved in that 
type of an environment, I think it is critical and I hope that 
that would be some type of a parameter that would be 
established.
    And lastly, Commissioner Kelly, just to applaud your 
efforts with what you have done in the collaborative effort 
between FERC and NARUC\1\ to bring those two entities together 
to talk about the regulatory environment that exists, the 
framework that has to be adopted and how the two can truly 
adopt best practices throughout the United States to help carry 
this out. And if you can just touch upon any of the practices 
that you have already identified or the progress that can be 
made and how we as a Congress can provide the support that you 
need, whether it is for FERC, DOE, NIST, with NARUC to help you 
do what it is that we need to do, recognizing that all of your 
testimony supports the robust investment that has been made in 
smart grid applications, recognizing the investments that can 
be made and the progress that can be made over the next five, 
10 and 15 years.
---------------------------------------------------------------------------
    \1\ National Association of Regulatory Utility Commissioners
---------------------------------------------------------------------------
    Ms. Kelly. Well, thank you, Congressman. It has been a very 
fruitful effort, this collaboration between the states and the 
Federal Government. In addition to adopting a policy that 
inter-operability has to be met by all smart grid investment, 
cyber security has also been a concern of State regulators as 
well as federal, and we have pledged ourselves to demand that 
any smart grid technology that comes before us for approval for 
deployment to the grid will have to be shown to be cyber 
secure. You already have helped us with the stimulus funds and 
in the ARRA you created a clearinghouse of information which 
the Department of Energy is working to establish right now, and 
we see both of these as very helpful for the encouragement of 
deployment of the smart grid. With the stimulus funds, we are 
anxious to see them spent on demonstration projects that 
actually demonstrate a range of technologies from the 
transmission end down to the distribution end, because some of 
these technologies are not known. So if we can have a 
demonstration project and get the information from that project 
that shows that this technology performs, that it actually 
provides benefits that we can quantify and report on and that 
it has been accepted by consumers, this is a wonderful way to 
kick start the deployment of smart grid technology and advance 
it. So thanks for your legislative efforts.
    Mr. Lujan. Thank you, and thank you, Madam Chair. I see my 
time is expired. I want to invite any of the other panelists to 
submit a response to that question if you so choose in writing 
for the record. Thank you very much. Thank you, Madam Chair.
    Ms. Giffords. [Presiding] Thank you, Mr. Lujan.
    The Chair will recognize Mr. Bartlett.
    Mr. Bartlett. Thank you very much.

                       National Security Concerns

    Just about a week before the G-8 ratified the framework 
agreement that ended the Kosovo conflict, I was sitting in a 
hotel room in Vienna, Austria, with three members of the 
Russian Duma and the personal representative of Slobodan 
Milosevic. One of those Russians was Vladimir Lukin, who is 
Ambassador here and at that time the Chair of what would be our 
Foreign Affairs Committee. He was very angry. He spent two days 
with his arms crossed looking at the ceiling and finally he 
said if we really wanted to hurt you with no fear of 
retaliation, we would launch an ICBM.\2\ We would detonate a 
nuclear weapon high above your country and shut down your power 
grid and your communications for six months or so. The third-
ranking Communist was there, Alexander Shabanov, and he smiled 
and said and if one weapon wouldn't do it, we have some spares 
like about 10,000, I think. What was he talking about? I won't 
ask Ms. Hoffman because I know that she knows what he was 
talking about. Let us start with Ms. Kelly. Because it really 
is relevant to this hearing and what you all are doing. What 
was he talking about?
---------------------------------------------------------------------------
    \2\ Intercontinental Ballistic Missile
---------------------------------------------------------------------------
    Ms. Kelly. Well, Congressman, he was talking about 
electromagnetic pulse and he was thinking about using it as a 
threat to the stability of the United States, and it is a 
concern. It is a physical threat as opposed to a cyber threat, 
but nevertheless a very real threat.
    Mr. Bartlett. Dr. Arnold.
    Dr. Arnold. Well, this is indeed a very serious concern 
that we must address in the context of the smart grid, and 
although it is a physical threat, it does have cyber 
implications because the greatest damage with that threat is to 
the control systems which are based on electronics. We consider 
that threat to be within the scope of the cyber security task 
force within the NIST standards program. We have a number of 
EMC\3\ experts who participate in that group and NIST has 
expertise as well. I would just like to say that I am aware 
that some of the manufacturers are at least sensitive to the 
issue and several of the manufacturers on our working groups 
have informed us of research they are doing on component 
technologies that are more EM immune than conventional 
circuits. There are existing approaches with layered magnetic 
shielding to create EMP\4\-resistant designs and there are 
applicable standards. IEC\5\ Subcommittee 77C has had work 
underway for some time and has produced a series of standards. 
The real challenge in this, and I am reminded of this by the 
report of the commission to assess the threat to the United 
States on EMP attack in which it says it is not practical to 
try to protect the entire electrical power system or even all 
high-value components from damage. So I think the key to this 
is identifying which are the critical assets that need to be 
protected and to apply the relevant design standards to ensure 
their protection.
---------------------------------------------------------------------------
    \3\ Electromagnetic Compatibility
    \4\ Electromagnetic Pulse
    \5\ International Electrotechnical Commission
---------------------------------------------------------------------------
    Mr. Bartlett. Yeah, the smarter we make the grid, the more 
vulnerable we are, and unless you are incorporating EMP 
protection, you are simply making it worse rather than better 
as far as security is concerned.
    Mr. De Martini.
    Mr. De Martini. Yes. In addition to what Dr. Arnold 
described, the other potential threat, physical threat, has to 
do with the long-cycle currents that are induced under one of 
the three different scenarios. There are three different pulse 
sort of effects that result from EMP. The second looks and acts 
like lightning on the system and the current grid use of 
lightning arrestors and protection devices will mitigate that. 
The third, though, is the one that has the most potential 
physical damage for things like transformers and others large 
equipment that we have on our bulk transmission system and also 
in our distribution and subtransmission systems. There are ways 
to approach this. This is also similar to a phenomenon, solar 
flares, which is fairly well understood. There have been a 
number of scenarios over the last 20, 30 years, one by Hydro 
Quebec in the 1980s and some of the technologies that they have 
deployed. Again, I think to Dr. Arnold's point, what we need to 
look at is sort of a risk assessment and looking at what we 
think are the key vulnerabilities. In the case of the physical 
infrastructure, it is long lead time items like transformers so 
if a transformer was to fail, getting a new replacement 
transformer for a 500,000-volt transformer is very long.
    Mr. Bartlett. What is ``very long''?
    Mr. De Martini. Could be two to three years, if we had a 
very wide scale. Usually if we have one fail, you know, there 
is a sharing arrangement usually with other utilities and 
manufacturers so that we can get something quick as in the case 
of an earthquake, but when we talk about widespread, you know, 
damage, then we would exhaust those standbys. So looking at 
ways to isolate those transformers or dampen those currents 
that may get induced into the system is something we can look 
at, and our 500-KB system, for example, in the West, and 
particularly in California, we have series capacitors to help 
actually shorten the lines, which is one of the things you can 
do to mitigate the exposure from EMP.
    Mr. Bartlett. My time is up. Let us come back to this in 
the second round because it really needs more exploration 
because if we don't adequately respond to this, it could 
really, if we had that event, end life as we know it in this 
country. So let us come back to that in the second round. Thank 
you, Mr. Chairman.
    Chairman Baird. Thank you, Dr. Bartlett.
    Ms. Giffords.

                             Energy Storage

    Ms. Giffords. Thank you, Mr. Chairman, and thank you to the 
panelists for being here today. I come from southern Arizona, 
and it is a state that is abundant in solar energy and 
incredible potential in its natural resources. As you all know, 
smart grid technologies provide a real relevance to the goal of 
making our state and the country more dependent on renewable 
energy and particularly solar because of the storage capacity 
issues that deal with the sun setting at night and clouds 
coming overhead, so I want to talk a little bit about what 
happens under the traditional rate-making process. There are 
very few ways currently that utilities can monetized the 
benefits of storage. Since storage technologies do not fall 
into any of the traditional asset classes like generation or 
transmission or distribution, it is really a struggle for the 
utilities to use storage as part of their rate base. So my 
question is, what can FERC do to encourage the use of energy 
storage in light of these circumstances, and should FERC 
institute a separate asset class for storage since it provides 
benefits for the generation and transmission and distribution 
of energy?
    Ms. Kelly. Thank you, Congresswoman. You are absolutely 
right. Storage is not a traditional resource on the system. The 
traditional resources are generation, transmission and 
distribution, and that is how rates have been set. Storage can 
potentially act as any one of them or all three of them, and 
that is where the difficulty comes in. If it is acting as a 
generator, for example, pump storage, a traditional storage 
facility, then it receives revenues as a generator. Some of the 
issues that get more difficult come if the deployer of the 
asset wants to capture multiple revenue streams. I know that 
there was a proposal by AEP that was at the distribution level 
in Texas that would have been a distribution asset and the 
Texas commission did approve that in distribution rates and I 
believe also allowed them to recover revenues as a generator at 
the same time. One thing that FERC has done to facilitate 
storage is to allow--in our organized markets, we have seven 
organized markets in the United States and we have allowed 
storage to qualify. We changed the rules so that storage can 
qualify as a demand response provider and we have lithium ion 
batteries in particular that, although they are expensive, can 
provide ancillary services because those ancillary services are 
costly. So we are working to change market rules to allow 
storage to sell power into the market. We also have an office 
of policy and innovation, and two months ago they began an 
effort internally to decide whether this is something that we 
should develop a comprehensive policy on or whether it is 
something that we should decide on a case-by-case basis, 
because you are absolutely right; storage can act as a number 
of different kind of entity within the system, and the question 
of whether or not they can recover as a transmission asset and 
a generation asset has a lot of implications for the market and 
the competitiveness of the market and cost recovery, but it is 
something that we are undertaking to look at to see whether we 
should come up with some sort of comprehensive policy.
    Ms. Giffords. Thank you, Ms. Kelly.
    Would anyone else like to comment? Ms. Hoffman.
    Ms. Hoffman. I just would like to comment that the best 
thing we can do for the industry is to develop a clear 
definition of those services and what can be covered under what 
cost structure so that the industry knows how to move forward 
and where they can get cost recovery so it is completely 
transparent and consistent.
    Mr. Ross. I would just like to say, we agree with your 
view. Storage is, you know, a very attractive solution for 
utilities. The price points are coming down now with some of 
the advantages gained through the development of batteries for 
electric vehicles, and I think those price points are now 
approaching new generation and I think more clarity would be 
beneficial for the industry because today where we are at, 
there are some utilities that have deployed storage solutions, 
grid-scale storage solutions, but it has tended to be basically 
on a pilot basis and not more widespread.
    Ms. Giffords. Mr. Chairman, just in closing, this seems to 
me a real key part of how we are going to figure out 
transitioning to renewable energy and, you know, I am glad that 
you are holding this hearing today and I look forward to 
working with all of you to make sure that we can actually get 
these changes in place so that we can really move forward and 
transform our economy and our energy usage.
    Chairman Baird. Excellent point, as always, Ms. Giffords. 
Maybe we want to pursue specifically a hearing on the issue of 
storage in some more detail.
    Ms. Giffords. That would be a great idea.
    Chairman Baird. Dr. Ehlers.
    Mr. Ehlers. Thank you, Mr. Chairman. I don't know about you 
but I am having fun. It is not every day we have a panel on 
which every member knows what they are talking about. So I have 
learned a lot.
    Just one quick comment on the EMP. When I look at that 
issue, I just think this is so far beyond what anyone should do 
that it almost is in the category of mutually assured 
destruction as being the only defense against it. We can 
protect some things but good grief, given all the processors 
around, if every car stops because of EMP, you have total 
gridlock, the Nation doesn't function. So it is something we 
would rather not think about it but I really think it is very, 
very difficult to address the whole issue.
    On the smart grid, it seems to me a smart grid requires 
smart people too, and I think the comments about digital 
meters--I think we would do everyone in this country a great 
favor if every major energy consuming appliance had a digital 
display on the appliance showing how much energy it was using 
at that moment. You know, this would apply to stoves, dryers, 
washers, dishwashers, the major appliances, perhaps even the 
furnaces and air conditioners, although you wouldn't want the 
display on the machine per se but somewhere in the house. 
People have to become much more conscious about their energy 
usage if we are really going to be serious about conserving 
energy, and so I would--you know, I don't know, Dr. Arnold, 
whether you want to put this as one of the standards but I 
certainly wouldn't mind seeing a recommendation in there that 
this is something we should move towards, and perhaps it 
requires legislation at some point. I think the public will 
make intelligent decisions if they know the facts, and we have 
to make sure that we let them know the facts in every way 
possible.

                     The Purpose of the Smart Grid

    The question I have is, what is the primary purpose of the 
smart grid? It seems to me its origin was in the blackouts and 
concern about that, but what you are talking about today and 
discussing is far beyond just dealing with blackouts, and I 
don't have much time left but if you can each give just a short 
response of what really are we trying to accomplish with a 
smart grid. What is our purpose? What is our goal? We will 
start with--well, let us reverse the order. Ms. Hoffman, you 
get nabbed every time. Mr. Stoessl, and just go down. I am 
looking for short answers, not long ones.
    Mr. Stoessl. I think unfortunately smart grid has become 
something that is ubiquitous. Everybody takes anything going on 
in the grid and calls it smart grid application but from our 
perspective, improving reliability is a key part of it. 
Improving conservation of resources, reducing waste is a key 
part of it, and providing signals to both consumers as well as 
the utilities on how to reduce waste, reduce usage is also a 
key part of it.
    Mr. Ehlers. Thank you.
    Mr. Ross.
    Mr. Ross. Yeah, I would agree with a lot of that. I think 
it is to create efficiencies. I think it is to improve 
reliability. We should have as a goal to increase security and 
I think there is a lot of work being done on that, and I think 
those are the main prongs.
    Mr. Ehlers. Mr. De Martini.
    Mr. De Martini. I would say there are three things. One is 
that if we look at renewable energy integration, involving 
large amounts of wind and distributed solar energy, we need a 
different set of technologies to be able to integrate that 
energy in a reliable, safe manner. The other is the grid 
efficiencies that were talked about, two elements. One is, 
there are superconducting technologies that can make our grid, 
the inherent grid more efficient which means less energy wasted 
through losses on the system, and then obviously engaging our 
customers in the process that you described in terms of using 
more-efficient energy. So I would say those, and then overall 
reliability of the grid in terms of providing better service 
for our customers.
    Mr. Ehlers. Dr. Arnold.
    Dr. Arnold. I think of it as reducing energy usage, 
allowing consumers to manage their use of energy, increasing 
reliability and benefiting the environment.
    Mr. Ehlers. Ms. Kelly.
    Ms. Kelly. Congressman, I think of it as doing the same 
thing that the dumb grid does, which is send electricity, only 
doing it better, more efficiently and more reliably, and then 
increasing our ability to do things with the grid that it has 
never done before like sending electricity two ways, allowing 
for net metering and allowing for dynamic price signals and 
automated demand response, things that we can't do with the 
dumb grid today.
    Mr. Ehlers. Ms. Hoffman.
    Ms. Hoffman. I will summarize it as sensing, measurement, 
information, decision-making and automation such that we have a 
greater--as you eloquently stated, an educated consumer and a 
more sophisticated industry.
    Mr. Ehlers. Thank you very much. Just to summarize, most of 
you mentioned the issue of efficiency, which I think is a huge 
issue that we have to deal with internationally, not just in 
this country, and I appreciate your comments. They are right on 
target. Thank you.
    Chairman Baird. Dr. Lipinski.

                      First Steps to a Smart Grid

    Mr. Lipinski. Thank you, Mr. Chairman, and thank you for 
holding this hearing today. It is very important that we talk a 
lot about alternative energy. This is another critical part of 
the equation that oftentimes gets overlooked. I will start out 
by asking about this. I read recently that the National 
Association of Regulatory Utility Commissioners reported that 
the most effective place for initial investment in the smart 
grid for smart grid improvements is on the electric grid itself 
where energy and cost savings are immediate and that rely upon 
change in customer behavior or for customers to purchase and 
install in-home energy-saving devices. So I was wondering what 
the panel thinks about the commissioner's assessment. Do you 
think that that is the best way to start building the Nation's 
smart grids? Maybe we will start with Ms. Hoffman.
    Ms. Hoffman. I actually think we need to drive innovation 
and smart grid technologies on all three levels, at the 
transmission level with the phasor measurement units, at the 
distribution level through substation automation, and at the 
customer level. The safest route from a regulatory 
commissioner's perspective is something that is dealing 
directly with the industry, or within the utility industry 
itself. The most competitive and most innovative aspect of the 
smart grid is on the consumer side for consumer decision-
making.
    Mr. Lipinski. Ms. Kelly.
    Ms. Kelly. Congressman, I would agree with Ms. Hoffman. The 
State utility regulators are concerned because the technology 
that we are talking about putting in is new to them and so I 
think that the DOE demonstration projects will be very valuable 
in demonstrating that the technology does perform, that it does 
provide benefits and that it is accepted by the consumers. The 
technology that they referred to is technology that we 
understand pretty well and we could put on the transmission 
system, and I think that is one reason they endorse it because 
it is well known and we know how much efficiency can be 
delivered by it. And so from that perspective, I think that it 
is important that that kind of technology be deployed but in 
parallel we should be undertaking these demonstration projects 
to show that other technology can also work well.
    Mr. Lipinski. Does anyone else have a comment? Mr. De 
Martini.
    Mr. De Martini. Yes. Thanks. I think that is important to 
recognize, for example, in California and certainly in southern 
California Edison's case, our peak, system peak is occurring on 
less than 60 hours of the year. During the period from 2002 to 
2007 when we were experiencing the dramatic growth in our 
economy, our average peak demand was growing by about 1,000 
megawatts a year. That peak, 30 percent of that peak, 7,000 
megawatts is air conditioning load. As we look at investing 
more in capital to try and meet that type of growth, which we 
anticipate that we will see again once we come out of this 
downturn, it is important that we engage our customers in a way 
that they can see what prices are, what the cost of this energy 
is going to be so that we can have this, you know, mutually 
beneficial relationship that we can meet their needs but also 
that they can recognize what the cost of this is so we can end 
up with a much more efficient system. It is just not possible 
to continue to try and meet that sort of growth.
    Mr. Ross. Yeah, I would like to just comment on that as 
well. I agree with what the other panelists have said. I would 
like to point out that a lot of the work that has been done to 
date, though, really has been on the grid operations and 
reliability side. So we have done a lot in transmission, and we 
are doing a lot at substations and distribution automation. 
Where we haven't done a lot so far really is on the demand side 
and looking at efficiency, and so a lot of those things 
hopefully through the smart grid demonstration projects and 
elsewhere we will see new technologies that can be deployed, 
but those things have done, you know, at best very small 
pilots. So a real focus on efficiency and addressing the demand 
side as well as the supply side I think is needed.
    Mr. Lipinski. Thank you. With the little time I have left, 
I want to ask Ms. Hoffman, is DOE spending any of the stimulus 
dollars on efficiency improvements on the electric grid itself?
    Ms. Hoffman. We are. Through the demonstration program we 
will have a complete portfolio of generation as well as smart 
grid technologies that will hopefully show improvement in 
efficiency of the whole system, the system as a whole. For the 
investment grant program, there are very technology-specific 
actions or proposals that will be submitted to the Department 
so some of them could but not all of them probably will.
    Mr. Lipinski. Thank you. I see my time is up. Thank you for 
your answers, and I yield back.
    Chairman Baird. Thanks, Dr. Lipinski.
    Ms. Biggert.
    Ms. Biggert. Thank you, Mr. Chairman. This must be smart 
grid day. I co-chair a caucus on high-performance buildings, 
and the title of what we are having today is ``Connecting 
Buildings in the Smart Grid.'' So it obviously is a topic that 
is very much in the forefront. I do chair this caucus with 
Representative Carnahan from Missouri, so if you happen to be 
down in the basement of Rayburn around 11:30, that is when that 
starts, if you need some more talk about the smart grid.
    I read recently that the National Association of Regulatory 
Utility Commissioners has reported that the most effective 
place for initial investment in smart grid improvements or 
immediate investments in the smart grid improvements is on the 
electric grid itself where energy and cost savings are 
immediate and do not rely upon changes in customer behavior and 
do not need customers to purchase and install in-home energy-
savings devices. Do you agree with that assessment as the best 
way to start building this Nation's smart grids? Ms. Hoffman.
    Ms. Hoffman. Congresswoman, thank you. I believe that we 
really need investments at the transmission-level system as 
well as at the distribution and at the customer levels. The 
innovation that is occurring on the system is occurring at the 
customer level as you look at the wealth of technologies 
including the appliances, with intelligence. It will provide 
great advancement and great education to the industry as well 
as consumers on their energy consumption.
    Ms. Biggert. Thank you.
    Ms. Kelly. Congresswoman, the technology that they are 
discussing there will indeed provide a lot of efficiency and 
translate into a lot of savings for consumers. However, I don't 
think we want to lose sight of the fact that adding smart grid 
technology at the retail level in the home also has the 
potential to accomplish similar types of savings.
    Ms. Biggert. Thank you. Anybody else?
    Mr. Stoessl, you mentioned something in your testimony 
about----
    Mr. Stoessl. Absolutely, and I think that while it is 
essential that we invest everywhere, I think if you really want 
immediate gains, the fastest response is going to come from 
going after management of efficiency on the grid itself. 
Voltage management and reactive power management, that first 
example that I provided, looking at how you turn capacitor 
banks on and off or turn voltage regulators on and off when 
demand shifts and the load comes up and down, that is something 
the utility can manage directly without relying on consumers to 
get cues and individually make a whole host of actions. And so 
I think there are opportunities for immediate benefits going in 
that direction while waiting for all the cues that the 
consumers will need to manage their own consumption, which is 
going to be very important down the road as well.
    Ms. Biggert. Well, you know, we hear a lot about the smart 
meters and the programs to enable consumers to reduce energy 
use, you know, usage and shift part of it, you know, to 
particular times of the day but it seems that there is more to 
the smart grid, essentially making the utility systems 
themselves self-healing as you mentioned, Mr. Stoessl, and 
making them more reliable and more efficient and lowering the 
cost of electric delivery. But if this is so, Ms. Hoffman, how 
is DOE encouraging the deployment of these types of smart grid 
systems?
    Ms. Hoffman. Well, hopefully we will get some wonderful 
proposals through the American Recovery and Reinvestment Act 
that demonstrate some of the objectives that the legislation 
asks us to do in advancing consumer behavior, managing load on 
the system as well as we look at supply and demand, increasing 
the availability of renewable resources. I believe that through 
the American Recovery and Reinvestment Act solicitations for 
both the demonstration as well as the investment grants, we 
will have taken a major step in the right direction in doing 
projects as well as documenting the benefits of these projects.
    Ms. Biggert. Thank you. I yield back.
    Chairman Baird. Thank you, Ms. Biggert.
    Mr. Davis.

                  Potential Energy Production Savings

    Mr. Davis. Mr. Chairman and Ranking Member, thanks for 
having the hearing today to better inform those of us who will 
be making decisions on energy issues in the future where 
America can become more energy independent and more 
economically secure and have greater national security. I look 
at the issues today that I hear discussed so often from 
everyone in this room and everyone in the District I represent 
and throughout the country, and each seems to have a better 
mousetrap. The windmills quit moving when the wind quits 
blowing and the solar systems quit working at least to 100 
percent efficiency when the sun goes down. We are putting--50 
percent of our energy production is from coal, which belches 
into the atmosphere carbon emissions that seems to be 
destroying our planet, about 24 to 25 percent from nuclear 
energy. We have no place to send the spent rods. And then some 
20 percent or so would come from natural gas or from fuel oils 
and then one or two percent from hydro and the wind and the 
solar. And now we talk about a grid that would transfer all of 
the energy that we are producing where the source may be in a 
more efficient and effective way where perhaps we can reduce 
the amount of generation, which means we would reduce the 
amount of pollution and more efficiently and more effectively 
transfer electrical energy that we are producing in certain 
locations throughout America. It is my understanding today, and 
I live in the Tennessee valley area, I represent Kingston where 
the spill is located, and so obviously all of us are trying to 
find some way to find a better use of that. So with the grids 
that we have, my understanding is, we transfer now energy being 
produced from one particular company to another, from one area 
and one region to another. How do we redo the grid system to 
where it can become more effective, and if we do with the costs 
we are talking about, how much more can we wring out and how 
much can we reduce the generation that we have today as a 
result of that? One percent, two percent, three percent, five 
percent? Would you give me an estimation of how, if we had the 
perfect grid system based upon your knowledge and study, how 
much can we save in production?
    Ms. Hoffman. I don't have an exact number for the savings, 
but I will characterize it a little bit differently. If we can 
reduce the peak on the system, we can show great savings. If we 
actually can flatten the loads of customers and flatten the 
transfer on the transmission system, we will get the greatest 
value and benefit. There are some numbers out for peak load 
reduction. I don't remember the exact savings numbers but I can 
provide that to you.
    [The information follows:]
                       Information for the Record
    A 2009 industry report (Faruqui and Sergici with the Brattle Group, 
``Household Response to Dynamic Pricing of Electricity--a Survey of the 
Experimental Evidence,'' funded in part by Edison Electric Institute/
Electric Power Research Institute) analyzed the results from the most 
recent 15 pricing pilot programs. The study concluded that, ``Across 
the range of experiments studied, time-of-use rates induce a drop in 
peak demand that ranges between three to six percent and critical-peak 
pricing tariffs induce a drop in peak demand that ranges between 13 to 
20 percent. When accompanied with enabling technologies (i.e., 
programmable thermostats), the latter set of tariffs lead to a drop in 
peak demand in the 27 to 44 percent range.''

    Mr. Davis. But when it gets to 100 degrees in Tennessee and 
it is 150 percent humidity, we all turn our air conditioners on 
and we want it to be about 75 degrees, and so that produces a 
peak. How do we convince that customer--and what you are saying 
is, we need to reduce the amount that we are consuming so 
therefore we don't have a peak. How do we do that? How does the 
grid system bring about a reduction in peak use for those 
customers who feel they need that energy?
    Ms. Hoffman. Well, one of the technologies is, you actually 
can cycle the air conditioners through peak price signals. They 
can cycle some sort of incentive program for cycling the air 
conditioners, and that has been a common program.
    Mr. Davis. And that works, because I just put like a 16 
series in my house from propane to electricity and we just 
changed all of the light bulbs, so we are not talking about 
grid now, we are talking about actually efficiency and 
conservation.
    Ms. Hoffman. And consumers' decisions. You can have the air 
conditioning running and there might be a price signal but the 
consumers may say okay, well, I am not going to start my 
dishwasher at this time, so you look at all the factors that 
pull together and not just the air conditioning.
    Mr. Davis. Yes, Ms. Kelly.
    Ms. Kelly. Thank you, Congressman Davis. FERC recently 
completed a study which the Energy Independence and Security 
Act asked us to do on assessing the national potential for 
demand response, and in that study we determined that in a 
perfect world, we could reduce peak 20 percent over the next 10 
years. Those are the numbers I think that Ms. Hoffman was 
talking about. Now, that would be a perfect world but that 
perfect world would be all consuming entities having a smart 
meter and having that smart meter send the real-time price 
signals, dynamic pricing, and having the devices and appliances 
have smart chips in them that could automatically respond to 
the price. But that estimate, 20 percent, is very significant.
    Mr. Davis. Yes.
    Ms. Kelly. It would be 120 gigawatts. Today we consume on 
peak about 820 gigawatts, so it would be very significant.
    Mr. Davis. At our home, it has reduced more than 20 percent 
the actual consumption of energy as a result of those two. So 
we are not necessarily talking about a grid that makes it 
smarter use, we are talking about customers who will be smarter 
users of the energy that we produce and that is a task for us.
    Thank you, and I apologize for running over my time.
    Chairman Baird. Thank you.
    Mr. Rohrabacher.

                        Potential Energy Savings

    Mr. Rohrabacher. Thank you very much, Mr. Chairman. It has 
been a very educational hearing, and again, I agree with Mr. 
Ehlers that all of the panelists have contributed to our 
knowledge base on this issue which I consider to be vitally 
important because I think that in the future, our country will 
be relying on electricity. Electrifying America even more than 
it is is probably the answer to the pollution problems that we 
face, the challenges that we face today. I might add that those 
of us who don't believe that global warming is a problem caused 
by CO2 are very concerned with pollution and very 
concerned with America's energy independence as well.
    I would like to get back to the question that my colleague 
just brought up about how much energy we are talking about 
here. You guesstimated that with the smart grid, we would have 
20 percent more efficiency in operating. What about today? How 
much of the electricity that is put into our system is 
dissipated in some way that wouldn't be dissipated if we were 
handling it in a smarter way? And I don't know, whoever can 
answer that. How about the guy from Southern California Edison? 
They know all that.
    Mr. De Martini. Thank you, Congressman. I don't have the 
exact number for our system but it is not unusual to have a 
system loss from the time it goes from generation down to the 
customer, somewhere in the neighborhood of maybe seven percent.
    Mr. Rohrabacher. Seven percent?
    Mr. De Martini. Yes.
    Mr. Rohrabacher. Okay. And so we are actually producing 
seven percent that never goes into some electric device in your 
home and things like that, that is just not used for the 
benefit that it could be used for?
    Mr. De Martini. That is right. That is through the losses 
in the transmission of the power over the power lines as well 
as through the transformer, so in the transformation from one 
higher voltage to a lower voltage we are stepping up in that 
transformation. And actually superconducting materials both 
applied to the conductors but we think that there is a lot of 
potential to apply it to the transformers and that is an area 
that we are putting a lot of focus on to see if we can't get 
some of that developed because that could be pretty easy to 
replace over the next decade.

                     Financial Benefit to Consumers

    Mr. Rohrabacher. So one of the goals of a smart system 
would be to bring that seven percent number down, which could 
pay for itself actually, when you think about what we are 
talking about here. And when we talk about smart meters and 
two-way meters, would a customer in the future be expected if 
he put solar power panels on his roof or finds a way of 
producing electricity with whatever method that would be, would 
that customer be expected to receive a financial benefit from 
that other than just the fact that he is not buying it? In 
other words, putting into the grid, would he receive some 
benefit? Is that what the goal is, or is that not the goal?
    Mr. De Martini. Yes, Congressman, that is what we mean by 
two-way flow of power.
    Mr. Rohrabacher. So what would that be? Would someone be 
able to receive payment back or credit for that would be in the 
same dollar amount as what it would cost him to take out--he or 
she?
    Ms. Kelly. Congressman, it really depends on the nature of 
the marketplace that they are selling into. If it is a 
traditional regulated utility, then it would be an offset from 
the bill. If they are in an organized--we have seven organized 
markets within the United States, doesn't cover all of the 
United States but two-thirds of the consuming areas of the 
United States. If they sold into that organized market, they 
would get the clearing price of that market, the market price 
at the time they sold into it.
    Mr. Rohrabacher. So they get the market price, so if 
someone----
    Ms. Kelly. They could get the market price.
    Mr. Rohrabacher. So if someone has like Dr. Bartlett here 
has a farm and he produces more electricity because he has got 
all the solar and the wind going, he would actually make the 
same amount of money as Southern California Edison in producing 
what he is producing. Is that right?
    Ms. Kelly. Particularly if he sold it back on peak when the 
price is higher.
    Mr. Rohrabacher. Okay. Well, thank you very much. Again, 
this has been very educational. I appreciate your leadership, 
Mr. Chairman.
    Chairman Baird. Mr. Tonko.

                 Job Creation and Workforce Development

    Mr. Tonko. Thank you, Mr. Chair. I apologize that I had to 
leave the hearing to go off to another meeting, so if I ask a 
question that has been asked, just tell me.
    Workforce development as it relates to smart metering and 
in upgraded grid, has any discussion been had in that regard? 
Are there things you would advise this committee in terms of 
the human infrastructure that is required in order to do this 
in the most effective way, whether it is retraining workforces 
out there or entering some new, and what potential exists in 
the future? Are there career developments we should be doing as 
early as high school? In the State of New York, we have an 
operation that will deal with some of the developments of more 
trade-related aspects. Are there any comments that any of you 
would wish to share?
    Ms. Hoffman. Let me start, Congressman. Thank you for the 
question. It is a very important question as we look at our 
aging workforce today. In the American Recovery and 
Reinvestment Act there is $100 million that is set aside for 
workforce training. The issues surrounding workforce training, 
I think as we look at putting more advanced technologies on the 
system, we will need to retrain workers that traditionally may 
do line work, but may have to also be able to handle solar 
cells on a pole on an electric system, as well as we need to 
have more sophisticated workforce coming into the electric 
industry as we start advancing power electronics. And as we 
look at cyber security, the information technology is probably 
not the way current line workers have utilized information 
technologies. There will be significant advancements with 
respect to computer use and information technology on electric 
systems that we need to make sure we advance the workforce in 
having them up to speed, and I think that--I believe that 
requires education at the high school level and at the starting 
point with respect to computers, mathematics and following that 
all the way through the two-year colleges.
    Mr. Tonko. Anyone else?
    Mr. De Martini. Southern California Edison agrees, you 
know, with Ms. Hoffman. We believe this is actually one of the 
larger issues when we start to look at a smart grid. As Ms. 
Hoffman pointed out, there are fairly large challenges with the 
workforce that we have today. You know, the average age of our 
workforce is nearing retirement or already retirement eligible.
    Mr. Tonko. And that is a pattern across the country, I 
think, especially in states where they deregulated?
    Mr. De Martini. Well, across the industry, so we are not 
unique in that regard, and one of the things that we have seen 
is that over the last 15 years when construction and growth of 
the electric industry slowed down after the 1980s, you know, 
the university systems largely dropped their power system 
certificate programs for the electrical engineering curriculum 
so there hasn't been a lot of graduates of electrical 
engineering programs specializing in power systems development. 
The other thing that we see clearly as we move forward, it is 
not just enough to reinstitute those curriculum because today a 
power system engineer also needs to understand computing 
systems. So we are working with a number of universities to try 
and reestablish the certificate programs and expand that to 
include computing systems, computing sciences as part of that. 
The line worker is a real challenge because most of our line 
workers and field workers are basically high school graduates 
and so they haven't had extensive, you know, sciences or 
certainly not electronics, and it isn't just the solar cells, 
although that would be a challenge as well. We are going to 
have a lot of power electronics out in the system, out on a 
circuit, as Mr. Stoessl highlighted. So as we have that, our 
folks need to understand, you know, electronics, which means 
that there is more education, so this is something we look at 
both with the labor unions in their development of their 
apprenticeship programs, community colleges we are reaching out 
to. This is a very large issue that the industry across the 
board is trying to----
    Mr. Tonko. Is the planning element of that all structured 
enough or should the Feds step in or states step in and make 
certain that all this is getting accomplished in the most 
effective way?
    Mr. De Martini. I believe most utilities are very well 
aware of this, and we have been looking at this issue and 
starting to put in place plans to develop it. Obviously, you 
know, certain budgets and many of the locations across the 
United States for education are, you know, under pressure and 
so developing new programs can be quite challenging to be able 
to move this forward.
    Mr. Tonko. Thank you. I had one second left, Mr. Chairman. 
I wanted to point that out.
    Chairman Baird. Well done, Mr. Tonko.
    Mr. Tonko. I am following our leader there.
    Chairman Baird. Mr. Olson.
    Mr. Olson. Thank you, Mr. Chairman, for allowing me to 
participate in this hearing today. I greatly appreciate that.
    I would like to follow up on my colleague from New York's 
questions about workforce development and specifically job 
creation. In April of 2009, Vice President Biden announced 
funding in the amount of $4 billion through the American 
Recovery and Reinvestment Act for smart grid initiatives. He 
did so under the premise of job creation. And that same day, a 
notice of intent was released by the Department of Energy which 
stated that job creation would be a primary criterion for 
ranking projects receiving funding under the program. However, 
revised guidance issued on June 26 has eliminated job creation 
as a primary criterion for funding. The funding opportunity 
announcement for smart grid initiative grants in the section 
entitled ``frequently asked questions,'' it states that DOE 
remove the criterion on the extent of jobs creation and will 
now require applicants as stipulated within the Recovery Act to 
report quarterly on the number of jobs created and retained. 
And we were told during the debate we had on the Floor in the 
stimulus package that the urgency behind the measure was due to 
the need for job creation, and yet we have seen, it looks like 
the exact opposite is occurring, and so my question for you, 
Mrs. Hoffman, why the change in criteria?
    Ms. Hoffman. The final funding opportunity announcement 
that came out recognizes that job creation is recognized 
throughout the solicitation. The major goals of the 
solicitation as listed in the introductory section says job 
creation is a goal. The proposers have to write towards those 
goals and recognize job creation as part of the proposals as 
well as the companies themselves must define the workers they 
require to implement projects in that solicitation, so we 
thought that--or we included job creation in almost every 
aspect of the technical requirements and the evaluation 
criteria of the proposal.
    Mr. Olson. I appreciate that answer, but let me read to you 
from the document that was issued on June 26. ``The question 
is, will DOE use the number of jobs estimated to be created 
and/or retained as a criterion for rating a proposal on 
funding,'' and the answer is no. And then they downgrade it and 
say, ``Although job creation is not included in the technical 
criteria used to rate proposals, it plays an important role 
throughout the grant process and grant recipients again are 
required to submit the numbers of jobs created and retained in 
their quarterly reports to DOErecovery.gov,'' and to me, that 
is a significant de-emphasis of job creation as part of the 
smart grids initiative.
    And following up on that, Ms. Hoffman, if jobs creation, as 
you say, is still a factor driving the force behind these 
grants, how many jobs do you foresee will be created using the 
smart grid initiatives?
    Ms. Hoffman. We are following the Council of Economic 
Advisors' methodology for job creation, and I don't have the 
number off the top of my head that they have quoted as part of 
their methodology.
    [The information follows:]
                       Information for the Record
    We anticipate that the Smart Grid Investment Grant Program and the 
Smart Grid Demonstration Program will result in 36,712 and 6,685 job-
years (full-time equivalents), respectively. These estimates were 
derived from the methodology provided by the President's Council of 
Economic Advisors, which prescribes that $92,000 of federal spending 
equates to one job-year.
    Job creation was applied within our review process to determine 
relative merit. Based on our review of applications, we expect that the 
funding provided by these programs will produce highly skilled jobs 
within the engineering, information technology, and business analysis 
professions.

    Mr. Olson. I appreciate if you could get that to us. And a 
follow-up for you, Dr. Arnold, as well. In your testimony, you 
stated that smart grid is a critical piece of this 
Administration's overall goal of fostering and creating 
millions of jobs in the green economy, and again, how does that 
statement coincide with the shifting standard that I have been 
talking about?
    Dr. Arnold. Well, I can talk about the role that standards 
play in that, and one aspect is enabling global market 
opportunities for U.S. manufacturers. And addressing Chairman 
Baird's question, we are working very actively with the key 
international bodies such as the International Electrotechnical 
Commission, the IEEE and others as a vehicle for promulgating 
standards that we are going to use in the U.S. smart grid. We 
are also engaging directly with other countries that are really 
following what we are doing. I would say we are in the lead in 
the world on this so that we can collaborate in the creation of 
international standards that will provide those global market 
opportunities for U.S. manufacturers.
    Mr. Olson. Thank you very much. I see my time is ending. I 
just want to encourage you all not to de-emphasize the jobs 
creation part of this. That is critical. If this is going to go 
forward, we need to create jobs and it appears it is being de-
emphasized. And Mr. Chairman, I yield back my time.
    Chairman Baird. I thank the gentleman. I am told by staff 
we may have votes in about 10 or 15 minutes. I know, Dr. 
Bartlett, you had a follow-up. I would like a brief follow-up. 
We will go ahead and start. I will try to shorten my time a 
little bit as well and ask colleagues to do the same.

                Incorporating Social Behavioral Aspects

    We had a markup in this committee this week earlier on a 
proposal to put social behavioral science program within DOE's 
work, and I am thinking about smart grid here and I am 
thinking, for goodness sake, please don't make this like 
programming my VCR or I am going to have a thermostat that 
flashes 12 constantly at me. The question really on a more 
serious note is, how are we working either at NIST or various 
companies here to incorporate the behavioral, cognitive, 
emotional even aspect of--I say ``emotional'' because my wife 
and I go round and round about what the heat should be in our 
home--of this technology? It is not a frivolous question at 
all. How do we incorporate that human behavior interface with 
smart grid work? Please, Mr. Stoessl.
    Mr. Stoessl. If I may, I can give you one perfect example 
that one of the electric co-ops in Delaware has taken the lead 
on. They have a program called Beat the Peak, and it is going 
exactly to the behavioral element of this. They know and 
anticipate when peak costs are going to strike their 
membership, and they are looking for a simple in-home display. 
Right now, what the head of that utility does is literally send 
out an e-mail to his membership saying, we expect peak rates 
from 4 to 6 p.m. this afternoon, please curtail your usage, and 
his members do, and what we are now developing for him and what 
he is looking for is a simple in-home display, just a simple 
red-green kind of thing that when that light is red, please 
curtail usage, whatever you can do. Go ahead and run your air 
conditioner if you want, but if you can curtail, please do. And 
that simple indication, which will be triggered by 
communications through his meter and through his communication 
infrastructure, is a behavioral way of going at it. Very 
simple, no programming required, just be aware if that light is 
on and you can do something, please do it.
    Chairman Baird. Are there other examples or comments?
    Ms. Hoffman. Just one comment, sir. The way the technology 
should be developed has to keep consumer behavior in mind and 
consumer sophistication, and I think that is not a one-size-
fits-all. We must tailor the technology to the customer, so if 
a customer just wants to know a price and have it automated on 
the system, we should be able to do that, whereas if a 
sophisticated customer that wants to go in and manipulate 
things just like he is sophisticated, say, on the stock market, 
we need to tailor the technology to meet the needs of the 
customer.
    Chairman Baird. Is that being incorporated in the work 
being done by DOE for NIST, et cetera?
    Ms. Hoffman. I am hoping we will see it as part of the 
projects that are proposed.
    Dr. Arnold. Chairman Baird, I would say that standards also 
play a key role in this and creating a standard for customer 
access to energy usage information. The standard I referred to 
earlier for communicating pricing information will enable the 
creation of software tools that can put this information in 
formats, you know, on a web browser or what have you that are 
easy for customers to see or even a simple red light-yellow 
indicator for customers who don't want to be that 
sophisticated.
    Chairman Baird. We go crazy over a 50 percent discount on 
cereal boxes at the grocery store, you know, you save your 
coupons and all this stuff. If somebody said you can run your 
dishwasher now but it is going to cost you much more now if you 
run it, and back to this peak issue, it would help a great 
deal. Ms. Kelly, did you want to comment?
    Ms. Kelly. I was going to say that a follow-up to that is 
something that the collaborative is excited about, and that is 
the DOE clearinghouse of information. Any of the demonstration 
projects that receive stimulus funds will have to report 
information to the clearinghouse, and it is one of our goals 
that the consumer acceptance, which I think is another way of 
describing what you are talking about, is something that will 
have to be monitored and followed and reported so that we can 
understand what kind of consumer interfaces work well as well 
as which ones don't work.
    Chairman Baird. That is encouraging.
    Mr. Ross. Mr. Chairman.
    Chairman Baird. Yes, please.
    Mr. Ross. I was just going to add that there has been a lot 
of work done in this area that can be translated from Internet 
and telecommunications technologies, and I think what you are 
seeing now is a lot of companies that for a long time have been 
developing new and innovative products in those areas moving 
into energy management systems. And there is a lot of work to 
be done there. There are some studies that have shown that, you 
know, programmable controllable thermostats, about 70 or 80 
percent of people don't actually bother to go ahead and program 
them, and so the new types of devices that are coming out are 
either portals for people to use online, in-home displays or 
some are even developing it through television interfaces. What 
they are finding is with just simple information, rather than 
waiting until the end of the month on the utility bill, people 
are reducing their energy consumption 10 to 20 percent.
    Chairman Baird. I would suggest we take a page out of the 
behavioral economics retirement investment models which suggest 
that if you preextract people's retirement 401(k) match, you 
have a much greater participation than if you wait for people 
to opt in, and let us ship the thermostats with preset things 
and adjust that to some easily, you know, wireless clock reset, 
and then if they want they can go with the default, it is a lot 
easier. So thank you for the insightful answers.
    Mr. Inglis.
    Mr. Inglis. Mr. Chairman, I have no further questions.
    Chairman Baird. Mr. Bartlett.

                         Electromagnetic Pulses

    Mr. Bartlett. Thank you very much. I was genuinely pleased 
at the panel's knowledge of EMP. I would just like to note that 
the usual things that we say that give us some comfort probably 
aren't relevant here, the mutually assured destruction. An EMP 
blast over North Korea would have little or no effect on North 
Korea. They just don't have any infrastructure that would be 
affected by EMP. As Vladimir Lukin said, with no fear of 
retaliation, if it comes from the ocean, how do you know from 
where it came? Two days ago, the Secretary of Defense was here 
and he made the observation that they were counting on 
deterrents to protect us from EMP, and I said Mr. Secretary, 
that is not going to work, because as Vladimir Lukin said, with 
no fear of retaliation. You know, we keep watching for whether 
North Korea or Iran has a missile which will reach us. That is 
irrelevant. Neither of them--I have been to North Korea. I 
spent three or four days there. They may be evil. They are not 
stupid. They are not going to launch a missile from their soil. 
It is going to come from the ocean, and all one needs is a 
tramp steamer, $100,000 to buy a Scud launcher and a crude 
nuclear weapon. You couldn't shut down the whole country with 
that but you could shut down all of New England with that. And, 
you know, if you missed by 100 miles, it is as good as a bull's 
eye because it really doesn't matter.
    You know, this is really a tough thing, but unless we 
protect ourselves against that--Mr. De Martini, you mentioned 
that it took two or three years to get these big transformers, 
and that is the kind of thing that Vladimir Lukin was referring 
to when he said it would shut down our grid and our 
communications for six months or so. Indeed, we don't even make 
those in our country, do we? You order them from overseas. So 
some of the smaller ones, maybe 18 months or so, and some of 
the larger ones that long a time. And in a cascading collapse 
of the grid, we would expect a number of these to be destroyed, 
would we not?
    Mr. De Martini. In a very large--you know, depending on the 
altitude that as I understand it in terms of where it would be 
exploded, it could impact a much wider area as you described 
and so yes, smaller distribution transformers, we actually have 
a lot of those in stock and those can be done relatively 
quickly. It is the very large high-voltage transformers that 
are essentially custom made. Those would be longer and most of 
that manufacturing is not done in our country.
    Mr. Bartlett. It is all done overseas and you order one and 
they will make one for us because these are on nobody's shelf 
including the manufacturer's shelf. They make them when you 
order them. This is such an incredible consequence that you 
just shy away from it. You know, it is the old saying if it is 
too good to be true, it is probably not true, and this is so 
horrible that maybe it is not true, but the reality is that it 
could be true. As a matter of fact, there is a new book out 
called One Second After, and the movie rights have already been 
sold to the book and it looks at what happens in our country to 
a--and their story is probably true to what will happen if it 
happens, and we hope it does not. And by the way, if we are 
immune to it, it is less likely to happen. Vulnerability 
invites attack. But the launch comes from the ocean and then 
the ship is sunk. There are no fingerprints. What do you do? In 
any event, what do you do when they have simply shut down your 
computers? And that is what it will do, just fry everything 
that is microelectronics. And do you then vaporize their 
grandmothers and their babies because they did that? It is a 
very difficult thing. You know, if we really are prepared, it 
won't happen because if we are not vulnerable, there will be no 
benefit in doing it. So thank you very much for your knowledge 
of this and hope you take it into account. Thank you very much.
    Chairman Baird. Dr. Bartlett, my strategy in that 
eventuality is to come to your place.
    Mr. Bartlett. Thank you, sir. You will be welcome.
    Chairman Baird. Mr. Tonko.

                            Superconduction

    Mr. Tonko. The application of superconductive cable and the 
promises that it might hold for dealing with some of our 
delivery system, our transmission systems primarily, any vision 
as to when we might be up and ready with the superconductive 
application?
    Mr. De Martini. The discussions we have been having with 
manufacturers in terms of both cable and transformers in 
particular, it looks like, you know, the technology is getting 
to a point where we can start to look at demonstrations within 
three to five years, particularly on transformation. We think 
that is a real opportunity to focus on in the near term, and 
which could lead to products being, you know, put into 
production into our service, you know, within a decade. So we 
see a lot of promise there. We already have today 
superconducting full current limiter that we have put in our 
system earlier this year. It is one of the first in the 
country, and we are working with actually American 
Superconductor.\6\ This was part of the award that was 
announced by Secretary Chu this week, a transmission-level 
superconducting full current limiter that will be going in our 
system in 2012. So we see the technology evolving and certainly 
over the decade we expect to see more of this going into 
service.
---------------------------------------------------------------------------
    \6\ American Superconductor Corporation
---------------------------------------------------------------------------
    Mr. Tonko. It seems to me we have trouble with the siting 
of many lines oftentimes which traverses several communities, 
expectedly. If we can do that with far greater capacity and the 
same dimension of cable, that we should really speed our 
investment in R&D, and I know that in New York State there are 
those companies who are breaking their own records in terms of 
development of the superconductive opportunity. Thank you.
    Chairman Baird. Mr. Tonko, thank you.
    Dr. Ehlers.

                            Public Education

    Mr. Ehlers.--secondary schools both before I got here and 
after I got here, and it continues to amaze me, I meet parents 
who say well, I don't see why it is necessary, Johnny already 
has enough math, he just doesn't--but this is a good example. 
If you are going to as I suggested earlier put digital devices 
on every appliance showing what the rate of energy usage is and 
you have a smart grid where you can also indicate the cost, you 
also have to have people who know how to use it and who program 
their thermostats and so forth, and there just has to be a 
basic level of intelligence and training of the American public 
if we are really going to make this work. I think also it is 
very important for the utilities. I think you mentioned that, 
Mr. De Martini, of trained workers, and I had an experience 
just in the past six months which surprised me. My wife and I 
came home, turned on a few lights and she started preparing 
dinner, and suddenly some lights dimmed, a couple went out and 
others were working fine. And I said aha, we have lost one 
phase of our three-phase electricity. So I called the power 
company, and the first question, she said are your lights out, 
and I said well, some are, some aren't, and I explained to her 
that we obviously had lost one phase of the electricity. She 
had no idea what I was talking about. She says well, we don't 
send trucks out immediately on a rush unless all your lights 
are out, and I tried to explain to her again what was going on. 
I just got nowhere and so I went out of the house, went up and 
down the street knocking on neighbors' doors and said please 
call in. She had told us that the more--if they got more calls, 
then they would send a truck out. And so I knocked on 
neighbors' doors and said please call this number and tell them 
your electricity is out, and as a result we got the truck there 
quicker than we would have before. But it just struck me that 
an employee of a power company would not, especially when 
dealing with the public, would not understand someone calling 
in like that. So at every level we have to have better training 
including the general public, but especially your employees in 
the utilities.
    I thank you, Mr. Chairman. That is the end of a very good 
hearing and I thank you for calling it and thank the panel for 
being here.
    Chairman Baird. Thank you.

                        Interagency Coordination

    I do have one last question, and it sort of integrates much 
of what has been discussed and it is this. It seems to me there 
is, hopefully, a positive synergy with the team that we see 
here, but you represent a much broader spectrum, and it is 
this. So you have got NIST working on standards, private sector 
working on innovative tools, electrical companies and 
distribution companies putting all that in place, DOE doing 
research. Are you comfortable in FERC regulating so much of 
this? Are you all comfortable that you are working together 
well enough? In other words, is there cross-pollination and 
cross-coordination? How is it going?
    Ms. Hoffman. In my opinion, in working on several programs 
within the Department of Energy, this has been one of the best 
working groups I have had to work with.
    Chairman Baird. Ms. Kelly.
    Ms. Kelly. We are very, very satisfied with the way things 
have been working.
    Dr. Arnold. The teamwork has been incredible with both the 
other agencies, federal and State level, and the private 
sector.
    Mr. De Martini. I think for utilities, we have all come 
together, not just regionally but also across the Nation and 
working very well with DOE, the regulatory agencies and NIST 
and this current effort and obviously with our suppliers in 
terms of these new products and innovations that are coming to 
the market.
    Mr. Ross. I would just reinforce what the other panelists 
have said. There seems to be a great deal of coordination among 
the federal agencies that are involved, and I think there is 
increased cooperation and participation in and among industry 
and with the utilities.
    Mr. Stoessl. And I will echo with the panel. I think there 
has always been good cooperation from the utilities and 
suppliers but with this particular issue with the government 
involvement that there has to be, there has been very, very 
good interaction and NEMA (National Electrical Manufacturers 
Association) has stepped in to really help pull industry 
together to give us one voice when we are interacting with the 
various councils, various standard bodies.
    Chairman Baird. Government, private sector, industry 
working together. Not a bad way to close the hearing. Thanks 
very much. Have a great day.
    [Whereupon, at 12:09 p.m., the Subcommittee was adjourned.]
                              Appendix 1:

                              ----------                              


                   Answers to Post-Hearing Questions




                   Answers to Post-Hearing Questions
Responses by Patricia Hoffman, Acting Assistant Secretary, Office of 
        Electricity Delivery and Energy Reliability, U.S. Department of 
        Energy

Question submitted by Chairman Brian Baird

Q1.  This May, the House passed the ``Waxman-Markey'' bill (H.R. 2454) 
to regulate carbon emissions and promote energy efficiency and 
renewable energy sources. How does the system of allowances and credits 
established therein, particularly in the cap-and-trade carbon system, 
relate to incentives or disincentives for industry to promote smart 
grid technologies?

A1. Smart grid technologies do not directly cause or reduce emissions 
of carbon or other greenhouse gases. Thus, the cap-and-trade carbon 
proposal with its allowances and credits does not provide either 
incentives or disincentives for smart grid technologies. Smart grid 
technologies are information and control technologies that can enable 
more efficient operation of the electricity system from generation to 
delivery and encourage customers to reduce their electricity 
consumption, particularly during times when power is relatively 
expensive. Smart grid technologies can also facilitate the integration 
of new renewable sources into the grid, thus indirectly supporting the 
goals of cap-and-trade.

Questions submitted by Representative Daniel Lipinski

Q1.  The National Association of Regulatory Utility Commissioners has 
reported that the most effective place for initial investment in Smart 
Grid improvements is on the electric grid itself, where energy and 
costs savings are immediate and do not rely upon changes in customer 
behavior and do not need customers to purchase and install in-home 
energy savings devices. During hearing questions, you and Ms. Kelly 
indicated that you felt that improvements upstream of the customer are 
worthwhile, other parts of the smart grid are at least as important.

     Can you qualify the potential energy savings and costs associated 
with these two categories of smart-grid technologies? Which will result 
the greatest savings for residential customers?

A1. The costs associated with upgrading customer systems (meters and 
load management applications) for integration with a smart grid were 
estimated at $62 billion, based on a 2004 industry report by the 
Electric Power Research Institute (EPRI). This estimate, although a bit 
outdated, fell within an order of magnitude with a 2009 estimate of $40 
billion for nationwide implementation of smart meters (Faruqui and 
Sergici with the Brattle Group, ``Household Response to Dynamic Pricing 
of Electricity--a Survey of the Experimental Evidence,'' funded in part 
by Edison Electric Institute/EPRI). The benefits from implementing 
smart meters with pricing programs with and without in-home energy 
saving devices are documented in the 2009 report after analyzing the 
results from the most recent 15 pricing pilot programs. The study 
concluded that, ``Across the range of experiments studied, time-of-use 
rates induce a drop in peak demand that ranges between three to six 
percent and critical-peak pricing tariffs induce a drop in peak demand 
that ranges between 13 to 20 percent. When accompanied with enabling 
technologies (programmable thermostats), the latter set of tariffs lead 
to a drop in peak demand in the 27 to 44 percent range.'' Thus, the 
peak demand reduction and associated energy savings from customer 
systems are highly significant, reflecting a non-zero price elasticity 
of demand for electricity.
    The net costs associated with upgrading the transmission and 
distribution (T&D) grid for smart-grid readiness were estimated to be 
$165 billion (not including those concurrent investments needed for 
meeting load growth and correcting deficiencies), from the same 2004 
EPRI report. The $165 billion in T&D modernization included a portion 
of the $62 billion for customer systems above; however, the exact 
portion was not known. Although the report concluded with an overall 
benefit to cost ratio of 4:1 to 5:1, the benefit breakdown used a 
different set of attributes, not those of peak demand reduction and 
energy savings.
    These industry studies evaluate the potential benefits of smart 
grid technologies deployment based on limited pilots. As part of its 
American Recovery and Reinvestment Act efforts, the Office of 
Electricity Delivery & Energy Reliability is developing a consistent 
cost/benefit analysis methodology to be applied to all smart grid 
projects to assess a broader experience. All cost/benefit data will be 
stored in the Smart Grid Information Clearinghouse to allow direct, 
comparative analysis, which will also address the question of what 
investment would benefit the residential customer most.

Q2.  What percentage of the stimulus funds that DOE is awarding goes 
toward smart grid technologies that improve the efficiency of the 
electric grid itself, as compared to technologies that produce savings 
only when consumers change their behavior?

A2. The $3.4 billion in the Recovery Act Smart Grid Investment Grant 
(SGIG) funding opportunity covers six topic areas: smart grid equipment 
manufacturing; customer systems; advanced metering infrastructure; 
electric distribution system; electric transmission system; and 
integrated and/or crosscutting systems (i.e., covering two or more of 
the preceding topic areas). The SGIG does not prescribe a funding range 
for each topic area; rather, all proposals will be evaluated based on 
their respective merits, including costs and benefits (economic, 
reliability and power quality, environmental, and energy security) and 
other performance merits. The selection of these proposals is still 
under way. The portion of the funding that will be allocated to 
programs that affect customer behavior, such as dynamic pricing, is not 
known at this time.
    In regard to the approximately $615 million in Recovery Act funds 
for new Smart Grid Demonstrations, $415 million of the total will 
support regional demonstrations and the balance will fund grid-scale 
energy storage demonstration projects. All proposals are still being 
evaluated, in accordance with the merit-review criteria including 
savings benefits. Again, it is too early to tell what portion of the 
$415M will be allocated to dynamic pricing programs.

Question submitted by Representative Lincoln Davis

Q1.  During the re-hearing, we discussed the potential savings in power 
production that could be realized with smart grid deployment. Can you 
please provide EERE's numbers on this potential savings at peak load or 
otherwise?

A1. The Federal Energy Regulatory Commission (FERC) issued a report in 
June 2009 that assessed demand response potential. The study projects 
that the peak demand in 2019 could be reduced by 44 GW, 100 GW, and 150 
GW under the expanded business-as-usual, achievable participation, and 
full participation scenarios, as compared to the base scenario of 
business-as-usual. The differences among these scenarios are defined by 
varying deployment levels of smart grid technologies and practices 
(advanced metering infrastructure, dynamic pricing offering, enabling 
technologies, and customer participation in the above). The 150 GW of 
peak demand reduction in 2019 under a full-participation scenario is 
equivalent to elimination of the need for 2,000 peaking power plant 
operations (based on 75 MW of output by a typical peaking power plant) 
or represents 16 percent of peak demand in 2019.
    Peak demand reduction from modernization of the T&D grid will be 
tracked by DOE through its data collection/analysis efforts to be 
implemented on all smart grid projects funded under the Recovery Act.
                   Answers to Post-Hearing Questions
Responses by Suedeen G. Kelly, Commissioner, Federal Energy Regulatory 
        Commission

Questions submitted by Chairman Daniel Lipinski

Q1.  The National Association of Regulatory Utility Commissioners has 
reported that the most effective place for initial investment in Smart 
Grid improvements is on the electric grid itself, where energy and 
costs savings are immediate and do not rely upon changes in customer 
behavior and do not need customers to purchase and install in-home 
energy savings devices. During hearing questions, you and Ms. Hoffman 
indicated that you felt that while improvements upstream of the 
customer are worthwhile, other parts of the smart grid are at least as 
important.

     Can you quantify the potential energy savings and costs associated 
with these two categories of smart-grid technologies? Which will result 
in the greatest savings for residential customers?

A1. There are significant opportunities for potential energy savings 
and other benefits that would be enabled by smart grid investments both 
on the transmission and distribution grid level (that do not involve 
any actions by customers) as well as on customer premises. It is, 
however, difficult to quantify these benefits with precision and, 
therefore, to identify whether one is greater than the other. However, 
there is evidence that shows that the installation of new systems and 
devices at customer locations can potentially produce significant 
energy savings. At the hearing, I cited a recent report by the 
Commission that estimated that pervasive installations of smart meters 
and other enabling technologies such as smart thermostats could lead to 
as much as a twenty percent reduction in peak demand.\1\ At the recent 
GrldWeek 2009 conference, a senior researcher from the Pacific 
Northwest National Lab reported preliminary results of an ongoing study 
showing that overall energy savings could be as high as twelve 
percent.\2\ In addition, savings that result from smart grid 
investments upstream of the customer will likely also be substantial. I 
therefore believe that both types of investments should be pursued in 
order to maximize the efficiency of the Nation's transmission and 
distribution system.
---------------------------------------------------------------------------
    \1\ Commission Staff Report, A National Assessment of Demand 
Response Potential, at 27-28 (June 2009), available at http://
www.ferc.gov/legal/staff-reports/06-O9-demand-response.pdf
    \2\ See Rob Pratt, PNNL, Potential Energy and Carbon Benefits of a 
Smart Grid, at 3 (Sept. 2009), available at http://www.pointview.com/
data/2009/09/31/pdf/Rob-Pratt-4771.pdf
---------------------------------------------------------------------------
                   Answers to Post-Hearing Questions
Responses by George W. Arnold, National Coordinator for Smart Grid 
        Inter-operability, National Institute of Standards and 
        Technology, U.S. Department of Commerce

Questions submitted by Chairman Brian Baird

Q1.  During the hearing, I noted the need for international 
compatibility with electric appliances. How is NIST coordinating with 
other nations to ensure global standards for consumer goods and power 
plugs and sockets?

Q1.  NIST recognizes the importance of international compatibility for 
the various elements of the Smart Grid. The use of internationally 
accepted standards will enable U.S. manufacturers supplying components 
to the Smart Grid to access foreign markets on an equitable basis. 
Extensive use of internationally accepted standards will also help 
reduce the cost of procurement, while increasing choices for customers 
looking to source products, components and assemblies for the Smart 
Grid in the U.S. The lack of common standards can significantly 
increase the cost for U.S. manufacturers, who would be forced to adapt 
their products for different countries.
    As you have noted, the existing electric infrastructures throughout 
the world use a variety of voltage levels, plugs and sockets, so there 
is a need for appliances to have different physical and electrical 
connections. Unfortunately such differences will continue to exist 
since it is not practical to rewire plugs and sockets built into the 
legacy physical infrastructure. However, it is possible to achieve 
international harmonization of the communications and information 
management aspects of smart grid applications and products, which are 
independent of electrical voltage levels and electrical plugs and 
sockets.
    NIST is working closely with relevant international standards 
organizations, such as the International Electrotechnical Commission 
(IEC), the International Organization for Standardization (ISO), and 
the International Telecommunication Union (ITU) to ensure that 
communications and information management standards for smart 
appliances are internationally harmonized wherever possible. The NIST 
effort is also engaging many other standards developing organizations 
domiciled in the U.S. which develop international standards, such as 
the Institute of Electrical and Electronics Engineers (IEEE), the 
Internet Engineering Taskforce (IETF), Open Geospatial Consortium 
(OGC), and others. Numerous multinational companies that have an 
inherent interest in the adoption and use of international standards 
are directly involved in the NIST process. Many standards identified in 
the draft NIST roadmap are international standards that are already 
used around the world (e.g., BACNet ANSI ASHRAE 135-2008/ISO 16484-5 
for Building Automation, IEC 61850 for Substation Automation and 
Protection, IEEE 1547 for Physical and Electrical Interconnections 
between Utility and Distributed Generation, ISO/IEC 18012 providing 
guidelines for product inter-operability, and ITU Recommendation G.9960 
covering in-home networking over power lines, phone lines and coaxial 
cables, etc.).
    Recognizing the importance of collaboration with other countries, 
NIST is also engaged in bilateral discussions with counterparts in 
other countries and regions about Smart Grid standards. NIST is 
partnering with the American National Standards Institute (ANSI) to 
engage the national committees of key countries (China, India, Japan, 
Russia, Germany) and the European standards body CENELEC in discussions 
about Smart Grid at the International Electrotechnical Commission (IEC) 
General Assembly in Tel Aviv, in October 2009. NIST is partnering with 
its sister DOC bureau, the International Trade Administration, to 
initiate a dialogue about Smart Grid standards with the European 
Commission and its relevant offices. Dr. George Arnold, the National 
Coordinator for Smart Grid Inter-operability, will provide a key note 
address at the Latin American Smart Grid Forum, in Brazil, and the 
Smart Grids Asia conference in Singapore in November 2009.

Q2.  This May, the House passed the ``Waxman-Markey'' bill (H.R. 2454) 
to regulate carbon emissions and promote energy efficiency and 
renewable energy sources. How does the system of allowances and credits 
established therein, particularly in the cap-and-trade carbon system, 
relate to incentives or disincentives for industry to promote Smart 
Grid technologies?

A2. As outlined in the Energy Independence and Security Act (EISA) of 
2007 (Public Law 110-140), the National Institute of Standards and 
Technology (NIST) is responsible for developing a framework for 
protocols and standards to achieve the inter-operability of Smart Grid 
devices and system. Inter-operability--the ability of diverse systems 
and components to work together--is vitally important to both the 
performance of the Smart Grid and the development of Smart Grid 
technologies. Given this focused, well-defined role, NIST does not have 
a position on how the system of allowances relate to the incentives or 
disincentives for industry.
    That said, H.R. 2454 does promote the development of Smart Grid 
technologies in a number of areas:

          State regulatory authorities and utilities will 
        establish standards and protocols for integrating plug-in 
        electric drive vehicles into the electric grid, including Smart 
        Grid systems.

          Inclusion of Smart Grid technologies and capabilities 
        in the Energy Star program.

          Inclusion of Smart Grid capabilities and potential 
        energy savings information on appliance Energy Usage labels.

          Appliances with Smart Grid features will be eligible 
        for rebates under the Appliance Rebate Program outlined in the 
        Energy Policy Act of 2005.
                              Appendix 2:

                              ----------                              


                   Additional Material for the Record




                    Statement of Katherine Hamilton
                               President
                         The GridWise Alliance
    Chairman Baird, Ranking Member Inglis, Members of the Subcommittee, 
thank you for allowing me to submit testimony for your hearing 
``Effectively Transforming Our Electric Delivery System to a Smart 
Grid.'' On behalf of the GridWise Alliance, I would like to thank you 
for your support and attention to our vision and goals, including 
crafting the Smart Grid Title XIII in the Energy Independence and 
Security Act of 2007 (EISA), enacting the American Recovery and 
Reinvestment Act with significant funds for smart grid, and recently 
passing the American Clean Energy and Security Act of 2009 which 
provides incentives for smart grid deployment.
    The GridWise Alliance is a coalition of 95 organizations advocating 
for a smarter grid for the public good. Our members broadly represent 
the Nation's interest in smart grid, including leading utilities, 
independent system operators, large IT and communications companies, 
small technology companies, manufacturers, consultants, investors, 
universities, and research organizations. We operate on a consensus 
basis and remain technology neutral, focusing on the policy issues 
surrounding the deployment of a smarter grid. We believe the market 
should determine which technologies prevail.
    The GridWise Alliance advocates for making the entire grid 
smarter--from the power plant bus bar through the transmission lines 
and substations, along the distribution lines, and all the way to the 
meter and appliances and equipment that consume electricity. A smart 
grid is dynamic and interactive. The smart grid has monitoring, 
control, and optimization capabilities that manage assets and demand, 
integrate distributed resources, and route power flows to maximize 
operation efficiency. All stakeholders on a smart grid can participate 
and make informed energy choices. Two-way communication allows system 
operators to observe what is happening on the grid and adjust 
operations to increase grid reliability while improving delivery and 
use efficiency. Smart grid technologies can provide increased 
functionality and intelligence to existing distribution devices. A 
smarter grid will include a variety of technologies and solutions, 
depending upon the regional and local systems, as well as the goals of 
the system.
    The GridWise Alliance thinks of a smarter grid as a means to an 
end--not an end unto itself. A smart grid can increase reliability, 
improve security, optimize the entire electricity system from 
generation to consumption, and contribute to the decarbonization of the 
electricity industry. A smarter grid can also enable the integration of 
dynamic forecasting, energy storage, clean distributed generation, and 
energy efficiency technologies, including plug in hybrid vehicles. A 
smarter grid allows for a more effective deployment of energy from 
renewable sources, reaping the full benefits of wind, solar, 
geothermal, hydropower, and biomass power. Smart grid technologies can 
provide more dynamic power flow control, increased bulk transfer and 
improved system efficiencies.
    The GridWise Alliance believes that critical issues for deployment 
of the smart grid through the Recovery Act funds includes establishing: 
1) clear guidelines for funding projects, ensuring the incorporation of 
the language of EISA as amended in the Recovery Act; 2) an expedited 
contracting process consistent with the Office of Management and Budget 
Initial Implementing Guidance for the Recovery Act; 3) a rational 
approach that fully respects both preexisting Intellectual Property 
rights and new intellectual property that emerge from the deployment of 
existing intellectual property in research and development, 
demonstration or investment projects ; 4) minimum smart grid standards 
for other energy infrastructure projects that are undertaken pursuant 
to provisions of the Recovery Act apart from those that contain the 
specific smart grid language; and 5) a transparent, but not onerous, 
process for monitoring allocations among different types of smart grid 
endeavors and altering new allocations to secure balance as appropriate 
in light of the overall Recovery Act and EISA objectives.
    Since the purview of this committee includes National Institute of 
Standards and Technology (NIST) oversight, the GridWise Alliance agrees 
that the Recovery Act appropriately funded development and 
harmonization of critical inter-operability standards framework through 
NIST. In EISA, NIST was given an unfunded mandate to develop a 
framework for smart grid standards; the Department of Energy (DOE) 
funded the Pacific Northwest National Laboratory to begin the process 
and created the GridWise Architecture Council to work closely with NIST 
and industry to develop the architecture for system inter-operability 
that could be used as a foundation in developing standards. While some 
of the groundwork had begun before the Recovery Act was passed, the 
generous funding and aggressive support of the NIST process has been 
critical.
    NIST has the appropriate mission, experience, and skills for 
coordinating the development of consensus-based standards and protocols 
in domains like building systems automation. These skills transfer 
easily to smart grid inter-operability standards with the funding in 
place. Dr. George Arnold, the National Coordinator for Smart Grid 
Inter-operability, is fully engaged in the process and the GridWise 
Alliance believes that NIST is on the right track in developing this 
standards process. The Alliance has participated by attending the 
meetings as well as providing detailed comments from the industry 
perspective.
    The inter-operability process will benefit from and be accelerated 
by stimulus funding for projects. Since utilities and others deploying 
smart grid technologies want to reduce the risk of stranded asset 
investments, they are driving early inter-operability standards 
development in domain expert work groups that feed into the NIST 
process. They are also designing deployments such that firmware and 
software could be revised, usually remotely, rather than change out 
entire equipment investments. This is common practice in other 
industries and is an effective means of driving deployment without 
excessive redeployment cost once the standards are finalized. Finally, 
the industry recognizes that standards should be applied where they are 
relevant, cost effective and appropriate to the intended function of 
the system. Too many times, we tend to assume all standards apply 
everywhere. Through the many industry domain working groups, the 
industry has established standards that are applicable for certain 
uses. Additional work will be needed to assess the cost effectiveness 
of those standards during deployment. It may be in the best interest of 
energy costs to phase in additional standards over time rather than 
replace legacy systems to accommodate new standards.
    The GridWise Alliance prefers open standards and protocols so that 
all players are enabled equal accessibility to compete in the market. 
Because of the increased scrutiny on cyber security and data privacy 
issues, certain criteria in developing technologies are critical. 
Industry has been collectively engaged in this process through several 
partnerships so that the security architecture for all smart grid 
technologies will be consistent. Developing standards and protocols for 
smart grid is important, yet entrepreneurs, utilities, universities, 
and other businesses developing smart grid technologies will continue 
to implement smart grid in advance of the NIST standard setting 
process. We do not want to hold up these efforts that can, among 
numerous other benefits, stimulate the economy, by waiting for 
standards to be developed and adopted.
    We agree that cyber security issues are paramount and should be 
carefully addressed when installing intelligent two-way communication 
devices on the grid. Best practices exist for segmenting different 
business functions such as generation, transmission, distribution, 
customer operations, and corporate and operational IT to ensure grid 
reliability. Strong access control, secure authentication, 
confidentiality, integrity, monitoring and non-repudiation mechanisms 
have existed for many years and can be applied to securing the smart 
grid. Further, security for smart grid technologies is being ``baked-
in'' from the start instead of ``bolted on'' as in the past; the 
security of the grid will benefit from this up-front, holistic 
approach. Digital devices have already been installed in many 
transmission substations; smart grid investments will serve to upgrade 
cyber security for these systems. The GridWise Alliance supports the 
coordination of the Federal Energy Regulatory Commission (FERC), North 
American Electric Reliability Corporation (NERC), and the National 
Association of Regulatory Utility Commissioners (NARUC) with the 
Department of Homeland Security and industry efforts as critical to the 
development of cyber security standards.
    Smart grid can be implemented differently in different places. The 
design and implementation of a smart grid can vary depending on the 
technologies and solutions deployed and the needs of the regional 
utility, transmission operator, and customer mix. For example, in some 
areas smart meters are a good first step in providing information to 
allow consumers to make energy choices and to allow utilities to have 
more data on consumer loads. In other areas, it would be wiser to start 
developing the smart grid with transmission technologies like phase 
shifting transformers. The issue is not so much which specific 
technology application is better, but what improvements can be made to 
the entire system and in what order the various applications are to be 
developed to meet strategic roadmap objectives.
    The GridWise Alliance believes that implementing smart grid 
technologies on the current grid will provide a multitude of benefits--
from helping alleviate congestion and integrating distributed renewable 
energy, more efficiently managing both the transmission and 
distribution systems, and engaging consumers with information exchange 
and new pricing programs. While we recognize the need for additional 
transmission to alleviate congestion and take renewable energy 
generation to load centers, we strongly believe that planning for this 
increase should include integrating smart grid technologies. New 
transmission coupled with smart grid applications like dynamic 
forecasting and energy storage can enhance the ability to deploy 
renewable energy and distributed generation sources onto our grid.
    While the electric grid has the same basic mechanical components 
everywhere, the entities operating and using the grid vary according to 
region, as do the goals of those systems. For example, a rural 
cooperative may have higher need for distribution system monitoring and 
control because of radial nature of their systems. A municipal utility 
may need to contain costs and have consumers adjust demand using rate 
incentives and smart meter technologies. A data center may require 
redundancy and increased security measures. The stimulus funding will 
only go so far. Our government has additional resources that can assist 
in developing the smart grid. We have experts in State energy offices, 
Department of Commerce Manufacturing Extension Partnership offices, and 
Department of Energy Industrial Assessment Centers. Many universities--
like Florida State, George Mason University, Northern New Mexico 
College, University of Colorado, Washington State University, and North 
Carolina State University, as well as many community colleges and trade 
centers--have smart grid technology research and education programs. 
Edison Electric Institute has worker training centers as does the 
International Brotherhood of Electrical Workers (IBEW). This technical 
expertise coupled with public utility commissions and regional planning 
authorities should enable this country to maximize the grid we have and 
make it smarter, stronger, efficient, more reliable, and freer of 
carbon.
    As with all technology development, the business case associated 
with commercial success often drives continued research and 
development. While we have substantial smart grid technology available 
today that creates benefits for our grid, we can continue to enhance 
these applications through research and development and demonstration. 
Research and development does not end when commercialization begins, 
but can continually improve performance, price, and other benefits from 
any given technology. Smart grid demonstration projects can serve to 
both spur widespread investment in these technologies and, as well as 
to provide greater clarity of the need for any additional research and 
development. Certainly continued robust funding for this research 
beyond the stimulus funds will be important to the continued 
development of new technologies for our grid.
    The full benefits of a smart grid will not be realized without 
allowing the consumers to make informed decisions on how they use 
electricity. Modern information technologies have transformed almost 
every other sector of our lives; many of those same technologies can 
change the way we use our electricity. Most consumers will not change 
behavior without energy consumption information or price signals, 
education, and technological assistance. Because our electric system is 
so ubiquitous and robust, we take it for granted when we flip the light 
switch on the wall. Electricity has become an integral part of our 
lives and a necessity for our nation's economic growth, prosperity, and 
our personal lifestyles and well-being. Most people do not think about 
where electricity comes from other than the outlet in their wall. They 
get their bill at the end of the month and react based on the size of 
the bill, but don't know what they did to make it go up or down. With 
increased information, and technological innovation, consumers could 
see in real time the impact of their electricity use and take action to 
reduce their bills. Utilities in states like California and Texas that 
have experimented with smart grid technologies have received positive 
results and feedback from their customers. As we move forward it is 
important that we not just deploy a smarter grid but build coalitions 
with consumers and other stakeholders so that they are fully engaged in 
the implementation of that smart grid.
    There are many knowledge gaps the GridWise Alliance has identified 
in the implementation of a smart grid that perhaps House Science 
Committee could take under consideration.

          One such gap is an understanding of how consumers 
        respond to continuous requests to curtail demand and how a 
        multitude of participants on the grid will figure into 
        implementing smart grid technologies;

          Another gap is in understanding how transmission and 
        distribution markets will establish a common basis for 
        regulatory innovation to support smart grid deployment;

          We will need to have an ability to quantify smart 
        grid benefits in order to demonstrate economic benefits, energy 
        efficiency, and operational flexibility as well as customer 
        service, outage management and enhanced emergency operations;

          We will need to understand the framework for system 
        inter-operability between new smart grid communications and 
        markets and existing systems;

          We will need measurements to understand how demand 
        side controls impact the supply side during outages;

          We also need to know what regulatory support will be 
        necessary to provide meaningful demand response as renewable 
        generation increases;

          Another gap exists in understanding what is needed to 
        protect customer data privacy in a two-way communications 
        system; and,

          Finally, we will need more research to understand new 
        digital transmission monitoring systems evolve into control 
        systems and how these smart grid monitoring systems allow for 
        lower reliability risks at the interconnection level.

    Smart grid was included in the Recovery Act because Congress 
correctly identified the smart grid as a key potential economic 
stimulator. The proof will be in the implementation, of course. We 
expect DOE to fund a variety of competitively solicited projects that 
can show a plethora of smart grid technologies and gather information 
about how smart grid affects the system operators, utilities, and 
consumers. We also expect that the projects will be spread around the 
country to see how smart grid differs by location. These projects 
should stimulate economic growth--by helping utilities retain jobs, by 
spurring offshoot industries, and by increasing jobs through 
installation of clean energy technologies. These projects are also 
expected to further technological advancement and spur greater 
investment in grid modernization and automation. But this is just the 
beginning. The GridWise Alliance believes that, since a smarter grid is 
a means to an end, additional smart grid policies need to be included 
in legislation that involves our electricity system, as they were in 
the American Clean Energy and Security Act. We will work with the House 
Science Committee to make sure that a smart grid is the foundation to 
fulfill our nation's energy independence, national security, and carbon 
mitigation goals.
    In conclusion, the GridWise Alliance reiterates that smart grid 
projects funded through the Recovery Act will create the cornerstone of 
a more reliable, affordable, and cleaner grid. In addition, smart grid 
provisions included in energy and climate legislation will help those 
goals to be met. The House Science Committee is uniquely qualified to 
ensure that the research and development process for our evolving grid 
is managed in a way that can transform the way in which we think about 
and use energy. Our Alliance is always available to help define what 
policies are important to the deployment of smart grid and we can 
provide expert guidance as you move forward with your policy 
initiatives. We thank you for allowing our voices to be taken into 
consideration; we look forward to working closely with this committee.
                   Statement of Gordon W. Day, Ph.D.
                            2009 President,
                    the Institute of Electrical and
            Electronics Engineers--United States of America
                               (IEEE-USA)
    On behalf of nearly 210,000 engineers, scientists and allied 
professionals who are IEEE's U.S. members, which includes many who are 
responsible for designing, building and operating the Nation's electric 
delivery system, IEEE-USA appreciates the opportunity to provide input 
to the Subcommittee for its hearing to highlight the critical issues 
involved in transforming the electric power delivery system into a 
Smart Grid. Our comments will focus on the overall needs and 
opportunities associated with this transformation, with a specific 
focus on associated workforce, cyber security and standards issues.

Why the Smart Grid Transformation is Essential

    Today, the U.S. electric grid is a network of 10,000 power plants, 
150,000 miles of high-voltage (>230 kV) transmission line, millions of 
miles of lower-voltage distribution lines, more than 12,000 substations 
and millions of customers. Our national electric power system is 
comprised of two key infrastructures:

          An electric infrastructure--that generates and 
        carries the electric energy in the power system, and

          An information infrastructure that monitors, 
        controls, and exchanges information between the utility and the 
        customer.

    Over recent decades, the grid has been severely stressed by 
increases in electric demand and a declining rate of new investment. 
Since 1982, growth in peak demand for electric power has exceeded 
growth in transmission capacity by almost 25 percent every year. The 
result is grid congestion and higher transmission losses, which can 
result in higher rates for electricity and lower reliability. The 
Department of Energy recently estimated that the cost of power outages 
ranges from $25 billion to $180 billion annually. The increasingly 
complex and competitive bulk power market is also adding additional 
stresses to the grid. Inadequate capacity, control and reliability are 
impediments to the deployment of new sources of alternative energy and 
limit our ability to increase the use of electricity in transportation.
    Transforming the existing electric power system into a Smart Grid 
is essential to mitigating these problems and promises several 
important political, economic, and environmental benefits for the 
Nation:

          By supporting the interrelated goals of price 
        transparency, clean energy, efficiency, grid reliability and 
        vehicle/transportation electrification, a Smart Grid will help 
        reduce the Country's dependency on imported oil.

          Enabling the real-time pricing of electricity will 
        allow consumers to make informed decisions about their energy 
        usage and reduce their energy costs.

          Providing the information and control needed to 
        better manage electrical demand will help facilitate the 
        integration of alternative energy sources by providing a means 
        to help mitigate the variability caused by their intermittency, 
        as well as enabling increasing electrification of our 
        transportation sector including the integration of plug-in 
        hybrid electric vehicles into the grid.

          Greatly expanding the connection of end-user loads to 
        grid information and control will facilitate energy efficiency 
        improvements.

          Adding intelligence (including sensors, 
        communications and software systems) to our electric grid will 
        enhance the ability of systems operators to detect and address 
        problems before they become widespread grid disturbances, 
        limiting the effects of disruptions and significantly improving 
        the system's overall efficiency and reliability.

    There are also likely to be numerous benefits of having a Smart 
Grid that are difficult to quantify at present. Examples include the 
flexibility to accommodate new requirements, the ability to accommodate 
advances in grid and electric generation technology, and the ability to 
support innovative new regulatory concepts, all without major 
replacement of existing equipment.
    Congress and the Administration recognized Smart Grid's potential 
by passing the Energy Independence and Security Act (EISA) of 2007 into 
law. Title XIII of the EISA Act mandates a Smart Grid that is focused 
on modernizing and improving the information and control infrastructure 
of the electric power system. The Smart Grid encompasses the 
information and control functionality that will monitor, control, 
manage, coordinate, integrate, facilitate, and enable achievement of 
many of the benefits of innovations envisioned in national energy 
policy.

Making an Effective Transformation

    In our 2009 National Energy Policy Recommendations (http://
www.ieeeusa.org/policy/positions/energypolicy.pdf), IEEE-USA outlines 
the following Smart Grid-related recommendations for governmental 
action, which we believe are essential to make the transition to a 
stronger and smarter electrical energy infrastructure:

          Fully funding previously authorized EISA legislation 
        to support the Smart Grid development effort.

          Supporting development of reference implementations 
        (field test) of Smart Grid standards to help rapidly resolve 
        technical issues and ambiguities either prior to or immediately 
        following adoption by Standards Developing Organizations 
        (SDOs).

          Working with Standards Developing Organizations to 
        help them address issues that delay development of Smart Grid 
        standards or act as barriers to their widespread deployment.

          Working with State regulators, the National 
        Association of Regulatory Utility Commissioners, and the 
        Federal Energy Regulatory Commission Smart Grid Collaborative 
        to resolve issues of ratepayer involvement, especially for 
        standards having benefits focused on national security and 
        energy independence issues.

          Providing R&D funding to address issues regarding 
        implementation of Smart Grid functionality by technologically 
        or economically challenged residential customers. Some Smart 
        Grid technologies may require residential customers to acquire 
        and use relatively sophisticated devices. R&D will be needed to 
        design user-friendly devices, minimize their cost, and identify 
        Smart Grid concepts that best match the capabilities of users 
        of all capabilities.

          Coordinating Smart Grid development efforts with 
        advanced broadband deployment. Coordination of these efforts is 
        essential to insure that the evolving broadband infrastructure 
        is available and can support Smart Grid communication 
        requirements.

          Devoting necessary attention and adequate resources 
        to the issue of cyber security for Smart Grid control systems 
        and software. Increasing our reliance on the Smart Grid's 
        information infrastructure also increases the risk of malicious 
        cyber attack and potentially increases the consequences of a 
        successful attack. Examples of potential attackers include 
        hostile foreign governments, organized crime, terrorists, 
        market manipulators, and disgruntled employees. In recent 
        years, cyber security in electric power systems has received 
        increased attention at the federal level. The North American 
        Electric Reliability Corporation (NERC) has adopted Critical 
        Infrastructure Protection (CIP) standards enforceable under the 
        2005 Energy Policy Act. EISA 2007 mandates cyber security 
        throughout the Smart Grid. A high level of continued focus on 
        cyber security is warranted.

The Importance of Standards and IEEE's Role

    A key focus of the Smart Grid effort will be to identify the 
requirements for the new information and communications infrastructure 
needed to support the Smart Grid and to define a body of compatible 
(inter-operable) standards to be used in its implementation. From an 
operational perspective, standards will be needed to enable the Smart 
Grid to meet a variety of new requirements, including integrating 
renewable energy sources, supporting new market concepts, helping 
improve energy efficiency, and accommodating new uses of electricity 
such as plug-in hybrid electric vehicles. Multiple standards 
stakeholder organizations are being leveraged to help define these key 
infrastructure requirements, which will enable a successful Smart Grid 
implementation by industry and regulatory authorities.
    IEEE is active in supporting the technologies and setting the 
standards necessary for the evolution and deployment of the Smart Grid. 
IEEE was identified as a key organization in the EISA 2007 and has been 
part of the NIST Smart Grid standards effort since its 2008 initiation. 
IEEE experts have been continuously involved in the NIST workshops and 
will lead multiple breakout sessions including Electric Storage 
Interconnection and Wireless Communications for the Smart Grid during 
the 3-4 August NIST workshop.
    IEEE is uniquely positioned to support the Smart Grid program 
because:

          IEEE leverages the global expertise and synergy of 
        its broad spectrum of organizational resources. IEEE integrates 
        44 technical societies and councils supporting technology 
        development, education, publication, in synergy with a global 
        standards community.

          IEEE Standards Association enables technology 
        integration across a spectrum of fields, necessary for a 
        forward looking platform, e.g., power, communications, digital 
        information management controls technology, networking, 
        security, reliability assessment, interconnection of 
        distributed resources including renewable energy sources to the 
        grid, sensors, electric metering, broadband over power line, 
        and systems engineering.

    As part of its new technology development effort, IEEE has 
mobilized its various constituencies into a coordinated Smart Grid 
effort, which includes a spectrum of activities and initiatives such as 
technical publications (i.e., ``IEEE Transactions on Smart Grid''), 
conferences, education, and industry recognized standards.
    In March of this year, a new project focused on the smart grid was 
approved by the IEEE Standards Board: IEEE P2030, Guide for Smart Grid 
Inter-operability of Energy Technology and Information Technology 
Operation with the Electric Power System (EPS), and End-Use 
Applications and Loads under the leadership of Dick DeBlasio and the 
sponsorship of a cross IEEE Standards Coordinating Committee (SCC21). 
This project addresses a body of IEEE 2030 standards supporting 
functional, inter-operability, and testing for verification of Smart 
Grid attributes and end use applicability. This project will leverage 
the work NIST is conducting in developing a standards framework. The 
first meeting was held in June 2009 involving over 300 participants, 
both on-site and remote. This program is projected to support the NIST 
September Smart Grid report. More information is available at the 
following web site: http://grouper.ieee.org/groups/scc21/2030/
2030-index.html
    The ``NIST-Recognized Standards for Inclusion in the Smart Grid 
Inter-operability Standards Framework Release 1.0,'' incorporated 
several IEEE standards and standards series:

          IEEE C37.118 Phasor measurement unit (PMU) 
        communications

          IEEE 1547 Physical and electrical interconnections 
        between utility and distributed generation (DG)

          IEEE 1686-2007 Security for intelligent electronic 
        devices (IEDs).

    Other IEEE standards and standards projects are referenced in the 
EPRI ``Report to NIST on the Smart Grid Inter-operability Standards 
Roadmap,'' e.g., the IEEE 802TM.

The Workforce Component

    The U.S. engineering and technician workforce is not yet prepared 
for planning, building, operating and maintaining a Smart Grid. This 
will make it difficult to realize the promised benefits of a Smart Grid 
soon. The aging workforce is a major concern. Nearly 50 percent of 
engineers and technicians currently employed in the electric utilities 
and over 40 percent of the university power engineering faculty is 
eligible to retire in the next five years. Increased and effective 
efforts are needed to attract young people to power and energy careers, 
and to becoming our next generation of educators.
    The vision is that Smart Grid technologies will become widely 
implemented in our nation's electricity delivery system. As a result, 
federal policies must support education and training in the electricity 
delivery field:

          to prepare an engineering and skilled trades 
        workforce that has the necessary knowledge and skills to 
        design, plan, construct, operate, and maintain a modern 
        electricity delivery system, including power system 
        infrastructure , and information systems, as well as to 
        manufacture the necessary components of that system,

          to enable retraining that will allow unemployed and 
        under-employed workers in other fields to find new job 
        opportunities in electricity delivery, and

          to enhance, build and sustain the education 
        infrastructure at accredited educational institutions, 
        including community colleges and universities, offering credit 
        and non-credit education in electric power and energy.

    A Smart Grid is transformative technology for the electric power 
industry. Our nation's educational institutions have to be transformed 
to respond to this technology advance. The Smart Grid will require 
engineers, computer scientists, and technicians among others who 
possess new and enhanced skill sets in information technology, 
communications, alternative energy resources, cyber security and other 
relevant technical fields. This workforce also must be prepared to be 
highly innovative. Most of the benefits of a Smart Grid will come 
through new applications that are not yet envisioned or developed.
    Appropriate curricula need to be developed. To develop those 
curricula effectively, a comprehensive study is needed to identify the 
new workforce skills for successful deployment of a Smart Grid and the 
training needed to equip the workforce with those skills. New and 
innovative ways of delivering these curricula need to be developed to 
meet the wide-ranging needs of learners. Support is also needed to 
increase access to these new education programs through increased 
financial assistance, and through effective and widespread 
communication of training opportunities throughout the Nation.
    The American Reinvestment and Recovery Act (ARRA) of 2009 (P.L. 
111-5) anticipated the need for preparing the workforce for a Smart 
Grid by appropriating $100 million for ``worker training activities'' 
related to electricity delivery and energy reliability funded through 
the Department of Energy. These funds should be used for putting in 
place the critical education infrastructure that supports job creation, 
professional development, career advancement, and workforce mobility. 
IEEE-USA's recommendations for the use of these funds can be found at 
http://www.ieeeusa.org/policy/positions/electricityworkforce.pdf

Conclusion

    The engineers, computer scientists and associated technical 
professionals responsible for creating the Smart Grid will do their 
part to ensure the Smart Grid is designed, built and operated to 
maximum advantage.
    The Federal Government can ensure an effective transition by 
bringing key stakeholders and participants together as needed to ensure 
consensus and collaboration on key decisions, by encouraging the 
development of the needed standards, and by supporting research and 
development needed to develop necessary technology, address user needs, 
and ensure the security of the system. New standards will provide the 
foundation on which the Smart Grid must be built. To make sure that a 
well-trained engineering and technical workforce is available to build 
and sustain the Smart Grid, targeted investments should be made in 
education and training on the Smart Grid combined with broad support 
for STEM workforce development.
    IEEE, through its standards, technical publications, conferences 
and members will play a key role in supporting efforts to create Smart 
Grids in the United States and in other countries around the world. 
Working through IEEE-USA, we stand ready to assist Congress and the 
Administration with information and advice as you wrestle with Smart 
Grid-related issues for the Nation.

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